Detail, east Portland photo, courtesy Miles Hochstein / Portland Ground.

For old times' sake
The bojack bumper sticker -- only $1.50!

To order, click here.

Excellent tunes -- free! And on your browser right now. Just click on Radio Bojack!

E-mail us here.


This page contains a single entry from the blog posted on March 4, 2007 3:22 AM. The previous post in this blog was But of course. The next post in this blog is Life in two dimensions. Many more can be found on the main index page or by looking through the archives.



Law and Taxation
How Appealing
TaxProf Blog
Mauled Again
Tax Appellate Blog
A Taxing Matter
Josh Marquis
Native America, Discovered and Conquered
The Yin Blog
Ernie the Attorney
Above the Law
The Volokh Conspiracy
Going Concern
Bag and Baggage
Wealth Strategies Journal
Jim Hamilton's World of Securities Regulation
World of Work
The Faculty Lounge
Lowering the Bar
OrCon Law

Hap'nin' Guys
Tony Pierce
Parkway Rest Stop
Along the Gradyent
Dwight Jaynes
Bob Borden
Dingleberry Gazette
The Red Electric
Iced Borscht
Jeremy Blachman
Dean's Rhetorical Flourish
Straight White Guy
As Time Goes By
Dave Wagner
Jeff Selis
Alas, a Blog
Scott Hendison
The View Through the Windshield
Appliance Blog
The Bleat

Hap'nin' Gals
My Whim is Law
Lelo in Nopo
Attorney at Large
Linda Kruschke
The Non-Consumer Advocate
10 Steps to Finding Your Happy Place
A Pig of Success
Attorney at Large
Margaret and Helen
Kimberlee Jaynes
Cornelia Seigneur
And Sew It Goes
Mile 73
Rainy Day Thoughts
That Black Girl
Posie Gets Cozy
Cat Eyes
Rhi in Pink
Ragwaters, Bitters, and Blue Ruin
Rose City Journal
Type Like the Wind

Portland and Oregon
Isaac Laquedem
Rantings of a [Censored] Bus Driver
Jeff Mapes
Vintage Portland
The Portlander
South Waterfront
Amanda Fritz
O City Hall Reporters
Guilty Carnivore
Old Town by Larry Norton
The Alaunt
Bend Blogs
Lost Oregon
Cafe Unknown
Tin Zeroes
David's Oregon Picayune
Mark Nelsen's Weather Blog
Travel Oregon Blog
Portland Daily Photo
Portland Building Ads
Portland Food and
Dave Knows Portland
Idaho's Portugal
Alameda Old House History
MLK in Motion

Retired from Blogging
Various Observations...
The Daily E-Mail
Saving James
Portland Freelancer
Furious Nads (b!X)
Izzle Pfaff
The Grich
Kevin Allman
AboutItAll - Oregon
Lost in the Details
Worldwide Pablo
Tales from the Stump
Whitman Boys
Two Pennies
This Stony Planet
1221 SW 4th
I am a Fish
Here Today
What If...?
Superinky Fixations
The Rural Bus Route
Another Blogger
Mikeyman's Computer Treehouse
Portland Housing Blog

Wonderfully Wacky
Dave Barry
Borowitz Report
Stuff White People Like
Worst of the Web

Valuable Time-Wasters
My Gallery of Jacks
Litterbox, On the Prowl
Litterbox, Bag of Bones
Litterbox, Scratch
Ride That Donkey
Singin' Horses
Rally Monkey
Simon Swears
Strong Bad's E-mail

Oregon News
The Oregonian
Portland Tribune
Willamette Week
The Sentinel
Southeast Examiner
Northwest Examiner
Sellwood Bee
Mid-County Memo
Vancouver Voice
Eugene Register-Guard
OPB - Portland
Salem Statesman-Journal
Oregon Capitol News
Portland Business Journal
Daily Journal of Commerce
Oregon Business
Portland Info Net
McMinnville News Register
Lake Oswego Review
The Daily Astorian
Bend Bulletin
Corvallis Gazette-Times
Roseburg News-Review
Medford Mail-Tribune
Ashland Daily Tidings
Newport News-Times
Albany Democrat-Herald
The Eugene Weekly
Portland IndyMedia
The Columbian

