Tuesday, March 20, 2007

Starbucks founder’s leaked memo reflects fears about brand dilution

Rivals gain ground as Schultz sees ‘sterile’ stores lacking coffee aroma

Starbucks Corp. chairman and co-founder Howard Schultz’s controversial internal memo, questioning whether the chain has watered down its brand for the sake of growth, reflects the concerns of many foodservice companies intent on expansion.

Though few rivals may achieve the kind of popularity that has made the coffeehouse giant a $6 billion-a-year enterprise, rivals nonetheless wonder how to grow a concept without altering its identity and original characteristics or giving up ground to imitators.

In a Feb. 14 memo to Starbucks senior executives that was leaked to a blog, Schultz wondered if some of the decisions of the past 10 years that helped the chain advance from fewer than 1,000 to more than 13,000 locations worldwide had led to a “commoditization of our brand.”
He lamented more “sterile, cookie-cutter” store environments, their loss of coffee aroma since the adoption of flavor-lock bags, and the diminished service theatrics that came with a switch to robotic espresso machines.

Schultz also acknowledged that the chain is facing stiffer competition from doughnut shops and numerous other fast-food chains that have upgraded their coffee offerings.

Just last month, for example, Consumer Reports magazine reported its test finding that McDonald’s new coffee was tastier and cheaper than Starbucks’ standard brew. Perhaps equally worrisome to Starbucks are reports this month that McDonald’s outlets have begun installing big, black machines to produce espresso-based caffe lattes and flavored cappuccinos.

Also, a forthcoming trend report by an industry consulting firm is to conclude that coffee consumers have toppled Starbucks from its No. 1 spot in favor of Dunkin’ Donuts. “Companies like Dunkin’ Donuts are ratcheting up their branding efforts, and that’s resonating pretty well with folks,” said Robert Passikoff, founder and president of New York-based brand loyalty consulting firm Brand Keys.

In Brand Keys’ soon-to-be-published 2007 Consumer Loyalty Engagement Survey of more than 20,000 consumers, Starbucks won’t retain the No. 1 spot it had held for five years. That distinction instead will go to Dunkin’ Donuts, the Canton, Mass.-based chain that has more than 7,200 stores. The doughnut chain also recently signed a deal with Procter & Gamble to distribute its coffee to supermarkets.

Schultz acknowledged the growing threat of competition.

“While the current state of affairs for the most part is self-induced, that has led to competitors of all kinds, small and large coffee companies, fast-food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.”

The memo was leaked to the website http://www.starbucksgossip.com/, and Starbucks later issued a confirmation. That statement also contained the company’s pledge to maintain “the authenticity of the Starbucks experience.”

Some analysts and industry veterans lauded Schultz for raising the issue of preserving Starbucks’ culture before any image erosion becomes irreversible.

“It’s not that they are losing ground,” said Al Ries, chairman of Atlanta-based Ries & Ries, a marketing strategy firm. “Their per-unit sales probably will continue to increase. That’s why [the memo] was courageous—usually you do not see these kinds of memos until a company is in trouble.”

Staying focused on the core details that distinguish one operation from another is critical for restaurants as they try to build stores and sales, according to veteran operators, analysts and industry observers. Schultz’s memo to Starbucks’ senior leadership served as an example of some of the unintended consequences of expansion.

“One of the things that happen to a lot of restaurants is a loss of focus,” said Chris Arnold, a spokesman for Chipotle Mexican Grill, the Denver-based chain that has grown rapidly to more than 600 locations. “When you lose that focus, that is when you are at the greatest risk of losing that ‘cool’ or mystique.”

As companies grow, they need to have a clearly defined mission and know what it is that makes them unique, says consultant and author John Moore, a former Starbucks marketing executive.
“All businesses that would like to get bigger need to write down four to five things they will never compromise—absolutely never compromise,” Moore said. “As a company gets bigger, if it compromises any of those four or five things, that’s when they start to lose who they are.”

A recent study on how the physical environment of restaurants affects customer satisfaction gives credence to Schultz’s concerns about how the public might begin to respond to a “commoditized” Starbucks that he said had sacrificed a warm, neighborhood feel for streamlined store designs.

“For Starbucks, it’s not just selling the coffee, but selling the experience,” said Eileen Wall, associate professor in the Bill Greehey School of Business at St. Mary’s University of Texas in San Antonio. “If the environment is not what the customer is expecting, they are setting themselves up for a downfall. You have to be sensitive to the right things.”

Wall, along with Leonard Berry, a marketing professor at Mays Business School at Texas A&M University in College Station, Texas, studied consumer responses to restaurants’ physical environment, food quality and service for a recent article in the Cornell Hotel and Restaurant Administration Quarterly.

The professors videotaped both good and bad service scenarios in two different units of an unnamed seafood restaurant chain. One store was newly remodeled and the other was an older-looking branch.

Participants who watched the videos gave higher ratings to the restaurant with the better service, regardless of its physical appearance, but the one with the better design and ambiance and better service was rated highest overall.

“Customers are like detectives, looking for clues on how good the service and food will be,” Wall said. “The first thing they see is how it looks. The environment impacts expectations, once you get in there, that’s where the people clues take over.”

