August 14, 2009
August 14, 2009
Despite its booming success, the coffee giant was hit like all other businesses and had to cut costs by at least $500 million, close 800 stores in the U.S. alone (6 in Oregon), and lay off more than 4,000 employees. In addition, the company conducted more customer research, offered discounts, and increased advertising to attract business. Those coffee houses that thought Starbuck’s Oregon pull-back was the beginning of a trend may face a renewed leaner competitor.
Starbucks put into operation a few simple, but efficient changes that saved money and allowed them to retain their title, as the “coffee giant of the world.” The company saved millions of dollars on milk by etching lines in the steaming pitchers so baristas would know exactly how much milk to use for each drink. Before, they just guessed, and poured the remaining milk down the drain.
Another cost-cutting measure included teaching baristas to set up the pastry case in 25 minutes rather than 45. This miniscule 20 minutes saved Starbucks $60 million in just three months. This summer, the company also began offering deals, such as charging $2 on any grande cold drink after 2 p.m. to customers who had already made a purchase that day.
Starbucks had to become more ordinary. It, like all other businesses had to find a way to increase profits while trimming the fat.
The cost-saving efforts paid off, by the end of July 2009, Starbuck’s profits increased. The company’s shares rose to $1.46, or 9.9 percent, to $16.15 in electronic after-hours trading. During regular trading before the results were released, the stock fell 23 cents to $14.69, still a significant increase.
So what does this have to do with small businesses across Oregon? Starbucks demonstrated that even large businesses are struggling because of the recession. Despite financial hardship, small and simple changes could significantly cut costs and increase profits.