Walking away from Starbucks...

I read the (supposed) real reason that Starbucks ad agency walked away from the Starbucks account on Advertising Age this morning. There has been substantial upheaval at Starbucks recently, starting with a return of the original CEO, job losses, and store closures. This is all a result of poor financial performance starting last year. All of this has resulted in Weider & Kennedy (Starbucks ad agency of record) has decided to quit the business... not something typical of agencies.

The reason that the Ad Age article gives is that:

...Starbucks was simply a very frustrating client for Wieden, an agency that other marketers have described as unusually honest in its communication with clients. Other agencies that have worked with Starbucks have felt frustration with the marketer too. Rich Silverstein, co-founder of Omnicom Group's Goodby, Silverstein & Partners, which did two stints representing Starbucks, said much of the fault lies with the mercurial Mr. Schultz. "He does not appreciate advertising," he said. "Any agency that comes in has one foot out the door already."

The thing is, this may be the reason that Wieden & Kennedy quit working for Starbucks, but its not the reason Starbucks is having problems. The problem is that the "brand promise" of Starbucks is not being fulfilled and that's not an advertising problem... its a coffee problem. Or rather it's an experience problem.

Starbucks growth has been its own worst enemy. As the commoditization of the atomosphere has been spread across the U.S., the folks who first supported Starbucks are now turned off of it. How to fix this? Localization - not advertising. Coffee Shops are one of those businesses that has to fit very specifically with the local market demands. In many ways, Starbucks in Malibu looks and feels the same as a Starbucks in Buffalo, but what do you think? Are people in those two cities the same? If so, put someone from Malibu on a plane to Buffalo in January!

The other part of the problem is the coffee. I have argued that Starbucks roasts are all too similar to each other. A mild coffee gets the same (or at least very similar) roast as a robust coffee giving it a burned flavor. I have also argued that this reduces the quality of the Starbucks coffee itself.

So, Starbucks has found itself becoming a commodity with (arguably) mediocre quality beverages in a tough economic time when "luxuries" like $3 lattes are getting trimmed back. This is not advertising problem - Wieder & Kennedy likely recognized this, and gave up the fight rather than be doomed to failure in Starbucks marketing department's opinion. That would be my guess for the REAL reason they walked away.

Fortunately for Starbucks, Howard Schwartz (returning CEO) knows his stuff, and has taken some steps to try and fix this already. Perhaps he will fully recognize this in time to save your favorite Starbucks store.