The Beatles
Bruce Springsteen
Joni Mitchell
Ella Fitzgerald
Steve Earle
Joe Ely
Stevie Wonder
Lou Rawls

E-mail, Feeds, 'n' Stuff

Sunday, March 4, 2007

The McDonald's of $4 coffee

Fascinating story in the Times yesterday about Howard Schultz and the current state of Starbucks. If you've got a Times subscription, you can read it here. If not, here's a really quick summary: Schultz recently sent around a memo lamenting that the company has drifted too far from its roots. But in order to keep its stock from collapsing, it has to. Wall Street wants to see growth, especially at established stores, and to produce the kind of numbers that the stock market wants, the company has to automate drink production and sell food and merchandise. That, and six new stores opening somewhere in the world every day.

Doesn't sound "sustainable" to me. But the stock has had quite a ride; at the moment, it's worth something like 50 times what it originally sold for.

Oh, and did you know there's an unofficial Starbucks gossip blog? Well, now you do. Apparently that's where the Schultz memo was first leaked.

Comments (19)

Here is a nice little thread describing how Starbuck's espresso has descended into suck. My guess is that's one reason why they push all those foo-foo espresso drinks. (The same reason you make mimosas out of Andre instead of Dom Perignon.)

Also, I recall reading that Consumer Reports recently ranked McDonald's drip coffee higher than Starbucks.

Starbucks is now so expensive, I just skip the drink part and snort the coffee grounds right off the counter.

Not only expensive, but their coffee and coffee drinks are crap. A latte with near boiled milk and a weak pulled shot of espresso, burnt coffee that has been sitting long past it's prime, and super sugary flavored abominations that belong at Dairy Queen, not a "gourmet" coffee retailer.

With such a great choice of other (mostly locally owned independant) cafes in town, Starbucks is a last resort.

I agree that Starbucks coffee sucks. I just don't drink it. I agree that Starbucks is so commoditized that it might as well be McDonalds. Nevertheless, we invested early on in Starbucks and over time the stock kept splitting and splitting. I finally took about 2/3 of my position off the table two weeks ago and pocketed enough to pay for the first two years of my daughter's college education and pretty much any school. If the other 1/3 position holds or goes up much further, we'll sell it and we should make enough to pay for another year of college. It would have to lose about 90% of its current share value before we'd actually lose any money. Ain't capitalism grand.

Starbucks started out with great products and service, but now its coffee is cold and weak, and the pastries are becoming too familiar and always taste as if they are 1-2 days old. I go there, but only because it's close. I sure wish Peet's and/or a good independent coffee shop would open near our house.

It's a fascinating dilemma for Starbucks. They can't just be profitable -- the size of their profit must grow each year, otherwise the stock price tanks.

If you and I had a business that pulled in a million bucks in profits each year, we'd pat ourselves on the back on the way to the bank -- even if the size of that profit didn't budge at all.

But the curious logic of the modern stock market means that a company can't have the same extraordinary profits each year -- rather the profit must grow, or the stock price tanks...

It used to be that folks were happy with "utilities" that didn't grow, but were just massive profit-producers. Take your dividend, and be happy. Not anymore.

That's one of the reasons that some companies are choosing to return to privately-held, rather than publicly-traded. Weird, weird, weird.

Y'know...I don't hit Starbucks or any of the coffee shops much, as I'm happier making my brews at home, and for way cheaper. But I gotta say, people may think their drinks are "crap" but the five Starbucks by my office all seem to doing a thriving business.

When I was last in Madrid there was a "native" coffee shop in this plaza near our hotel and a Starbucks. At 11pm the "native" was empty --and where we got our brews-- but the Starbucks was jam packed and that despite higher prices.

It's unquestionably a phenonenon. But one that can't grow forever. That's indeed a weird part of capitalism's demands.

Kari, what's so weird about it. This is the way public companies operate. It's called grow or die. Starbucks stock price is trading at 38.5X earnings and they pay no dividends. And you are also wrong about "the modern stock market". Companies that pay a dividend greater than government bonds can have the "same extraordinary profits each year" and folks will continue to invest in them, like utilities. Anyway, in your mind, it's probably George Bush's fault.

