Has Starbucks Reached a Tipping Point?
An entire generation of American consumers has grown up with a Starbucks nearby. In some neighborhoods, there’s a coffee shop every few blocks. And, in certain spots, there are actually locations right across the street from each other. Starbucks has, essentially, become the “McDonald’s” of coffee in the United States. But recent events indicate the brand may have reached a popularity tipping point.
Sales are slowing, though the company insists they’re not in a slump. Shares may have dipped a bit, but sales are still growing, just at a slower rate than expected. But, when you’re Starbucks, a slower rate of growth is tantamount to stagnation.
The company has been experiencing incredible growth over the past few decades, expanding and selling in record numbers. The growth was so outstanding and so consistent, it became the norm, the expectation. Now, numbers that other companies would find wonderful are, at Starbucks, considered disappointing.
But there may be more to the reports than just a reaction. There may be some writing on the wall. Consumer tastes are slowly shifting. Not that people are drinking less coffee, but Starbucks’ “cool factor” is slowly diminishing. This is happening as other brands are ramping up the competition.
Dunkin Donuts recently announced plans to make a brand-shifting push further into the coffee space. That will put added pressure on Starbucks sales at shops and on grocery shelves.
The actual numbers involved are hardly any reason for anyone at Starbucks to panic, but they could suggest a tipping point. It’s entirely possible Starbucks has effectively saturated the current market and is experiencing a minor shift as things settle into a different status quo. If that’s the case, the brand challenge for Starbucks will shift to maintaining current customers and trying to win back those who have defected to Dunkin and other brands.
This is not a position Starbucks has been in for some time, but it’s not one they are entirely unfamiliar with. The company spread quickly, but it did so while actively shifting consumer tastes as much as responding to them.
The rise of Starbucks was an incredible American brand success story, and they can leverage that energy and story to maintain market dominance in this transition period, if that’s, indeed what they’re facing.
It’s possible all of this is just a minor blip in an otherwise stellar past two decades for Starbucks. Even if that’s the case, the competition is starting to rise, and Starbucks will need to be ready to meet it head on.
Ronn Torossian is the Founder and CEO of the New York based public relations firm 5WPR: one of the 20 largest PR Firms in the United States.