Starbucks to get rid of warm breakfast sandwiches

Howard Schultz made the announcement in his Wednesday conference call with analysts. "The scent of the warm sandwiches interferes with the aroma of the stores," he said. (Boy, is he right!) Stores will still offer warmed pastries. (Associated Press reports the no-more-warm-sandwiches news.) || You can listen to a replay of the call at this link.

** The warm sandwiches "are going to be out by year's end." In the meantime, they will be "de-emphasized."

** Serving sandwiches got in the way of employees' "ability to make the perfect shot of espresso." In other words, spending time on sandwiches took away from the focus on coffee.

** The sandwiches will be replaced with "a breakfast menu that delivers what our customers are asking for."

** "We're going to be in the lunch business; we're going to modify it."

** "We are bringing back our annual leadership conference." There will also be open forums for all partners.

** Re the $1 short coffee, Schultz reminds analysts: "This offering is just a test."

** Schultz also notes that "it has only been three weeks since we made leadership changes, but we have made significant progress."

** Although underperforming stores are being closed and new-store growth has been slowed, Starbucks is still a "growth company," says Schultz.

** Detailed turnaround plans will be disclosed at the March annual meeting.

Comments

Seriously!!!!!????

Yahoo!

Maybe he really is listening...

[BOSTON STARBUCKS REBEL]

Down with BREAKFAST sandwiches!

[Vicki Verona]

Just to clarify, WARMING OVENS ARE NOT GOING AWAY.......He is a business man and understands how much capital was used to implement warming. We are going to offer warming for pastries and lunch still

[.]

Does that mean we'll be able to buy large volumes of the sandwiches at clearance prices?

[Vicki Verona]

^ LOL. I can see it now when we get the action items for markdowns

The real question is whether there will be any effort to bring back the smell of actual *coffee* in the shops. I love the *smell* of coffee and I can't remember the last time I really smelled it in a SB.

[BOSTON STARBUCKS REBEL]

Or wait, what am I suppose to eat now for breakfast.

[.]

I think there will be a big effort to bring back the coffee smell. That's one thing Howard mentions again and again and generally what he wants, happens. Losing the mcmuffin aroma is a good start.

[BOSTON STARBUCKS REBEL]

Let's have a bonfire of breakfast sandwiches. The smell of burnt cheese never smelt so good! Burn, baby burn!

[BOSTON STARBUCKS REBEL]

If anybody can get me the locations of those 100 stores closing. Please, and thank you.

[erstwhile]

HOORAY. So glad my store isn't going to have to be remodeled just to shove an oven in it.

[Demonic Sweater]

I am only in the store for about 1 minute at a time and don't give a crap what the sandwiches smell like when cooking. I just like to eat 'em.

Also, automatic shots mean I don't have to wait. Is the new improved Starbucks experience going to include more waiting?

Maybe then I would care what the sandwiches smelled like.

Hey, Howard try two versions of Starbucks one quick-serve and one "experience"-serve. Isn't fast service a good experience?

[.]

"what am I suppose to eat now for breakfast?"

We've got a huge overstock of Chantico. We could mix it with protein powder and drip and sell it as a Breakfast Protein Power Drink.

[BOSTON STARBUCKS REBEL]

I guess burning all those breakfast sandwiches really worked. Ham burns best, GROSSNESS all the way!

do you REALLY feel that the sandwhiches are your only option? There is a pastry case you know.... If you want one of the sandwhiches go get a Sausage Egg McMuffin or something from McDonalds. I work at Starbucks now, I worked at McDonald's in High School and the sandwhiched are nearly the same.

Cheaper at McDonald's too

[harmaa]

I'm so happy! :D

Keeping the oven for pastries is great, too.

[embean]

I think bringing back Chantico would be a good idea...
protein shakes I like too, but doesnt that take the focus from coffee just as much? I don't know.

If we would just get rid of frappuccinos... Or at least give them a serious overhaul.... Then i could be happy.

[BOSTON STARBUCKS REBEL]

And the baristas REJOICED! *Beep beep* the cheese is dead, the burnt cheese is dead!

[Melody]

He says that the Annual Leadership Meetings are back (I'm not a partner) - Is this the store manager meetings that I once heard about eons ago? Did anyone else catch what he said about that?

