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The Problem With Growth

What do you think of this headline?..
Burger King to sell Starbucks' Seattle's Best brew -Reuters
If you're a coffee snob like myself, you're probably thinking: "nice job destroying your brand, Starbucks!" Of course, if you're a coffee snob like myself, you probably stopped drinking Starbucks years ago, or maybe around the time they announced their intent to sell instant coffee crystals in the grocery store.

(from Flickr user d2digital)

This headline pretty much sums up the problem with business growth and the reason why so many publicly traded companies eventually lose their premium-brand credibility. On one end of the spectrum, you have coffee enthusiasts who want a good strong cup of coffee. On the other end of the spectrum you have shareholders who demand constant earnings per share growth. At first, both groups are satisfied with expansion. Starbucks opens more stores, serves more cups of coffee and makes more money. But there's a limit to growth. There are only so many street corners and strip-malls in America. Coffee drinkers might be satisfied at this point, but shareholders never will. So Starbucks opens stores internationally, but it's a tough sell to the Asians and the Europeans. So they start cranking out new products, cutting costs in the stores, generally doing things to make the shareholders happy, even as it starts to piss off the coffee enthusiasts.

Contrast this with a small, privately-owned chain of coffee shops. Maybe the owner doesn't have aspirations to be a billionaire like Howard Schultz. Maybe he just likes being able to wake up in the morning and know that he can live comfortably for the rest of his life doing the one thing he loves: roasting and selling coffee. Maybe he takes pride in knowing that he has the best coffee in town, and the most highly respected brand with the coffee enthusiasts.

From the coffee snob perspective, I'd rather there be a different small chain of coffee shops in every city in America rather than a single conglomerate that operates stores in those cities. While it's great to see our favorite brands starting to grow and expand, too much growth will probably destroy the very thing about the brand that we once loved.

Comments

Wade said…
I've visited Starbucks in China and Malaysia and the places were full. Of course they were buying the sweet crap, not real coffee. I didn't see any in Thailand or Korea though.

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