A Losing Battle For The Latte

...as consumers cut down on cappuccinos for the credit crunch


Starbucks is closing 600 U.S. coffee shops with the loss of 12,000 jobs, up dramatically from its previous plan of 100 closures.

The move comes as consumers tighten their belts amid worsening economic conditions and cut down on cappuccinos and espressos.

The chain, which has 650 outlets in the UK, is paying the price for the rapid expansion which took it from 84 American branches in 1990 to more than 10,000 now.

Some are so close together they 'cannibalise' each other's customers. Of the stores slated for closure, 70 per cent have opened since 2006.

To put it another way, Starbucks is closing 19 per cent of all U.S. company-operated stores that opened in the last two years, Chief Financial Officer Pete Bocian said during a conference call.

Now under-performing branches are to be closed over the next year. The news led to a 3 per cent increase in Starbucks shares on the New York stock exchange.

So far the company has not hit any such problems in Britain, where it is second in size only to Costa, which has 700 outlets.


But it recently came bottom in a taste test of the main High Street coffee chains.


The 500 additional stores set to be closed had been on an internal watch list for some time. They were not profitable, not expected to be profitable in the foreseeable future, and the 'vast majority' had been opened near an existing company-operated Starbucks, a spokesperson said.

Some analysts had wondered whether Starbucks' explosive growth in the U.S. would come back to haunt it as the market became saturated.

But before yesterday, the company avoided acknowledging that saturation was an issue, and pinned weak financial results and adjustments to new store openings on the economy.

A spokesperson said that between 25 per cent and 30 perc ent of a Starbucks shop's revenue is cannibalized when a new store opens nearby, and that the closures should help return some of that revenue to the remaining stores.

Starbucks still plans to open new stores in fiscal 2009, but it has cut that number in half to fewer than 200. The company did not adjust its plan to open fewer than 400 stores in 2010 and 2011.

At the end of March, there were 16,226 Starbucks stores around the world. The company operates 7,257 of those stores in the U.S. and 1,867 abroad; the remaining 7,102 locations are run by partners who license the Starbucks brand." Daily Mail.co.uk


I am not walkin two blocks to find a Starbucks! If it isn't on the corner then I'll just have to make do with the office vending machine![/b]