The decline of the empire of Starbucks

26 July 2008

Matthew Lynn says coffee is the pure brew of capitalism — as the credit crunch bites, no wonder the world’s most ubiquitous coffee-house chain is heading for trouble

In Christopher Guest’s witty canine mockumentary Best In Show, there is a line of dialogue that tells you everything you need to know about the world’s biggest coffee chain. ‘We met at Starbucks,’ says a woman character of her current romance. ‘Not the same Starbucks, but we saw each other at different Starbucks across the street from each other.’

Not many companies are so instantly recognisable that their brand names can be dropped straight into a movie without introduction. Nor are there many whose ubiquity could be the punchline for a gag. Indeed, there is probably only one: Starbucks.

But, quite possibly, not any more. For the first time since it was founded in Seattle in 1971, the company that introduced the world to the double mint mocha decaf skim latte is on the retreat. Its stock price has been hammered. Its key founder has been hauled back to restore the old magic. It is experimenting with new products to revive flagging sales. And, most significantly, it has announced that 600 of its American shops are to close, the first major cull since it was founded. For the first time, people are starting to ask if the caffeine empire is about to fall.

If so, it will be as good a symbol as any of the closing of an era of capitalist exuberance. You could have an interesting debate about which was the most iconic business of the last couple of decades. Microsoft was the richest, and Apple probably the coolest. But, for an exercise in pure marketing, for the chutzpah involved in turning frothy milk and hot air into one of the most powerful brands in the world, it would be hard to beat Starbucks.

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