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Too much coffee may be hurting Starbucks

A financial analyst decided to downgrade Starbucks’s stock to market perform from outperform. Andrew Stelzik, at BMO Capital Markets, believes the coffee chain has too many stores. According to his research, Forbes says, “there are 3.6 Starbucks stores within a one mile radius of a typical Starbucks in the United States.”

This has led to increased “cannibalization,” Strelzik said in a research note. “Strong new store performance appears to be coming —at least in part— at the expense of existing store traffic.”

In other words, new Starbucks stores rob their older peers of customers. Why that happens may be beyond the scope of Strelzik’s research. Your correspondent, a former New Yorker, may offer you a clue.

Starbucks is probably the best place to hang out in New York or anywhere else in the States. The coffee is usually good or very good (depending on your taste), the ambiance is welcoming, WiFi connectivity is excellent and you can sit down forever to work on your computer, read, meet friends or befriend strangers.

But there are problems. As your correspondent has noted at some of his favorite Starbucks locations, over time stores decay. First to go is bathroom cleanliness. Even at stores where the WC is behind armored doors and locked with passcodes, the filth may occasionally be indescribable. Then clutter and garbage begins to pile on tables. Unmannered patrons leave half-finished drinks, which at Starbucks may be the size of a bucket, on counters, tables and even restrooms. Staff morale begins to decline, and so does service, eventually.

What happens next is almost inevitable. A sprightly new Starbucks opens a few blocks down the street and the big migration begins. Until the cycle of decay starts anew. Perhaps Starbucks should recruit an army of undercover inspectors to monitor what is going on in its vast empire. It would be a pity to see it go down. No other company has translated more successfully the Italian caffè concept into a quintessentially American coffee store.