When I first went to France as a student, in 1961, one of the striking things was the coffee. It was expensive, and very good. Now, in France, coffee is cheap and ordinary -- and nothing in France has changed. Starbucks really deserves the credit for the development of coffee, and the market for it, in the U.S. Maybe Starbucks' coffee isn't as good as it used to be; or maybe it never was. Either way, people vote for it every day in a big way. It would be better, though, if they didn't just acquire all their competitors or drive them out of business.

[reposted from my comment at ]

here are just a few local examples. enter these in Google (with the quotes), and view the results.
Starbucks buys Coffee People
"Once feisty Coffee People whipped into Starbucks"
Starbucks buys Torrefazione
"Starbucks to shutter Torrefazione cafes"
Starbucks buys Seattle's Best
"Starbucks to buy Seattle's Best Coffee"
Starbucks buying out Pasqua in SF, for example
Starbucks wants world dominance, double # of stores, etc.
"Business: Starbucks: Just Getting Started (Seattle Weekly)"
Starbucks trying to block Africa trademarking its own coffees and address poverty
"Starbucks in Ethiopia coffee row"
"Africa Growers Back Ethiopia in Row with Starbucks"

Starbucks exclusive leasing deals
"Owner of small coffee shop takes on java titan Starbucks"
"Starbucks Litigation Lawsuit"
"Starbucks Sued Over Alleged Antitrust Violations"

that will get you started--there are hundreds more.

sorry for the lengthy post. these kinds of stories aren't simple, or easy to construct in Internet links.

thanks for the forum, jack.

You're welcome. Now don't go gluing their locks.


Well, Richard, I'm no financial wizard - but it seems to me that the 'utilities', those no-growth-huge-dividend companies don't do much in terms of stock price.

Everybody seems enamored of the all-growth-no-dividend companies these days.

I'm not disagreeing that that's "how the market works" - I just find it curious that a company like Starbucks can take 35 cents of coffee (add $1.75 in health care costs) and sell it for four bucks.... and their investors are complaining!

(p.s. I made up those numbers. I'm sure the real ones exist somewhere, but I'm bored already.)

I agree with all the complaints about Starbucks.

However, I still go fairly often, because it still has the most caffeine per penny. Starbucks coffee is significantly stronger than any of it's competitors. And at the end of the day, that's why I drink coffee, I'm an addict and I need my caffeine fix.

Oh and yes, McDonalds coffee is surprisingly good.

actually, the most expensive part of a coffee drink you buy most anywhere is...the cup.

and, caffeine content of beans varies by very little. generally, range of caffeine content for every cup of coffee sold is between one and two percent.

in fact, Starbucks buys Arabica beans, which grow at higher elevations--and have less caffeine than all other beans. they're known in the industry for "over-roasting" these beans for maximum effect--resulting in what some people call that "burnt" flavor.

so, when you buy Starbucks, you're actually getting *less* caffeine per dose.

This is the way public companies operate. It's called grow or die.

So Richard S., can you explain WHY this is what Wall Street expects? It seems to me that a publicly-traded company that earns 10% profit every year should be able to keep doing what it's doing, even if same-store sales are flat. In my naive little world, it always seemed that's what business should be about -- taking something you do well, and selling it for more than it costs you to do it. But from reading this article, it sounds like Wall Street is demanding an unsustainable pyramid scheme.

And seriously, please keep it remedial as this is not my area of expertise.

Starbucks is currently trading at $29.40, which is 39 times its current earnings. That equates to a 2.56% return on investment. Therefore, if earnings stopped growing and investors required a 10% return, the stock would drop to $7.50 per share to be in equilibrium. That is why shareholders demand continued growth. Utilities tend to trade closer to 10 times earings and therefore do not require much growth.

Miles: In a chain like Starbucks, same store sales is what it's about. If you have 100 stores and sales don't grow at any of them would you invest your money in them. What's the upside to you? Flat same store sales mean you've maxed out. Bob is right on the money, sorry for the pun. And Miles, any company that earns 10% profit ever year on flat sales is going backward because of inflation. 10% last year is 14% this year to keep pace.

"any company that earns 10% profit ever year on flat sales is going backward because of inflation."

True enough, but that company, if its sales rise in line with inflation, is not going backward.


