Seeing the future in the swirl of a coffee cup
The move marks a return to daily management for Mr Schultz, seen by many as the conscience of the company.
It has been a dramatic few months for the group and its fall from grace is a mirror of what is happening in general to the US economy where rising inflation and falling growth are becoming a distinct possibility for 2008.
Mr Schultz, who was chief executive from 1987 to 2000, said Starbucks would close underperforming US outlets and speed up international growth.
In the past 12 months, the share price has nearly halved, cutting the value of the world’s biggest coffee chain to $13 billion (€8.8bn), thanks to weaker growth in the US.
It is a far cry form where the group was back in April when Mr Schultz told shareholders at the annual general meeting strong growth has been the force behind the brand’s success.
The then chairman’s comments came in the wake of a 20% slump in the company’s share price from its 52-week high in November.
That resulted from a rash of negative headlines over fair trade issues, brand strategy and investor confidence in the group, which has a reputation for being tooaggressive and cynical in how it portrays itself as a fair trade dealer in coffee.
Critics say the company sets the terms with growers that it then brands as “fair trade”.
That kind of negative publicity hit the group’s Irish expansion when in 2005 the company was forced to open its first outlet in Dundrum Town Centre in Dublin, instead of in College Green, as objectors claimed the chain’s presence would result in a dumbing down of an historic part of the city.
It didn’t stop the giant coffee house chain, however, and it now has a sizeable outlet there.
Back in August, Mr Donald, who became chief executive in 2005, addressed the slowdown issue.
In a revealing comment he blamed slowing consumer spending, due to a weaker economy, as a key reason for the disappointing growth of 1% in consumer traffic for the previous quarter.
Falling US sales, soaring dairy prices and competition from fast-food rivals such as McDonald’s have been hurting the group also, analysts said.
From an Irish, and indeed an economic perspective, the slowdown in Star-bucks is more interesting for the salutary message it is sending us about the state of affairs in the American economy.
It is synonymous with the new brasher America where people regard dining out as their birthright and who thought nothing of paying $5 for a coffee — a few times a day in many cases.
But the harsh reality is that less punters are prepared to part with that kind of money when times are tougher, as they are in the US.
For Ireland the tribulations at the coffee group suggests tougher times ahead here also.
Fast food group McDonald’s has more than 70 stores here and employs 3,500.
It sources huge amount of its beef here and also exports €54m worth to supply its European restaurants.
Recently it warned that the US slowdown was causing it to suffer as well.
It reported sales at its American restaurants, open at least 13 months, were unchanged in December, which was well below estimates from analysts who had been predicting 2.8% growth for the period.
With Irish food habits increasingly aping those in the US, we can expect the difficulties hitting that market to migrate to Ireland if our economy slows to the extent that most analysts now believe it will.