[Dangerous Dan]

Maybe the breakfast sandwiches vexed employees, but it's the major thing that got me into the store in the morning. They are DELICIOUS...much better than the soggy McMuffins and more healthful (not healthY but at least not as fat-ridden) as Croissant breakfast sandwiches. Sorry, but SBUX isn't going to prosper on coffee alone. Real estate and overhead is too expensive...much more than small portable buildings alongside gas stations. (Who, by the way, have REAL baristas!) Midway through the call and SBUX shares are already down about 2% in afterhours trading.

[Melody]

Dangerous dan, What about toasted bagels? I remember when that was the only warm item you could get. Many stores (at least around me) still offer them.

He just said breakfast sandwiches "will be out by year end"

say what you will, Dan, but many MANY customers hate the sandwhiches too.

Um, not delicious at all.
And at least a McMuffin is actually made.
We just pull it out of the plastic wrapper and throw it in the oven. Gross.

[leeannaindiana]

and he did say they would be looking for healthier options that no one else is offering to backfill. and that they would still warm pastries.

my market is one that still doesn't yet have warming, so i wonder if we'll still get the ovens for warming pastries now...?

[Northern Latte]

Will the store managers being going on the leadership conference again? or just DM's? Did he say? My player isn't working.

[Vicki Verona]

I just sent a text message to about 75 people in my cell phone about the breakfast sandwiches, I'm getting 100% excited responses, even from DMs

I feel like we should all congregate somewhere and rejoice!

I'm about to crack a bottle of champagne.....this is the best news all week...now if only the Pats win on Sunday my week will be complete!!

re coffee smell.. There was an item on portal saying, "Be prepared to receive 5lb bullets of coffee instead of the 9oz prepacks you ordered." Don't know if this could be related.

[Dai]

mhm i am from Seattle and next door to my work place is a starbucks and a McD's... and i hate to swim against the flow but i am going to miss them.. they just tasted more homemade then the stuff that McDs sells.. but this is just me...

[Vicki Verona]

^ I dont think so. Although grinding coffee fresh every morning does give SOME coffee aroma, it quickly deminishes when you get your breakfast sandwich rush during your peak.

[Laurie Ross Clements]

The return of the intoxicating smell of coffee greeting me at the door is a big step to winning me back.

Laurie
AKA Strayed from Starbucks in Spokane

[Tall Guy]

I work in a neighborhood SB store and we sell a significant amount of breakfast sandwiches. I agree the quality was not exceptional but for the folks who want a quick, warm bite and a coffee on the way to the office now have great reason to stop at McDonalds to pick up a latte and sandwich. Not trilled to hear they are going away...although I am interested in hearing what the new breakfast is going to be.

[Elese]

Wahoooo! Add my name to the list of partners now eager to hug Mr. Schultz. I think this is a great idea, I'm glad the ovens are staying so that warmed pastries are still an option and I'm eager to find out what he is going to introduce in order to replace the breakfast and lunch items.

I also second the idea of completely getting rid of or drastically changing the frappuccinos.

Although now I'm slightly concerned about the pre-packs of coffee ... I hope those aren't going away.

Elese,
they ARE going away. REJOICE!
Fresh ground coffee for all!

[Vicki Verona]

Personally, I'd love it pre-packs went away and we went back to grinding "COD" not "COW" Thats how it used to be like when I was a barista. And as much as I'd love to see scooped beans again, I know it wont happen. But implementing more coffee culture into store design would be awesome to see. Like back in the day when they had bean displays at the "bean lands" that showed the life of a coffee bean from green to roasted.

[Laurie Ross Clements]

With the big and powerful brand starbucks has, it can enter into any business sector they want. But they need to be careful where they take that brand. It doesn't belong or fit in everywhere and it can get hurt or tarnished.

I'm sure some customers like the bfast sandwiches and I'm sure some stores sell a lot. That's not the point. This move, was a bad move in the first place. It caused damage to the brand and what it stands for. So going forward, some damage was done but its the right move to drop the prefab breakfast sandwiches. People like pizza, and some people may like sbux pizza and some stores will sell quite a bit. But it would be a bad move and tarnish the brand, as well as, the smell.

Refocus on COFFEE

My opinon is the food offerings should be simliar in each store, but also offer a local twist supporting the communites they serve.