As a lawyer/blogger, I get
to be a member of:

In Vino Veritas

Lange, Pinot Gris 2015
Kiona, Lemberger 2014
Willamette Valley, Pinot Gris 2015
Aix, Rosé de Provence 2016
Marchigüe, Cabernet 2013
Inazío Irruzola, Getariako Txakolina Rosé 2015
Maso Canali, Pinot Grigio 2015
Campo Viejo, Rioja Reserva 2011
Kirkland, Côtes de Provence Rosé 2016
Cantele, Salice Salentino Reserva 2013
Whispering Angel, Côtes de Provence Rosé 2013
Avissi, Prosecco
Cleto Charli, Lambrusco di Sorbara Secco, Vecchia Modena
Pique Poul, Rosé 2016
Edmunds St. John, Bone-Jolly Rosé 2016
Stoller, Pinot Noir Rosé 2016
Chehalem, Inox Chardonnay 2015
The Four Graces, Pinot Gris 2015
Gascón, Colosal Red 2013
Cardwell Hill, Pinot Gris 2015
L'Ecole No. 41, Merlot 2013
Della Terra, Anonymus
Willamette Valley, Dijon Clone Chardonnay 2013
Wraith, Cabernet, Eidolon Estate 2012
Januik, Red 2015
Tomassi, Valpolicella, Rafaél, 2014
Sharecropper's Pinot Noir 2013
Helix, Pomatia Red Blend 2013
La Espera, Cabernet 2011
Campo Viejo, Rioja Reserva 2011
Villa Antinori, Toscana 2013
Locations, Spanish Red Wine
Locations, Argentinian Red Wine
La Antigua Clásico, Rioja 2011
Shatter, Grenache, Maury 2012
Argyle, Vintage Brut 2011
Abacela, Vintner's Blend #16 Abacela, Fiesta Tempranillo 2014
Benton Hill, Pinot Gris 2015
Primarius, Pinot Gris 2015
Januik, Merlot 2013
Napa Cellars, Cabernet 2013
J. Bookwalter, Protagonist 2012
LAN, Rioja Edicion Limitada 2011
Beaulieu, Cabernet, Rutherford 2009
Denada Cellars, Cabernet, Maipo Valley 2014
Marchigüe, Cabernet, Colchagua Valley 2013
Oberon, Cabernet 2014
Hedges, Red Mountain 2012
Balboa, Rose of Grenache 2015
Ontañón, Rioja Reserva 2015
Three Horse Ranch, Pinot Gris 2014
Archery Summit, Vireton Pinot Gris 2014
Nelms Road, Merlot 2013
Chateau Ste. Michelle, Pinot Gris 2014
Conn Creek, Cabernet, Napa 2012
Conn Creek, Cabernet, Napa 2013
Villa Maria, Sauvignon Blanc 2015
G3, Cabernet 2013
Chateau Smith, Cabernet, Washington State 2014
Abacela, Vintner's Blend #16
Willamette Valley, Rose of Pinot Noir, Whole Clusters 2015
Albero, Bobal Rose 2015
Ca' del Baio Barbaresco Valgrande 2012
Goodfellow, Reserve Pinot Gris, Clover 2014
Lugana, San Benedetto 2014
Wente, Cabernet, Charles Wetmore 2011
La Espera, Cabernet 2011
King Estate, Pinot Gris 2015
Adelsheim, Pinot Gris 2015
Trader Joe's, Pinot Gris, Willamette Valley 2015
La Vite Lucente, Toscana Red 2013
St. Francis, Cabernet, Sonoma 2013
Kendall-Jackson, Pinot Noir, California 2013
Beaulieu, Cabernet, Napa Valley 2013
Erath, Pinot Noir, Estate Selection 2012
Abbot's Table, Columbia Valley 2014
Intrinsic, Cabernet 2014
Oyster Bay, Pinot Noir 2010
Occhipinti, SP68 Bianco 2014
Layer Cake, Shiraz 2013
Desert Wind, Ruah 2011
WillaKenzie, Pinot Gris 2014
Abacela, Fiesta Tempranillo 2013
Des Amis, Rose 2014
Dunham, Trautina 2012
RoxyAnn, Claret 2012
Del Ri, Claret 2012
Stoppa, Emilia, Red 2004
Primarius, Pinot Noir 2013
Domaines Bunan, Bandol Rose 2015
Albero, Bobal Rose 2015
Deer Creek, Pinot Gris 2015
Beaulieu, Rutherford Cabernet 2013
Archery Summit, Vireton Pinot Gris 2014
King Estate, Pinot Gris, Backbone 2014
Oberon, Napa Cabernet 2013
Apaltagua, Envero Carmenere Gran Reserva 2013
Chateau des Arnauds, Cuvee des Capucins 2012
Nine Hats, Red 2013
Benziger, Cabernet, Sonoma 2012
Roxy Ann, Claret 2012
Januik, Merlot 2012
Conundrum, White 2013
St. Francis, Sonoma Cabernet 2012

