Starbucks Dismisses 'Saturation' Warnings Starbucks released its quarterly earnings report Thursday: Profits were up again. The stock price fell, though, because of a small decline in customer traffic in U.S. stores. The company will press ahead with plans to open 1,600 new stores next year.
NPR logo

Starbucks Dismisses 'Saturation' Warnings

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Starbucks Dismisses 'Saturation' Warnings

Starbucks Dismisses 'Saturation' Warnings

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Michele Norris.

Starbucks has just released its quarterly report. And for the first time in the company's history, customer traffic at stores in the U.S. actually fell. That's despite the devotion of millions of customers. People represent it well in the movie "Best in Show."


NORRIS: (As Meg Swan) We met at Starbucks. Not the same Starbucks, but we saw each other at different Starbucks across the street from each other.

NORRIS: (As Hamilton Swan) Mm-hmm. And I know that sometimes I'd be in one Starbucks and then you'd be in the other Starbucks and then I think maybe, you know, I should go over to that Starbucks the next weekend and then you'd be at the other Starbucks. So we kind of lost...


NORRIS: With traffic for the most recent quarter off a bit, we wondered: has Starbucks finally hit the saturation point?

From Seattle, NPR's Wendy Kaufman reports.

WENDY KAUFMAN: The number of customers buying things in U.S. stores was down 1 percent. It's a tiny number but disconcerting for the company, and investors blame softness in the economy, pressures on consumer spending, price increases for Starbucks offerings, and improved coffee at places like McDonald's and Dunkin' Donuts.

In a Web cast conference call yesterday, Starbucks CEO Howard Schultz expressed a bit of disdain for those competitors.

NORRIS: They don't have 35 years of history and heritage around sourcing, buying, blending and providing the customer with a fully comprehended, vertically integrated experience. That's an asset that is very, very important to our customers.

KAUFMAN: But in a much publicized e-mail earlier this year, Howard Schultz bemoaned that the aroma of fresh ground beans was absent from the stores and handmade drinks had been replaced by those from an automated espresso machine - a consequence of having nearly 11,000 U.S. stores.

And Ron Paul, president of Technomic, a restaurant industry consulting firm, says cannibalism may finally be taking hold.

NORRIS: While their history has been very, very good and every time they open a store, ultimately, sales at both the new store and the old store that's close by go up. At some point, there is a point of diminishing returns.

KAUFMAN: Today, Starbucks is launching its first ever TV campaign. The company and its investors will be watching nervously. Shares of Starbucks stock are down roughly 40 percent for the year.

Wendy Kaufman, NPR News, Seattle.

Copyright © 2007 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.