02 July 2008


Now is probably not a good time to be a Starbucks employee in the US. Starbucks are reporting that they are to close 600 of their coffee shops in the US and this will eliminate some 12,000 jobs. Strangely enough the market reacted pretty well to the news and put on as much as 7.2% in Nasdaq trade. The shares eventually closed up 4.7% in after hours Nasdaq trading at USD 16.35.

Starbucks had more than doubled in size in the last three years but despite store growth the company had seen declining earnings. Perhaps if there is a case to be made for a company growing too fast then this might be it. Almost 70% of the stores to be closed are less than three years old. However, the company maintains that it is going to stick to its plan of opening another 200 stores through September 2009.

Analysts are suggesting that Starbucks has fallen victim to surging world oil prices where consumers are less likely to spend income on luxuries such as cafe lattes and caramel machiatto.

I was in Starbucks in Plaza Senayan last night and it was doing a roaring trade for a Tuesday evening at 21.00. It was full and more people were lining up to get their gourmet coffee fix. I would be surprised if the franchise holder in Indonesia was looking at consolidating or closing stores, in fact I would be more surprised if an expansion in the number of stores was not being contemplated. However, I am not privy to the financial books and my observations are completely anecdotal based on drinking coffee in various Starbucks stores and them always being full.

Come to think of it, it is time for a coffee!

But it ain't gonna be no Starbucks but rather it is going to be a Kapal Api!


rimafauzi said...

$4 is not much for the average american, yet they are closing 600 shops because many seem to think that $4 is too much to spend on a cup of coffee (I agree).

When I was in Jakarta, I went to a starbucks and bought a cup of moccha something for 50 thousand rups.

$4 in America might get you one meal, perhaps that is why they think that much for a cup of coffee in this time of weakening economy is too much.

In Indonesia, 50 thousand rups can get you 4 meals and drinks. I thought the economy is far worse than it is in America, but Starbucks is still there, I think they are opening new stores and people are still coming.

I don't know if I'm stupid, but does this mean Indonesian economy is stronger than American? :p

Rob Baiton said...

The example that I always use to confuse people that I talk to that say that Indonesia is still in some kind of financial crisis or crises is...

The middle class in Indonesia is larger than the entire population of Australia!

Maybe it does say that one economy is stronger than the other!

But in reality I think Starbucks expanded too fast for its own good and has decided to consolidate with the former CEO stepping back into the role. The market seemed to like the move.

therry said...

Indonesians who come from low to middle class actually receive capitalization with their open arms.

That's why places like Starbucks and J Co and Bread Talk will always be crowded by people - it's not because they need coffee / bread, it's because they need something to leverage their status symbol.

In their minds, carrying stryofoamed Starbucks coffee cups make their status seem much more appealing. Ditto to boxes of breads and donuts from J Co and Bread Talk.

So when the average Americans already feel fed up with too many Starbucks outlets and agreeing the closing down of 600 of them, Indonesians have just started to join in on all the hype of it! :D

Rob Baiton said...


I take your post to mean that you do not drink Starbucks coffee, do not eat J Co donuts, and stay away from the carbs on offer at Bread Talk, is that right?


therry said...

You got that right Rob. My mother owns a bakery so I got plenty of carbs supply and I prefer cheapo Kapal Api sacheted coffee rather than Rp. 40,000.- cup of Starbucks coffee which probably came from Sumatra anyway!

I don't have anything against Starbucks, J Co or Bread Talk though. It kind of turns me off seeing Indonesians get all hyper in buying such products from such franchises just because of their 'gengsi', not because they want to enjoy coffee/ are carb-craving.

Rob Baiton said...

Funnily enough, I know what you mean! I see exactly the same thing in my office :D

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For my part one and all ought to look at it.