In 2016, Starbucks CEO Howard Schultz said he wanted to open a thousand Reserve coffee bars—essentially, high-end artisanal versions of the company’s more traditional coffee shops.
New CEO Kevin Johnson is dialing back those aspirations, the Wall Street Journal reports. “One thousand was an aspiration,” he said. Instead, Starbucks (SBUX) will test six to 10 Reserve stores to see if they can generate the necessary returns before they go any further.
Starbucks is certainly to thank for priming consumers for higher priced coffee drinks over the past two decades. But with third-wave coffee‘s worldwide takeoff, Starbucks’ mass-produced products now seem affordable—and basic—by comparison. Comedians in the 1990s loved to joke about the rise of the $5 cup of coffee. Today’s artisanal coffee roasters make Starbucks seem cheap by comparison.
After the company began missing sales targets in the past few years, Johnson announced Starbucks wants to achieve 3% to 4% in same-store sales growth in 2019. That would be unlikely to happen if core customers are alienated by higher prices as more affordable coffee offerings from places like Dunkin Donuts and McDonalds continue to improve in quality.
Schultz believed that the exceptional experience offered by high-end destination retail stores would draw back consumers who had abandoned malls, while the higher prices would also bolster Starbucks’ bottom line. Johnson’s new, slightly more sober approach, acknowledges that Starbucks might not be able to conquer the third-wave coffee market after all.
