Wait Time Curbs Sales at Starbucks
Starbucks is getting hit today, on same store sales at the lower end of the range. Q3 earnings (July 2), rose 16%, but comparable-store sales only rose 4% in July.
I cannot answer what its like at the rest of the chain, but the Starbucks in my building has such a long line every morning I simply bypass them. (I won't even waste my assistant's time on line there).
I see this everyday on my way in, and finally decided to take a snap of it:
click for larger photo
Yes, that's a line out the door and then down the block . . .
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UPDATE: August 3, 2006 12:46pm
So I decide to send the above photo in to Liz Claiman and Bill Griffeth of CNBC. I have no dog in this fight (i.e, no position in Starbucks), I am just annoyed I can't get any in the morning.
CNBC uses the photo, and mentions the blog -- traffic spikes! -- but even more amusing is the stock's reaction: It makes up about half its losses.
A friend calls it "The Big Picture rally" . . .
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UPDATE: August 4, 2006 2:04pm
Its another edition of READ IT HERE FIRST: The WSJ runs similar pictures of long lines at SBUX:
Late Wednesday, the chain said sales in stores open at least 13 months, a closely watched measure, rose just 4% in July, that smallest increase in nearly five years. That followed several months in which same-store sales, while higher, still fell below the 8% to 10% to which investors had grown accustomed.
While a 4% sales increase would be considered terrific at many restaurant chains, the Starbucks news prompted an investor selloff. Even though the company reported Wednesday that third-quarter net income rose 16%, its shares yesterday tumbled 8%, or $2.66, on heavy volume to $30.64 in 4 p.m. trading on the Nasdaq Stock Market.
Executives seemed baffled by the fall, saying that the real news was their plan to open at least 2,000 stores during the current fiscal year, which ends Sept. 30 -- at least 200 more than previously announced -- and move forward on expanding in India and Russia. "Those are the indicators for us that we're in control of our business," Chief Executive Jim Donald said in an interview.
Starbucks blamed the weak July sales growth on unexpectedly heavy demand for cold, sweet Frappuccinos in the morning, spurred by heat waves across the country. Frappuccinos take longer to prepare than most drinks because they are mixed in a blender, topped with whipped cream and drizzled with sweet toppings. That made Starbucks's frequently long lines even longer, driving away customers, the chain said.
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Sources:
Starbucks Earnings Rise 16%; Wait Time Curbs Sales Growth
JANET ADAMY
WSJ, August 3, 2006; Page B2
http://online.wsj.com/article/SB115455211119624932.html
Are Frappuccino Woes or Frugality To Blame for Starbucks's Stumble?
JANET ADAMY
August 4, 2006; Page A1
http://online.wsj.com/article/SB115462259310725842.html
Thursday, August 03, 2006 | 09:15 AM | Permalink
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» Then Again, Those Lines At Starbucks Are Pretty Damn Long from DealBreaker.com
We literally howled with laughter this morning when Starbucks said it had lost revenues because it was making so many of those sugar-coated cold drinks in the hot summer. But maybe we were too quick to judge. Look at... [Read More]
Tracked on Aug 3, 2006 3:26:32 PM
Comments
Barry: pretty funny picture.
What say you regarding the Europeans today? Specifically, the BOE?
Posted by: WhateverMan | Aug 3, 2006 9:37:38 AM
Nothing like a $4 latte and $3 muffin to start your day off right! Healthy for the body and the wallet.
Posted by: Mike M | Aug 3, 2006 9:39:33 AM
Two things:
1. Those people are way too kind, in my neck of the woods, you would have people much closer together.
2. You know what the answer to longer wait lines is -- more starbucks!!
Posted by: Abhay | Aug 3, 2006 9:48:38 AM
So, does this picture lend support to the claim it takes too long to make a Moca Latte?
Posted by: Chief Tomahawk | Aug 3, 2006 9:52:12 AM
That's the same line that is outside Sprinkles in Beverly Hills all day long except they only sell cupakes.