For example Preist Lake, Idaho is famous for huckleberries. Having pasteries with north idaho berries not only localizes a big company like starbucks, but they will sell well. And having a huckberry sconce doesn't compromise the image, but rather embrace it.

Laurie

[lux]

Oh happy day! I hated those damn sandwiches.

i think all starbucks oughta have like maybe 5-8 types of sandwiches for lunch, i think most of the ones that have those are only the ones in barnes & noble & things like that, some bigger stand alone starbucks. ive never gotten a sandwich from starbucks but they look pretty good from when ive seen em, like some type of chicken on foccaccia, just have some dif sandwiches like that. they looked pretty big too. starbucks could gain a lot of income from having these type of sandwiches everywhere so people would eat there for lunch and get coffee along with it and or after they were done eating. they could be like a more limited version of panera at lunch.

[Dolce]

Lets give McD's our breakfast sandwich customers... good idea guys

I'm not the biggest fan of the sandwiches but our store sells a TON of them every day to business people who don't know how to make their own breakfast and want something that tastes worth their money. Our customers believe the SBUX sandwiches are a fortifying breakfast and are going to stop coming when we don't sell them anymore.

Here's what I'd like to see as a replacement to compensate for this change:

-Real espresso machines (not autos)
-Latte art classes and a lid station next to the bar so we can hand off bev's with the tops off so we can show off our art (like the indie places I love to visit)
-New line of bagels (from plain to everything and all in between) in addition to new lunch options that can be warmed in the existing ovens
-More focus on whole bean; maybe a presentation of the country of origin on the promotional coffee or a coffee tasting session where a coffee master presents the coffee with pairings and discusses with interested customers...

Any thoughts on these ideas? What would you like to see?

This is a double-edged sword. It seems like stores are a little addicted to the sales these puppies made, plus the fact (I think -- could be wrong) that they added labor.

What will replace them and will it be as time-intensive as the current breakfast program?

Also, I'm wondering, if they don't get a breakfast program transitioned before they end the sandwiches, how will this affect the bottom line? Surely investors won't like it next year when the heady feeling of change goes away after today and they're left with Q12009's sales being down compared to previous quarters.

Another thought is that clearly these things sell. I mean, there wouldn't be baristas being so vocal about preparing them if they didn't do well. I know from my own experience that 3 out of 5 customers in the line ahead of me order one of these things every day. There are even some customers on here that have noted that.

To the baristas, this is good times, until store sales drop and you lose even more hours.

That brings my last thought up: labor. Did he mention anything about this (I haven't listened to the entire call)? How can they roll out all of these training initiatives without increasing store labor hours?

That adds cost. That, plus the cost of a new breakfast program test and roll-out, the cost of flying out potentially SMs and DMs for an annual meeting minus the cost of closing some stores surely can't add up to a profit. And these are only the tip of the iceberg.

There is really nothing to see here, yet. Let's see what they say in March.

It seems investors are not content with this, either:

After Hours: 18.90 Down 0.32 (1.66%) as of 6:54PM ET on 01/30/08 [52wk Low: 17.66]

Howard also said at the annual shareholder meeting on March 19th, the company will lay out 5 specific, bold, consumer facing initiatives that will be a catalyst for change. I'm guessing one of these 5 initiatives will be free Wi-Fi

As far as breakfast sandwiches are concenered, they said on the conference call they only contributed a very small amount to revenue.

[KC]

I'm hoping one of the 5 specific, bold consumer initiatives for change is manual espresso machines either in specific stores in every area or manual espresso machines in all stores along with the current push button. The customer can then choose which one they want their drink made from. The manual machines can also be used to introduce a different espresso experience than some customers have had before.

[ensenadajim]

Well, let me give you a customer's view -
Howard Schultz made the announcement in his Wednesday conference call with analysts. "The scent of the warm sandwiches interferes with the aroma of the stores," he said. (Boy, is he right!)

Who are you kidding? You think the lunches will not interfere with that "aroma" that is a figment of your imagination? Starbuck's has not smelled like coffee for a very long time.

** Serving sandwiches got in the way of employees' "ability to make the perfect shot of espresso." In other words, spending time on sandwiches took away from the focus on coffee.

Sorry, but most Starbuck's employees do not have a clue about what a perfect shot of espresso is. Automatics just cannot deliver that shot in all situations. Poor excuse for getting rid of the warmed breakfast sandwiches.