The Occasional Book

Marc Maron - Waiting for the Punch
Phil Stanford - Rose City Vice
Kenneth R. Feinberg - What is Life Worth?
Kent Haruf - Our Souls at Night
Peter Carey - True History of the Kelly Gang
Suzanne Collins - The Hunger Games
Amy Stewart - Girl Waits With Gun
Philip Roth - The Plot Against America
Norm Macdonald - Based on a True Story
Christopher Buckley - Boomsday
Ryan Holiday - The Obstacle is the Way
Ruth Sepetys - Between Shades of Gray
Richard Adams - Watership Down
Claire Vaye Watkins - Gold Fame Citrus
Markus Zusak - I am the Messenger
Anthony Doerr - All the Light We Cannot See
James Joyce - Dubliners
Cheryl Strayed - Torch
William Golding - Lord of the Flies
Saul Bellow - Mister Sammler's Planet
Phil Stanford - White House Call Girl
John Kaplan & Jon R. Waltz - The Trial of Jack Ruby
Kent Haruf - Eventide
David Halberstam - Summer of '49
Norman Mailer - The Naked and the Dead
Maria Dermoȗt - The Ten Thousand Things
William Faulkner - As I Lay Dying
Markus Zusak - The Book Thief
Christopher Buckley - Thank You for Smoking
William Shakespeare - Othello
Joseph Conrad - Heart of Darkness
Bill Bryson - A Short History of Nearly Everything
Cheryl Strayed - Tiny Beautiful Things
Sara Varon - Bake Sale
Stephen King - 11/22/63
Paul Goldstein - Errors and Omissions
Mark Twain - A Connecticut Yankee in King Arthur's Court
Steve Martin - Born Standing Up: A Comic's Life
Beverly Cleary - A Girl from Yamhill, a Memoir
Kent Haruf - Plainsong
Hope Larson - A Wrinkle in Time, the Graphic Novel
Rudyard Kipling - Kim
Peter Ames Carlin - Bruce
Fran Cannon Slayton - When the Whistle Blows
Neil Young - Waging Heavy Peace
Mark Bego - Aretha Franklin, the Queen of Soul (2012 ed.)
Jenny Lawson - Let's Pretend This Never Happened
J.D. Salinger - Franny and Zooey
Charles Dickens - A Christmas Carol
Timothy Egan - The Big Burn
Deborah Eisenberg - Transactions in a Foreign Currency
Kurt Vonnegut Jr. - Slaughterhouse Five
Kathryn Lance - Pandora's Genes
Cheryl Strayed - Wild
Fyodor Dostoyevsky - The Brothers Karamazov
Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
Brian Selznick - The Invention of Hugo Cabret
Sharon Creech - Walk Two Moons
Keith Richards - Life
F. Sionil Jose - Dusk
Natalie Babbitt - Tuck Everlasting
Justin Halpern - S#*t My Dad Says
Mark Herrmann - The Curmudgeon's Guide to Practicing Law
Barry Glassner - The Gospel of Food
Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
Evelyn Waugh - Brideshead Revisited
J.K. Rowling - Harry Potter and the Sorcerer's Stone
David Sedaris - Holidays on Ice
Donald Miller - A Million Miles in a Thousand Years
Mitch Albom - Have a Little Faith
C.S. Lewis - The Magician's Nephew
F. Scott Fitzgerald - The Great Gatsby
William Shakespeare - A Midsummer Night's Dream
Ivan Doig - Bucking the Sun
Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
Madeline L'Engle - A Wrinkle in Time
Steven Hart - The Last Three Miles
David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 5
At this date last year: 3
Total run in 2017: 113
In 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269

Clicky Web Analytics