Original title: Closing 200 more stores in North America, why is the epidemic only squeezing Starbucks? Source: Venture State

Starbucks recently announced that it will once again close 200 stores in the US and Canada to reduce operating costs.

Earlier, Starbucks said it has plans to close 400 stores in North America over the next 18 months.

Starbucks's slogan is to provide consumers with a “third space.” Consumers spend $5 not on coffee, but more like rent to occupy a space to socialize, meet, or relax.

However, with the “normalization” of the COVID-19 pandemic, this vision is facing enormous uncertainty.

The article “How Pandemic Trends Are Squeezing a Squeeze on Starbucks” (How Pandemic Trends Are Squeezing a Squeeze on Starbucks), which promotes the medium website in this issue, is written by Dylan Hughes.

At first, Howard Schultz (Howard Schultz) started with a small Seattle store, and Starbucks quickly grew after he took over six stores, giving people an experience beyond coffee for the first time — a comfortable place to meet, work, and recharge.

After an initial public offering in 1992, Starbucks's stock price slowly climbed to $18.88 in 2006.

However, before the 2008 financial crisis began, Starbucks was already going downhill.

For Schulz, the company at the time lost its soul, and coffee became a commodity.

Before the company went bankrupt, Schulz had to carry out major reforms and cut stores and employees.

Most importantly, though, he revised the menu and made the company refocus on the secret to staying at its peak, which is high quality coffee.

Two years after the financial crisis began, Starbucks reached a record high in the stock market, and there has been no major crisis since then.

Now that Schulz is gone, Kevin Johnson (Kevin Johnson) has taken over, Starbucks is once again facing new challenges, and the company's original vision is no longer a panacea.

Prior to joining Starbucks as Chief Operating Officer in 2015, Johnson worked as an executive at technology companies such as IBM, Microsoft, and Juniper Networks.

Compared to Schulz in 2007, Johnson has a unique advantage. That is, Starbucks already has higher customer loyalty and overall brand recognition.

Meanwhile, Starbucks has $4.3 billion in cash, which is critical.

However, the author said that Johnson did not have a very easy time because of this. In the company's fourth quarter report, Starbucks' quarterly revenue fell 8.1% and full-year revenue fell 11.3%.

According to the report, the company has been boasting about the progress of global store expansion, including the results of adding 480 new stores in the fourth quarter and plans to open another 2,150 stores next year.

However, due to the impact of the pandemic, all of these Starbucks stores simply provide drive-in access to coffee that is more expensive than McDonald's, Dunkin', etc.

Strong competitor Dunkin', on the other hand, saw a visible increase in revenue despite a decrease in the number of stores in its recent quarterly report.

Although Dunkin's international business did not perform well, its US business performed well and was profitable, while Starbucks lost money.

The author notes that Dunkin' beat Starbucks in price, and that part of its earnings in the most recent quarter was due to the company's move to lower the unit price to $2 over the summer.

In fact, this may be because Starbucks operates itself as a luxury coffee brand, and the other items on the menu are also very expensive.

Compared to other competitors, Starbucks's breakfast sandwiches are smaller and more expensive, and even the company's avid fans rarely brag about these menus.

By contrast, Dunkin' started with Dunkin' Donuts (donuts) and continues to expand its food supply.

McDonald's business isn't built on coffee either; it just so happens that even coffee is well-made and can be paired with other delicious foods.

To be fair, McDonald's also reported significant losses last quarter.

This is because both McDonald's and Starbucks have much larger international operations than Dunkin', with the latter accounting for only 3% of total revenue.

Despite this, Starbucks sales in similar stores in the US fell 12%, the worst of the three. As mentioned earlier, Dunkin' turned a loss into a profit, and McDonald's lost 8.7% in the same store in the US.

In addition to tough competitors, the US coffee market is facing a new trend. That is, by 2020, the home coffee market is expected to grow by more than 4%.

Although Starbucks can also capitalize on this trend, as its liquid milk jugs, cold brewed coffee, and coffee powder bags are everywhere. McDonald's also has McDonald's coffee powder on its shelves, and Dunkin' also sells liquid creamer.

However, none of these companies make as much money from these products as they make from consumers sitting in stores.

As a result, as fewer people go out, Starbucks loses more globally and in the US.

The author still feels that Starbucks is not going to die out.

The reason it has come this far is mainly because of the quality of its premium coffee. Consumer demand that values these things will not disappear now, nor in the future.

However, as of now, the cheaper and more comprehensive fast food chains such as Dunkin' and McDonald's have been much less affected, and it is not yet known when Starbucks will return.