Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; JimAlling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass;Paula Boggs; Sandra Taylor
Subject: The Commoditization of the Starbucks ExperienceAs you prepare for the FY 08 strategic planning process, I want toshare some of my thoughts with you.
Over the past ten years, in order to achieve the growth, development,and scale necessary to go from less than 1,000 stores to 13,000stores and beyond, we have had to make a series of decisions that, inretrospect, have lead to the watering down of the Starbucks experience,and, what some might call the commoditization of our brand.Many of these decisions were probably right at the time, and ontheir own merit would not have created the dilution of the experience;but in this case, the sum is much greater and, unfortunately, muchmore damaging than the individual pieces. For example, when we wentto automatic espresso machines, we solved a major problem in termsof speed of service and efficiency. At the same time, we overlooked thefact that we would remove much of the romance and theatre that wasin play with the use of the La Marzocca machines. This specific decisionbecame even more damaging when the height of the machines,which are now in thousands of stores, blocked the visual sight line thecustomer previously had to watch the drink being made, and for theintimate experience with the barista. This, coupled with the need forfresh roasted coffee in every North America city and every internationalmarket, moved us toward the decision and the need for flavorlocked packaging. Again, the right decision at the right time, andonce again I believe we overlooked the cause and the affect of flavorlock in our stores. We achieved fresh roasted bagged coff ee, but atwhat cost? The loss of aroma -- perhaps the most powerful non-verbalsignal we had in our stores; the loss of our people scooping fresh coffeefrom the bins and grinding it fresh in front of the customer, andonce again stripping the store of tradition and our heritage? Then wemoved to store design. Clearly we have had to streamline store designto gain efficiencies of scale and to make sure we had the ROI on salesto investment ratios that would satisfy the financial side of our business.However, one of the results has been stores that no longer havethe soul of the past and reflect a chain of stores vs. the warm feeling ofa neighborhood store. Some people even call our stores sterile, cookiecutter, no longer reflecting the passion our partners feel about our coffee.In fact, I am not sure people today even know we are roasting coffee.You certainly can't get the message from being in our stores. Themerchandise, more art than science, is far removed from being themerchant that I believe we can be and certainly at a minimum shouldsupport the foundation of our coffee heritage. Some stores don't havecoffee grinders, French presses from Bodum, or even coffee filters.Now that I have provided you with a list of some of the underlyingissues that I believe we need to solve, let me say at the outset that wehave all been part of these decisions. I take full responsibility myself,but we desperately need to look into the mirror and realize it's time toget back to the core and make the changes necessary to evoke theheritage, the tradition, and the passion that we all have for the trueStarbucks experience. While the current state of aff airs for the mostpart is self induced, that has lead to competitors of all kinds, smalland large coff ee companies, fast food operators, and mom and pops,to position themselves in a way that creates awareness, trial and loyaltyof people who previously have been Starbucks customers. Thismust be eradicated.I have said for 20 years that our success is not an entitlement andnow it's proving to be a reality. Let's be smarter about how we arespending our time, money and resources. Let's get back to the core.Push for innovation and do the things necessary to once again differentiateStarbucks from all others. We source and buy the highestquality coffee. We have built the most trusted brand in coff ee in theworld, and we have an enormous responsibility to both the people whohave come before us and the 150,000 partners and their families whoare relying on our stewardship.Finally, I would like to acknowledge all that you do for Starbucks.Without your passion and commitment, we would not be where weare today.