Starbucks Plans New Drinks, New Discounts

Starbucks isn't selling as many cups of coffee as it once was. Former CEO Howard Schultz is back at the helm, trying to turn around sagging sales. He is making dramatic changes, including new machines, new prices and even new coffee.

RENEE MONTAGNE, host:

In more shareholder meeting news, investors in Starbucks gathered yesterday in Seattle for the company's annual meeting. After two decades of rapid expansion, the company faces falling sales and a sliding stock price. CEO Howard Schultz said he wouldn't use the sagging economy as an excuse. Instead he announced new drinks and new discounts.

From Seattle, NPR's Wendy Kaufman has more.

(Soundbite of cheering)

Mr. HOWARDS SCHULTZ (CEO, Starbucks): Wow. Thank you.

WENDY KAUFMAN: The reception Howard Schultz received as he walked on stage gave no hint that his company's stock had lost half it's value in the past 14 months.

Mr. SCHULTZ: Wow. I really didn't know what to expect.

(Soundbite of laughter)

KAUFMAN: For thousands of shareholders who packed the concert hall, Schultz is viewed as a savior. For roughly 25 years he engineered the stunning growth and success of Starbucks. As the company began to falter last year, board chairman Schultz decided to take back his job as CEO. He's been there since the beginning of the year.

But even the relentlessly optimistic executive admits that turning things around hasn't been and won't be easy. For starters, three and four dollar espresso drinks can be a tough sell in a weak economy, and that's not the only problem.

Mr. SCHULTZ: I think we all realize that we have kind of lost our edge. We somehow evolved from a culture of creativity and innovation to a culture of, in a way, mediocrity and bureaucracy.

KAUFMAN: In the past two quarters, fewer customers went to Starbucks. To address that, Schultz is going back to the company's roots. He announced new and better espresso machines, a new premium coffee blend, and an innovative device to make a single cup of premium java.

Mr. SCHULTZ: I was in a New York store - not ours - that was selling coffee with a Clover machine. And I thought there was a mistake on the menu, because it said $7 for a cup of Clover. And there was a line.

(Soundbite of laughter)

Mr. SCHULTZ: I was really - I was not happy.

KAUFMAN: So Schultz bought the small Seattle company which makes Clover. Starbucks will sell the coffee for less than $7, but it won't be cheap. Other initiatives include a reward program offering reduced prices of some specialty drinks to customers who use prepaid cards. Refills of drip will be on the house. And by the end of the year, Schultz says, Starbucks will offer new healthy foods and beverages along with energy drinks.

But above all else, he said, Starbucks would fight to the death to ensure that it remained the premier company in the specialty coffee industry.

Mr. SCHULTZ: You have our promise.

(Soundbite of applause)

KAUFMAN: The feel-good, upbeat atmosphere at the meeting was encouraging to many shareholders, including Todd Mason.

Mr. TODD MASON (Shareholder): The initiatives they're taking inspires confidence and we're looking forward to a bright future.

KAUFMAN: How about the stock being down 45 percent from its high a year ago?

Mr. MASON: Well, it's - it's part of the overall trend in the market. It's unfortunate, but with Howard Schultz back in control, I think the future looks good.

KAUFMAN: But Jonathan Block was not so sanguine.

Mr. JONATHAN BLOCK (Shareholder): I was disappointed. I didn't like the message that we're going to have now the better cup of coffee but it's going to be a year before it gets to all the stores.

KAUFMAN: Notably absent from Starbucks' presentation yesterday were financial details and projections and costs. Those won't be available till next month. The only thing CEO Schultz would say was that profit margins are being squeezed right now and they're not expected to improve any time this year.

Wendy Kaufman, NPR News, Seattle.

Copyright © 2008 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.