Starbucks is changing the way it does business to try to attract more customers and maintain its status as a growth company and a popular...
Starbucks is changing the way it does business to try to attract more customers and maintain its status as a growth company and a popular coffee-shop chain.
Chief Executive Howard Schultz outlined several strategic moves during the company’s annual meeting Wednesday in Seattle. All garnered applause from an audience of 6,000 employees and shareholders at McCaw Hall, but none pushed Starbucks’ struggling stock out of its slump.
“It’s more good strategy. And I’m happy to see they’re getting back to their roots and doing what they do best, which is being a premier retailer of coffee,” said James Walsh, an analyst at Coldstream Capital Management in Bellevue, which owns shares as part of more than $1 billion it manages for clients.
Still, he said, “these are long-term initiatives that are going to pay off over time and will not necessarily be reflected immediately in their financials.”
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Starbucks shares dropped 74 cents to $17.50 during regular trading Wednesday, then rose 19 cents to $17.69 in after-hours trading. The stock has been trading between $32.45 and $16.77 during the last year.
The company’s new initiatives include buying Ballard-based Coffee Equipment Co., the maker of the highly regarded Clover single-cup commercial brewer. Details about the deal were not disclosed.
It will introduce the machines to many U.S. stores, although “every manager in our system wants that machine, and they’re all not going to get it at once,” Schultz said.
Clover, which has 11 employees and is privately held, sold its first machine in 2006 and has become a sensation in the coffee world.
It custom-brews coffee using a unique method similar to a French press, but it is automated and uses a special vacuum technology.
Schultz said he first drank coffee from a Clover machine in New York, where a cup was selling for $7.
“How do you do that?” he jokingly asked the company’s co-founder and chief executive, Zander Nosler, on stage at Starbucks’ annual meeting.
Starbucks has tested the Clover machines at stores in Seattle and Boston and charges about $2 to $3 a cup.
There are only a couple of hundred Clover machines in coffee shops and high-end personal kitchens worldwide, Nosler said. The retail price for the commercial machine, which requires plumbing and higher voltage than found in most kitchens, is $11,000.
Starbucks also unveiled a new espresso machine. Unlike the Clovers, espresso machines are the equipment workhorses at its coffee shops, cranking out the coffee for lattes and other espresso-based beverages.
The new machines, called Mastrena, will be manufactured in Switzerland by Thermoplan, the same company that makes Starbucks’ current machines.
The companies are not disclosing the cost of switching machines.
The new machines will begin rolling out next month, replacing the Verismo automated machines Starbucks introduced in 2000.
Before that, it used manual machines from La Marzocco, which are still in stores in some international markets.
The Mastrena is about 7 inches shorter than Starbucks’ current machines, allowing baristas to interact with customers more easily while they make drinks.
They also time the length of each shot so baristas can adjust the grind, if necessary, and how much steam comes out of their steaming wands.
Among other initiatives to revive Starbucks’ flagging growth is a loyalty program for Starbucks Card users and a new drip coffee called Pike Place Roast.
To get a better idea of what customers want, Starbucks launched its first social-networking site to allow them to share thoughts and ideas.
Chris Bruzzo, Starbucks’ chief technology officer, said the idea for MyStarbucksIdea.com arose in December. “We did it really fast,” he said.
Starbucks launched a similar site Wednesday for employees only.
Chatter among employees and customers has happened for years at StarbucksGossip.com, a site not affiliated with the company that is run by Jim Romenesko.
“MyStarbucksIdea.com was clearly inspired by my site, which was created nearly four years ago to move barista/customer conversations to the web,” Romenesko said in an e-mail Wednesday.
“My site will continue to thrive because it’s an authentic reflection of how customers and employees feel about the company. MyStarbucksIdea.com, on the other hand, is clearly a corporate propaganda site,” he said.
Schultz said more changes are in store, including offerings in the “health and wellness” business and entry into the fast-growing energy-drink market later this year.
Wednesday’s announcements are the second wave of changes Schultz has introduced since returning as CEO in January. In February, Starbucks said it would cut about 600 jobs and close about 100 underperforming U.S. stores this year.
Since then, he has had employees retrained, offered free Wi-Fi to certain customers and said the chain will stop selling warmed breakfast sandwiches.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org. The Associated Press contributed to this report.