Starbucks is struggling

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Good morning – here are your five chart for the day.

So, I’m in Boston for a couple of weeks before we head back to Switzerland when the children start school in mid-August. What did I do this morning? I went to Starbucks. It’s not because I have any great affection for the place – I simply needed a coffee. The other day I went to Nero in Boston, another chain I know from the UK. Again, there’s nothing particularly special about it either. And that’s the story.

Starbucks emerged at a time when Americans began drinking less soda, creating a gap in the market. Starbucks filled that gap by offering caffeine, sugar and fat all in one beverage. They became the modern-day replacement for soft drinks, disguised as coffee, and for a while they were all the rage. Now, though, they’re just another coffee shop and that’s what the first chart shows.

CHART 1 • Global comparable sales growth declining

The coffee giant that taught America to pay $4 for a latte is running out of steam. Starbucks has now posted six straight quarters of shrinking same-store sales, with its latest Q3 results showing a 2% decline globally. The North American business – its profit engine – saw transactions drop 3% as customers balk at complexity and queues.

New CEO Brian Niccol is throwing out 30% of the menu and cutting 1,100 corporate jobs in his "Back to Starbucks" strategy. But here's the rub: while Starbucks fumbles with its identity crisis, rivals are eating its lunch. Upscale competitors like Ceremony Coffee are stealing the artisan crowd, while budget chains capture the morning rush. The middle ground Starbucks occupies is becoming quicksand – too fancy to be fast, too basic to be special. With home coffee machines delivering barista-quality brews for $1 a cup, the question isn't whether Starbucks can turn around. It's whether the $4 latte era is simply over.

Source: Barchart.com

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