Getting the people and environment clues right is as important as getting the food right, she said. “These are your differentiators,” Wall said. “These are what has traditionally made [Starbucks] special, but everyone has jumped in the ball game and taken away from that. Schultz is saying, ‘We’ve got to use our environment to differentiate us again.’ ”

Monday, March 12, 2007

Whole-Grain Cereals for Heart Health

According to a recent analysis of the Physicians� Health Study, daily consumption of whole-grain breakfast cereals was associated with a lower risk of heart failure. Researchers presented findings of the study at the American Heart Association�s 47th Annual Conference on Cardiovascular Disease Epidemiology and Prevention held Feb. 28 to Mar. 3, 2007 in Orlando.

The analysis shows that those who ate a whole-grain breakfast cereal seven or more times per week were 28% less likely to develop heart failure over the course of the study than those who never ate these cereals. Even lower consumption rates can benefit heart health: The risk of heart failure decreased by 22% for those who ate whole-grain breakfast cereal two to six times per week and by 14% for those who included whole-grain cereal up to once per week.

The study categorized breakfast cereals with at least 25% oat or bran content as whole-grain cereals. Whole grains are rich in many vitamins, minerals and antioxidants in addition to a high fiber content. In the United States, foods that can be labeled �whole grain� contain 51% or more whole-grain ingredients by weight per reference amount customarily consumed.

�There are good and powerful arguments for eating a whole-grain cereal for breakfast,� said Luc Djouss�, M.D., M.P.H., D.Sc., lead author of the study and assistant professor of medicine in the Division of Aging at Brigham & Women�s Hospital and Harvard Medical School, Boston. �The significant health benefits of whole-grain cereal are not just for kids, but also for adults. A whole-grain, high-fiber breakfast may lower blood pressure and bad cholesterol, and prevent heart attacks.

More information about the health benefits of whole grains can be found on Food Product Design�s free online Webinar, �The Whole Truth: Uncovering the Benefits of Whole Grains.�

Friday, March 02, 2007

Hot Cross Buns

We decided to revisit and post this recipe for the season

makes 24

1 cup milk
2 Tbsp yeast
1/2 cup sugar
2 tsp. salt
1/3 cup butter, melted and cooled
1 1/2 tsp. cinnamon
1/2 tsp. nutmeg
4 eggs
5 cup flour1
1/3 cup currants or raisins
1 egg white


(you can use this one or your favorite)1 1/3 cup confectioner's sugar 1 1/2 tsp. finely chopped lemon zest 1/2 tsp. lemon extract1-2 Tbsp milk

In a small saucepan, heat milk to very warm, but not hot (110°F if using a candy thermometer). Pour warm milk in a bowl and sprinkle yeast over. Mix to dissolve and let sit for 5 minutes.

Stirring constantly, add sugar, salt, butter, cinnamon, nutmeg and eggs. Gradually mix in flour, dough will be wet and sticky. Continue kneading until smooth, about 5 minutes. Cover bowl with plastic wrap and let the dough "rest" for 30-45 minutes.

Knead again until smooth and elastic, for about 3 more minutes. Add currants or raisins and knead until well mixed. At this point, dough will still be fairly wet and sticky. Shape dough in a ball, place in a buttered dish, cover with plastic wrap and let rise overnight in the refrigerator. Excess moisture will be absorbed by the morning.

Let dough sit at room temperature for about a half-hour. Line a large baking pan (or pans) with parchment paper (you could also lightly grease a baking pan, but parchment works better). Divide dough into 24 equal pieces (in half, half again, etc., etc.). Shape each portion into a ball and place on baking sheet, about 1/2 inch apart. Cover with a clean kitchen towel and let rise in a warm, draft-free place until doubled in size, about 1 1/2 hours.

In the meantime, pre-heat oven to 400° F. When buns have risen, take a sharp or serrated knife and carefully slash buns with a cross. Brush them with egg white and place in oven. Bake for 10 minutes, then reduce heat to 350° F, then bake until golden brown, about 15 minutes more. Transfer to a wire rack. Whisk together glaze ingredients, and spoon over buns in a cross pattern. Serve warm, if possible.

History of the Hot Cross Bun:

Hot cross buns are typically eaten on Good Friday and during Lent

Stories abound about the origins of the Hot Cross Bun. Yet, the common thread throughout is the symbolism of the "cross" of icing which adorns the bun itself.

Some say that the origin of Hot Cross Buns dates back to the 12th century, when an Angelican monk was said to have placed the sign of the cross on the buns, to honor Good Friday, a Christian holiday also known as the Day of the Cross.

Supposedly, this pastry was the only thing permitted to enter the mouths of the faithful on this holy day. Other accounts talk of an English widow, who's son went off to sea. She vowed to bake him a bun every Good Friday. When he didn't return she continued to bake a hotcross bun for him each year and hung it in the bakery window in good faith that he would some day return to her. The English people kept the tradition for her even after she passed away.

Others say that Hot Cross Buns have pagan roots as part of spring festivals and that the monks simply added the cross to convert people to Christians. Even if this is the case, I think it was rather bright of the monks to be able to so readily tie existing traditions to Christianity!