Posted by: lola | Aug 3, 2006 9:54:38 AM
Wonder how many are waiting in line for the 700+ calorie Banana Coconut Frappuccino.... maybe they should run around the block a few times first.
Posted by: emd | Aug 3, 2006 10:09:43 AM
Leads me to the old STYX song
"Too Much Time On My Hands"
Posted by: Marko M | Aug 3, 2006 10:10:12 AM
"Wonder how many are waiting in line for the 700+ calorie Banana Coconut Frappuccino.... maybe they should run around the block a few times first."
Given block sizes in New York City, you'd have to run around the block five times to equal one mile.
200 lb man running @ 8 MPH = 160Cal/mi
So, one would need to run around the block 22 times to burn off that Banana Coconut Frap. Given how long that line is, though, you'd could probably finish your run before you got to the front of the line.
Posted by: Bynocerus | Aug 3, 2006 10:19:05 AM
That picture reminds me why I'm not a coffee snob. Go down the block to the guy in the trailer. It's faster and cheaper.
Posted by: Royce | Aug 3, 2006 10:26:21 AM
At the Starbucks nearest to me it's very hard to get a seat when you're laptoppin' especially in the evening. It's packed with a lot of kids who'll be buying $5 coffee for the rest of their lives. The second closest one has a drivethrough that usually has 10 cars in line.
So I'm saying I wish I bought SBUX a couple years ago when I thought about it. Maybe it'll go down another 10%.
Posted by: Brian | Aug 3, 2006 10:28:52 AM
" (I won't even waste my assistant's time on line there)."
I like that, can I nominte it for snark of the day?
Posted by: me | Aug 3, 2006 10:45:32 AM
sheeple....
Posted by: MrMarket | Aug 3, 2006 10:45:46 AM
Now I know there are too many NYC Downtowners with too much $ and too much time on their hands. "My' Starbucks in 93101 gives away coffee to homeless people. Nice group to meet 1st thing in the AM!!!!!!!!!!
Posted by: snook | Aug 3, 2006 11:05:28 AM
Every time I see people lined up to spend $4 for a cup of coffee I wonder how many of them have a well funded IRA or 401k.
$4 once a day, add in some compounded interest (say 8% from a stock fund), and in 20 years you're talking some real money! $67,316 to be exact.
Posted by: spinning head | Aug 3, 2006 11:08:14 AM
Isn't coffee supposed to make you more productive during the workday? How are you more productive if you are spending an extra half hour in line?
Posted by: Rusty | Aug 3, 2006 11:13:36 AM
One other thing - when is the Long Tail going to start kicking Starbucks' ass? It's taken too long already. When you break it all down, the only differentiation that people are standing in line for is printed paper cups.
Who is with me on starting a "design your own to-go cup" venture?
Posted by: Rusty | Aug 3, 2006 11:25:43 AM
This is what Dunkin Donuts perfected in the northeast - incredibly fast service. In my suburb growing up, I used to wait in line in the drive-thru, which had at least 5 cars in it, and still get my coffee and donut in less than 60 seconds.
Now that I live in a city without Dunkin Donuts (St Louis, MO), I goto Starbucks b/c its the only place with ice coffee in the summertime. However, I ask for just ice coffee and they even have the gall to ask me if they want me to leave room for cream. Who gives a damn? Seriously. I understand the "spoil the consumer" business model, but at some point I dont want to be spoiled, I just want a cup of coffee.
Posted by: joe | Aug 3, 2006 11:27:12 AM
how hard can it be to buy your own espresso machine?? you don't have to wait in line, you can have a coffee every 5 mins, and you're no longer being ripped off by paying $4 for a coffee that cost maybe 10 cents to make.
Posted by: hans van deun | Aug 3, 2006 11:47:47 AM
Starbucks is not in the coffee business. One cup of their regular coffee or cappuchino coffee will tell you that.
Ever notice about half-way down a cup of Starbucks coffee a slight bitter taste? Well, it's there on purpose. It's the way they roast their beans. They are purposely overcooked (burnt) because it's a formula that America seems to like. Americans simply don't know (nor understand) good coffee.