** The sandwiches will be replaced with "a breakfast menu that delivers what our customers are asking for."

And what precisely is that? I am a customer and visit several Starbuck's and I have yet to be asked about what I would like. This is one of those imperial "we" situations where the customer is being credited for the decision while the customer has not been involved in any way with Schultz's imperial decision.

** "We're going to be in the lunch business; we're going to modify it."

And how will this affect that mythical coffee aroma that the breakfast sandwiches supposedly cover up?

This is a crock of Spanish-roasted coffee. Not worth drinking or believing.

j.

[Allie]

I like your ideas Dolce, especially the ones about latte art classes and a new line of bagels. I mean, come on we have like a million zillion different kinds of coffee cakes... some that don't even taste like coffee (coughcherrylemoncough) and our breakfast pastries are limited to two kinds of bagels, muffins, and scones. I would love to see a strawberry bagel =D

Wow. I cannot believe that the very week my store gets sandwiches, he announces that they're fazing them out. Jeez.

[Lab]

#1) I think this focus on the presence (or absence) or warm sandwiches in shop is silly, and largely a pet project of a small % of the bux customer base. This site is in no way representative of the standard bux customer - the fact that we frequent here means we are, to a certain degree, much more "involved" (I say this in a kind way - some might call us obsessed).

The focus on the sandwiches conjures up images of Roman patricians in the city of Rome lamenting the decline of morality and decorum as 500,000 barbarians crash into Europe. In other words, it's an act of self-deception, focusing on these little things and ignoring the larger problems.

#2) Starbucks is moving more and more into a very dangerous 'wedge' position with its customers, as it is simultaneously encountering loss of brand exclusivity AND price resistance. It's like stagflation on a firm level: each force by itself is a problem, but put them together and you are in a huge 'pickle'.

For example: I see comments about 'raise the price to make things more exclusive'. Indeed, bux will 'exclusive' itself out of the game if it does that. You can't suddenly restore a brand's cachet by racheting up its prices. You have to give people a REASON to engage those prices. Having 15,000 stores doesn't easily enable you to match a higher price with such an image.

Moreover, there is a ton more price resistance out there for any given level of income. This is what happens as any product switches categories from unique good to commodity. An extreme example (which bux isn't at yet, but it's heading there): no matter how wealthy a customer you are, you don't go after a bag of $10 flour when the market rate is $2. Heck, you might even spend $3 or $4 for imported flour from Italy or Poland or whatever. But, after a certain point, you look at the bag and say 'it's only flour'

#3) The barbarians are at the gates, literally. Dunk D continues to do extremely well with their coffee push, and if you watch them, they expand their offerings and advertising a little more every season.

People have been way too dismissive of McD's. This is the Microsoft of the food world. They aren't necessarily going to get it right the first, or the second, or the third time. But if they see a source of untapped revenue, they will keep on after it again and again and again until they tap the market. Because they have the time, the deep pockets, and the wherewithall to do it.

#4) Revenue is crack. Plain and simple. Several comments already alluded to this. It is VERY hard for a company to EVER accept a short (Let alone medium) term diminishment in store revenue in the name of some ephemeral long run growth plan or image restructuring or 'buff' of brand exclusivity. Hell, parse the language in the announcement: all they really said was 'in less than 12 months, we're going to replace the current sandwiches with other food, and also increase our lunch sandwiches' ... net gain: more food / more sandwiches. This almost comes off as a PR move more than anything else.

That is all for now. I remain concerned about the future viability of the company. All it will take -- ALL it will take -- is the emergence of a high-end national coffee phenomenon, to really put the bux in a hard place. Don't think for a minute that entrepreneurs and capitalists aren't looking at the figures and thinking 'there's great potential here'. I hear this all the time from small and medium size coffee shop owners. That's where they see their place in the next 10 years. If one of them takes off, then you'll have pressure on the low, medium, and high end chipping away at the whole demographic.

[ensenadajim]

Whoops, missed adding this to the above:

What does this mean to me?

It means that three to four days of the week, I'll not be at Starbuck's in the morning - instead, I will be across the street spending that same money in an independent coffee house on their breakfast burrito - where I would really prefer the Starbuck's breakfast sandwich or wrap.

j.