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Sunday, August 18, 2024

Starbucks -- One Of The Most Fascinating Business Stories To Follow Over Next 12 Months -- August 18, 2024

Locator: 48455SBUX.

Updates

Later, 7:49 p.m. CDT: I was wrong -- CNBC thinks Starbucks' big problem is its mobile app, link here:

 Original Post

Starbucks. New CEO. Two things to watch:

  • how the new CEO cuts costs to increase earnings to excite investors:
    • close under-performing stores quickly; surely there must be many;
      • take a lesson from GE's Jack Welch's "cut 10%" policy (stores, not baristas)
    • close "uncomfortable" stores (high crime areas); symbolic but will appeal to investors;
  • how the new CEO changes the product to excite customers; the product?
    • price: perceived as high-price option; coffee and a bagel costs as much as a Chipotle burrito; prices have to come down, but I just don't see it; will probably market "value" for price, maybe offer more specials at slow times of the day.
    • service: perceived as slow (with which I disagree)
      • is there an opportunity for self-serve for simple black coffee like most other places?
    • fare: perceived as bland, little change in ten years
      • could they add smoothies during the summer? I honestly don't know.
    • loyalty rewards: perceived as really, really chintzy (with which I agree)
      • give local baristas more latitude in rewarding daily visitors, especially those who actually spend time in the restaurant; offer a free refill and see if a customer might be ready for another snack (at cost)
      • seriously, how much revenue is lost when a barista offers a free refill on a tall black coffee;
    • the app: seems okay to me

This will be absolutely fascinating; a new CEO is generally given a year to make his/her mark. 

Where to watch the new CEO's successes / failures? On Cramer's Mad Money.

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