Starbucks Faces a Brewtiful Disaster, The CEO’s Plans Aren’t Working

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Transcript:

[00:00:05] Doug McIntyre: Starbucks hired a guy, uh, Brian, is it Niccol? I don’t know how to pronounce his last name, but, you know, he pitched himself as the greatest turnaround artist in the history of fast food. He actually did do a great job at Chipotle (NYSE: CMG). And Taco Bell (NYSE: YUM). Talks about it all the time. Moved over.

[00:00:23] Doug McIntyre: Starbucks is still a train wreck. You know, he, he keeps saying it’s gonna get better, five straight quarters. He is just done some fabulous things. All the baristas have to wear outfits. They’re the same.

[00:00:35] Lee Jackson: They were on strike. I literally saw them striking over what they had to wear.

[00:00:40] Doug McIntyre: They are going on strike because they have to wear, he’s, what he’s done is, is he’s done all this stuff that’s really just, you know, it is just ball.

[00:00:53] Doug McIntyre: You come out with a list of things that you give to investors and say, I’m gonna do all these things. You, you can’t come into Starbucks and use our bathrooms, uh, or wifi, or, right. We’re gonna use where the, the bathrooms are gonna, whatever it is. None of them has to do with why people go to Starbucks or don’t people go to Starbucks because of how long it takes to get a drink and what it costs.

[00:01:18] Doug McIntyre: Okay. I don’t, it isn’t a communi, you know. 20 years ago when I’d go into a Starbucks, there were, you know, cushy chairs and people would go there and they’d bring their kids. Those days are over guys. It’s not, those days ain’t coming back. No. So the idea that he’s gonna recreate the community coffee houses.

[00:01:36] Doug McIntyre: Is is nuts. He can’t bring down prices because the price of coffee, which is his major ingredient. Yeah, it’s been difficult. You have to have a long-term futures contract. He, I know that they do have, look, they do have contracts with growers. I get it. But overall, the price of coffee, because of what’s happened in West Africa, which is the, where most of it comes from, overall, the price of coffee is moving up.

[00:02:02] Doug McIntyre: They have chocolate, they have sugar. I mean, a lot of the stuff that they put in to their products is, is rising right now. They have an unhappy workforce. They have an unhappy workforce. Really tough to do a great job with an unhappy workforce.

[00:02:20] Lee Jackson: Yeah, it’s not easy. Well, you know, I, I read an interesting article the other day and, and you had brought this up when we’ve talked about Starbucks before, you know, where people like to go get coffee, McDonald’s of all places, and, and I saw the guy that had, you know, shepherded the.

[00:02:38] Lee Jackson: McDonald’s coffee for years. He said, oh, we have a special way to brew it. And we give these good Arabica beans, however it’s pronounced, you know, and, and apparently it’s become a new favorite. You pointed that out and I, I, I saw them talking about that yesterday.

[00:02:52] Lee Jackson: And if that’s indeed the case for people just going to get a coffee, uh. Starbucks is doomed because? Because that was really the initial reason everybody went to Starbucks 30 years ago. It was to get a coffee, you know? And you also pointed out, and I thought this was very astute, the young, don’t give a damn coffee.

[00:03:12] Lee Jackson: Black tastes like crap. I want a Red Bull, or I want a Monster (NASDAQ: MNST), or I want something like that, which you were exactly right about. So Starbucks really seller of the Starbucks.

[00:03:22] Doug McIntyre:  Starbucks is getting squeezed over here. You’ve got McDonald’s and Dunkin Donuts. Yeah. What I would describe as the traditional coffee drinker.

[00:03:31] Doug McIntyre: Yeah. They’re getting squeezed Starbucks. You’ve got, uh, Red Bull, the 5-hour Energy drink. Yep. You’ve got all this stuff. Celsius the drink it’s got. Yep. It tastes good. It’s got nothing but, uh, caffeine in it. Now, who is the US spokesman for Celsius?

[00:03:52] Lee Jackson: I, I have no idea. My son could be, ’cause I, he always has that.

[00:03:57] Lee Jackson: My son,

[00:03:58] Doug McIntyre: athlete, my son, the famous athlete is one of the spokespeople for Celsius.

[00:04:02] Lee Jackson: Okay, well there you go. Because kids can relate to that.

[00:04:05] Doug McIntyre: Kids relate to it. They see him out there, the obstacle guy. But I like to be proud of my son. But the primary thing I’m trying to say here is, is that the number of energy drinks that are available right now.

[00:04:16] Doug McIntyre: If you go into a grocery store, oh, there’s gas station. Yeah. The shelves are just full of, it’s like milk. It used to be you could just get whole milk. Now if you go into the milk aisle, 14 varieties. Unbelievable. So the, and there’s oat milk and you

[00:04:30] Lee Jackson: know, whatever else, almond milk. But yeah, it is interesting.

[00:04:33] Lee Jackson: And, but you’re right. 30 years ago when I, when I was living in Dallas and stopping at the Starbucks and Highland Park every way, going down to the Crescent Court, you know, offices. Everybody was in there, but it was 1995, you know, it was 30 years ago. And, and that’s changed that that whole demographic has changed.

[00:04:54] Lee Jackson: I mean, I don’t go to Starbucks anymore. I don’t like the way their coffee tastes anyway. I gladly go to a Pete’s or a Dunkin’ here. There’s the Dunkin five minutes from me. So yeah, I, they’re doomed. And guess who’s coming back? If they’re doomed.

[00:05:09] Doug McIntyre: Howard Schultz’s here buddy. The one in future. He’s like Iger.

[00:05:13] Doug McIntyre: He is the one in CEO. Uh, look, I think Starbucks is a sell sell. It’s just a sell. As far as I’m concerned, the chances of being turned around are low. What we haven’t talked about is the fact that luck and coffee is creaming them in China, right? They always said China was gonna become their number one market, right?

[00:05:33] Doug McIntyre: Their number two market and same store sales. There are crummy. The, the local Luckin Coffee, which is the Starbucks of China, has twice as many locations as Starbucks has, at least in China. Now, how are you gonna beat that kind of competition? It’s local

[00:05:52] Lee Jackson: And just the, the, the coffee generation, remember it was the coffee generation. Well, that generation is us and it’s passed

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