Starbucks’ Slowing Growth
According to the Friday, August 04, 2006 edition of the Wall Street Journal, Starbucks??? unwavering growth finally, well, wavered. While still on the ???growth??? end of the stock game, sales in stores that have been open longer than 13 months only grew 4%, falling well short of the standard 8-10% growth to which they had been accustomed. According to the author, Janet Adamy, there could be a number of reasons: the unbelievable growth of Starbucks??? chain has finally reached a ceiling; or that customers are cutting out extravagances, like $4.00 a pop coffee drinks, when the market gets tough, to name two.
Financial analysts intimated that Starbucks???s expansion in more rural markets reaches consumers more likely to cut out small luxuries when the money gets tight. Also, the number of breakfast coffee drinkers is on a downward trend from 48.7 % in 1990 to 37.7 in 2005. Starbucks spokespeople have blamed the lag in sales on longer lines due to the ???unexpectedly heavy demand for cold, sweet Frappuccinos in the morning spurred by heat waves across the country. Frappuccinos take longer to prepare because they are mixed in a blender, topped with whipped cream and??? toppings.??? The reported lagging sales resulted in an investor sell-off, and stock prices fell. While Starbucks still does better, growth-wise, than most other established restaurants, one has to wonder if the company???s seeming invincibility will last much longer.
Starbucks has also announced plans to open at least 2,000 new stores before the end of the fiscal year, September 30. The up and coming markets for Starbucks? India, Russia, perhaps Brazil. The company states that their coffee drinks are an affordable luxury, and despite troubled economic times, they expect to keep growing.
-The Wall Street Journal, Vol. CCXLVIII, No. 29
August 4, 2006 ???Are Frappuccino Woes or Frugality to Blame for Starbucks???s Stumble???? Author: Janet Adamy