So, what do I like and what do I consider good? #1) IllyCaffee makes the worlds best expresso coffee. Everyone in Europe, and many in America, know it. First, it's the fine Arabica bean that is harvested in So America and Africa and then perfectly roasted, the Italian way. Then, they pack it in sealed containers using inert gas for freshness. Now, it ain't cheap. But, the family run company isn't as big as my second favorite: La Vazza, which is probably the top seller in Europe. La Vazza makes drip, where Illy really doesn't.
Now, here's the beauty of Italian roast expresso: IT IS FLAVOR FILLED, BUT NOT CAFINE SPIKED. I have had many an expresso prior to bed....no problem.
When in San Francsico, I suggest people visit Caffe Trieste, a family run "coffee house" opened in 1957. There, they roast and sell their own coffee. It's where cafe society all began during the beat generation in the 1950s, and a personal favorite of mine since 1977.
BTW, I just returned from Vienna and Prague, where everyone serves great smooth cappuchino!
Posted by: Larry Nusbaum, Scottsdale | Aug 3, 2006 11:48:02 AM
Caffeine
Posted by: Larry Nusbaum, Scottsdale | Aug 3, 2006 11:52:22 AM
You are all missing the point........
This is a big pullback on a company selling addictive drinks. This isn't about YOU!!!! You guys are all playing the latte factor.
For me, and for you, it should be about the LINES.
EVERYONE needs to go to the Pacific Northwest just once, AND to figure out coffee. Dunkin' Donuts for coffee? REALLY? There is no accounting for taste.
For a culture that drinks so much of a product, we are pathetically ignorant of what constitutes good coffee, properly made. This not to say Starbucks is the ideal, it isn't, but Dunkin' Donuts isn't even in the same universe.
Some coffee purists would poo-poo the icy summer drinks. I don't. The Frappathingies are to get the people paying into my retirement to stand in line when it's hot.
The hot coffee drinks get them to stand in line and to pay into my retirement when it's cold out.
However, these line standing customers DO know coffee from the colored canary piss that passes for coffee almost everywhere else.
Quick, someone figure out how much an investor is making on that line.......
Posted by: Craig | Aug 3, 2006 12:02:51 PM
I think Barry knows a little bit about good coffee too.
http://bigpicture.typepad.com/writing/2004/04/ahhh_coffee.html
Posted by: glenn | Aug 3, 2006 12:07:15 PM
"However, these line standing customers DO know coffee from the colored canary piss that passes for coffee almost everywhere else."
No.....they don't. Not if they are in line for that mud.
Posted by: Larry Nusbaum, Scottsdale | Aug 3, 2006 12:13:59 PM
BTW, Illy is predominantly Brazillian Cerrado and is purged of oxygen with inert nitrogen which prevents oxidation. It is excellent. Brazilian Cerrado is suited for their roast. Nobody buys more top quality Brazilian coffee beans than Illy.
I roast my own which kills all other sources for taste and freshness, including Illy. I try a different varietal every day. $4.00 a pound green. Takes me about 15 minutes to roast 2 days worth while I read this blog or trade.
Also, Starbucks sells more dairy products than coffee by far. Some don't like a full city roast, so Starbucks also offers their "lightnotes" roasts which tend to be Central American varietals like Costa Rican and Guatemalan that are better suited to a lighter roast.
Not all Starbucks coffees are dark full city/vienna type roasts, but it is by far the most popular.
The worst espresso I ever had was in New York City, before Starbucks existed there. Made all Starbucks taste like Illy!
Posted by: Craig | Aug 3, 2006 12:18:20 PM
They aren't!
They are standing in line for a Frappacino.
And to donate to my retirement.
When they stand in line for "coffee", it will be more for dairy products than Coffee. And as a wintertime comfort pick-me-up.
The Starbucks roast is designed to stand up to the drinks they offer, which are variations on the European coffee theme, with milk, chocolate and flavored syrups.
All those things would bury Illy flavor.
Illy is meant for REAL espresso, cappuccino.
That isn't what those customers are waiting in line for.
Posted by: Craig | Aug 3, 2006 12:31:43 PM
