The Problem with Starbucks

Starbucks' stock ( SBUX) is collapsing, and I think I know why. People are drinking less Starbucks.

Me at the Starbucks restaurant in Farmers Market, taken while studying at the Lee Strasberg Institute in 2004.

I drank Starbucks coffee for many years, especially during my years of burnout depression from 2000 to 2003 when I spent just about every morning in the Telford Gardens Starbucks café drinking coffee and reading the 東方日報 or 蘋果日報 newspapers. Before Starbucks came on to the Hong Kong scene, it was almost impossible to sit down, relax and have a decent cup of coffee in a café. Rents were too high, and coffee was not a common beverage (we're not talking about Cantonese-style coffee sold in the Chinese cafés here), so coffee cafés were not a viable business. The only choices for coffee lovers were the expensive high society Cova cafés or the Japanese styled high-turnover Pokka restaurants; not a great choice.

Starbucks changed that. They provided us with cafés where we could enjoy a decent cup of coffee for a reasonable price in a relatively quiet and relaxing place where we wouldn't be pressured to finish our coffee and leave as soon as possible to make room for the next customer, and Starbucks made coffee popular. In a self propagating development, Starbucks made coffee cafés viable.

Starbucks' success paved the way for other cafés. Here in Hong Kong, we now have several coffee café chains to choose from including Pacific Coffee, LGB, Habitū and UCC, and for that, coffee drinkers are grateful, but Starbucks now has a dilemma on its hands. While new café chains were popping up around it, Starbucks didn't make any changes to meet the competition. We drank coffee at Starbucks because it was decent coffee at a decent price, a quality and price that were not offered at other cafés. That's no longer true.

Reasons to drink at other cafés:

LGB's tarts are excellent companions to their coffee and mochas. The macaroons are however a little too expensive for my tastes.

LGB

The cappuccinos are great at similar prices to Starbucks. Their chocolate-based drinks including mochas use delicious France-imported cocoa-based chocolate syrups (with both light and dark selections) and are out of this world while Starbucks continues to use taste-insulting concentrated sugar syrups. LGB's tarts and French food are also very tasty.

Habitū

Again, the cappuccinos are far better than Starbucks' cappuccinos at similar prices. The food is also superior to Starbucks' food though not quite as good as the food at LGB.

Cova

The coffee is great although slightly more expensive than Starbucks' coffee, but Cova has a unique advantage. Their range of baked-in-house French-styled cakes and biscuits are absolutely delectable. It is a rare moment when you do not see people lined up outside their restaurants waiting for their turn to attack the cake buffet.

Queues are a regular occurrence at Cova restaurants all over Hong Kong because of their cake selection.

Some of the problems that Starbucks needs to examine:

They don't have good black or straight coffee!!! Typically, a Starbucks long black coffee is made by pouring one or two shots into a cup and filling the cup with hot water; yuk! In Australia, Starbucks has a better method of making long black coffees but Starbucks Hong Kong dissuades their barristers from using this method; essentially involving 23-second shots; because it requires more time to make.

Smelly! When I visited the Starbucks stores in L.A. in 2006, I was intrigued that the stores were so smelly, damp, dingy and generally very low grade. How can American people put up with that? Also a major problem in L.A. was the speed of the employees and their demeanor. While the barristers in Hong Kong's Starbucks stores are usually cheerful and quick (although over-worked and under a lot of pressure from management), the barristers in L.A. were rather sad and as slow as cattle meandering through a field of oats. Almost every morning and night in the Sherman Oaks Starbucks store, people had to wait in line for twenty to thirty minutes to get their coffee. That's absolutely unacceptable, especially if the product is mediocre.

Howard Schultz has returned to Starbucks to help turn it around. It'll be interesting to see what he does, but I'd start with a few simple things.

Find out why other restaurants are making better coffee and improve Starbucks coffee. Use better ingredients. Use less sugar and corn syrup in the syrups.

Improve the café environment. The cafés should be relaxed, comfortable and clean. No strange smells. No dampness.

Close a few cafés (in the U.S.A.) There are too many too close together. If you want to make the coffee more readily available, open Starbucks counters (such as the Starbucks MTR Kwun Tong counter here in Hong Kong) rather than full scale cafés. A majority of Starbucks customers buy take away so too many cafés are a waste of space and rent.

I've basically stopped going to Starbucks. Given the choice, I'll get my coffee at LGB or Habitū. Or I'll just make my own ;-)