In 2003, Starbucks was on their first peak of their climb. It’s very likely that the corporate ego was also peaking. “We can do anything”. But, just as they hit that peak, somehow their corporate arrogance got the best of them and they decided they are bigger than “just coffee”, so they created their own recording company, which successfully won 8 Grammy’s 2 years later. In 2006, Starbucks launched their first movie, then started partnership with William Morris to scout for music, books, films and finally Starbucks opened their own “entertainment” office in LA. I remember when, a few agency folks marvelling and trying to convince me to follow the Starbucks lead. The whole idea was that Starbucks had the potential to be the “third place” in people’s lives: Home, Office and Starbucks. The music and movies were all part of bringing that to life for Starbucks. Marketing academics were writing about it and gushing over it. That’s ok as an idea in theory, but in terms of managing a culture, Starbucks had a very hard time staying focused on what they did best: make a great cup of coffee.
By 2008, the lack of focus caught up with them. The most loyal consumers of Starbucks were seeing cracks in the service and quality and began choosing local establishments, who were solely focused on making a great cup of coffee. Starbucks cut 18,000 jobs, closed 977 stores and same store sales were down 7%. Stock price falls to $7.83, down from $39.63 in 2008. Yikes.