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Frozen yogurt and Starbucks
By Daniel | May 16, 2008
I was surprised today to hear a local talk show host say in a few years when people hear the name Starbucks they’ll say, “Huh?” Even more surprising is that the host admitted he was an SBUX stockholder! The stock is currently down 43% from its 52 week high.
There’s no doubt the company’s struggling. According to employees and company insiders the company grew too fast, lost its core focus by selling everything from videos to breakfast sandwiches, has declining same-store sales and is now too ubiquitous to have the coffeehouse cachet it once did.
But to predict that this American icon will vanish into obscurity? How can that happen?
Two words: frozen yogurt.
The first TCBY store opened in 1981. In 1984 they went public and grew to more than 2,700 locations worldwide. But as competition grew and the novelty of frozen yogurt wore off in the mid ’90s, TCBY saw sales decline and stores close. According to Chain Leader magazine, the company is down to 1,000 units and is “trying to recapture the success of its heyday.”
How will they do this? According to TCBY Director of Marketing Steve Willes, by returning to its frozen-yogurt roots. That includes removing all ice-cream products from the stores, launching a new line of yogurt-based smoothies and hand-scooped yogurt, and rolling out a modern new design.
Getting back to its roots. Where have I seen that? Oh yeah, that’s what Howard Schultz said when he this year reclaimed the Starbucks CEO position he gave up in 2000. (How his plans to now introduce fruit smoothies to the SBUX menu accomplishes that goal escapes me!)
MSNBC reported in January that Starbucks has more than 15,000 stores worldwide and has stuck to an ambitious long-term goal of having 40,000, but in November, 2007 it announced a slight scaling back of U.S. store openings. When Schultz returned as CEO, he cut the company’s fiscal 2008 store openings to 1,175 from 1,600. The company opened nearly 1800 stores in fiscal 2007. But in April, Yahoo reported the company adopted a new plan that would drastically slash those numbers. U.S. company-owned and licensed store openings would be limited to 400 per year in 2009 through 2011, while international openings in those years would range from 1,050 to 1,300.
Meanwhile McDonalds, already entrenched as a breakfast destination, has launched a direct attack on the coffee front against “snobby” Starbucks. So has Dunkin’ Donuts. It might well be that with current economic conditions that John Workingman can no longer indulge himself with a $3+ morning Joe.
So might what seems like an improbable prediction come true? Will Starbucks stores be harder to find than a TCBY? Today there are just 5 locations left in the entire state of Washington to get “The Country’s Best Yogurt”; 6 in Oregon. Hell, right now there are at least that many Starbucks locations within 5 minutes of my house!
Meanwhile I sit here with a cup of 7-Eleven piss water coffee wishing I had my usual Venti Americano with room for half-and-half and 4 Sweet & Low (Equal and Splenda be damned!).
Granted coffee is more entrenched in our society than frozen yogurt, so I wouldn’t write off Pike Place Blend just yet. Meanwhile, I’ll make note to get over to TCBY June 15 for my free Father’s Day cone. Of course if I have to spend $5 in gas to get to one of their few remaining locations, is it really “free”? Maybe I’ll just join the loyal holdouts for a Starbucks breakfast sandwich.
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