When Starbucks made its New York City debut in 1994, preservationists were fearful that a franchise might displace neighborhood coffee shops. But no less a cultural custodian than the New Yorker predicted the company would never take root because, as they said, "New York is coffee." Starbucks instead became Seattle's answer to dandelions.
While its success here had been linear thus far, the labor market and increased competition have inflicted growing pains. To staff more than 100 stores in Manhattan alone, Starbucks relaxed its hiring standards. (Remember the old crews of college kids behind their counters?) If this somehow weakened their service, it shouldn't have affected their product. How could a lesser-educated employee weaken a cup of coffee?
Alas, to expand in perpetuity Starbucks wanted to speed things up and dumb things down. That is why the company installed those automated espresso systems in their stores. And as the company's CEO Howard Schultz specifically confessed to in a recent and widely discussed memo critical of his coffee's quality, they stink.
Getting a first-rate shot of genuine espresso requires (1) a fixed amount of coffee (2) ground to the proper calibration with (3) near-boiling water (4) pumped through the grounds for 18 to 20 seconds. The original Starbucks system for this process was called the Verismo, a semi-automatic contraption that semi-automated those four components.
The Verismo took care of steps three and four, leaving one and two for the staff. By comparison, the fully-automated machines found in stores today take care of all four steps, so that ground grounds fall into a filter without any human intervention. Although it is not immediately evident why, this leads to inconsistencies that even mocha drinkers complain about.
I spoke to Starbucks' Manager of Equipment Development Larry Eister about this very matter almost six years ago. "It is not a problem we are unaware of," he said.
The problem, evidently, is that when grinding and packing espresso beans manually, it is possible to note subtle variations in their fineness. A trained bar worker can make adjustments to correct for variance, while the automated machines cloak this part of the process. As a consequence, undesirable degrees of coarseness go undetected.
Starbucks cited a mountain of data showing the new system capable of evenness. "It's a training issue," Mr. Eister continued. "Once technicians learn how to properly administer [step two] on the new machines, it will be resolved."
That was back in June 2001, and according to a long-time Starbucks employee from my local store, "The only reason people stopped complaining is because they got used to it.
Sensing opportunity, McDonalds - normally at the vanguard of automated food preparation - took aim at the coffee franchise and came up with a freshly made product that acquits itself tastily, according to no less a custodian of quality as Consumer Reports.
In this new market environment, investors are atwitter as to whether Starbucks can reach the astounding 20 percent revenue growth that Mr. Schultz has set as its benchmark.
Here investors should recall that equipment development manager I spoke to and specifically his reference to training a "technician," a revealing verbal split from the more artisanal sounding "barista." Anyone who has followed the instructions on a home machine knows that espresso is more art than science. Technicians read the water meter and pump gauge; craftsmen rely on the intangibles. It's the difference between a Ford and a Ferrari. Henry made fine automobiles; Enzo did better without the assembly line.
The quality discrepancy vexing Starbucks is purely a function of industrial advance. One can expect a consistently functional product via standardization. But there is a reason Ferraris cost more than Fords.
There also used to be a reason Starbucks charges upwards of $3 for my preferred coffee drink. But the company forgot one fundamental of this town: New Yorkers expect quality when they're being overcharged.
So the takeaway message from New Yorkers to Howard Schultz would be: Feed our addictions, not Wall Street's afflictions. Because in the end, the financial analysts whom investors are fearful of disappointing are themselves unapologetic coffee snobs, and those overworked, overpaid, and overtired New Yorkers would look kindly upon any company that serves them a better product to help get them through long days. They don't call the good stuff black gold for nothing.