Inside Track by Mark Wingett
“We see you at your most vulnerable, when you are looking for something positive to start or end your (working) day on.” So describes Kris Engskov, the managing director of Starbucks UK, of the weight of responsibility he believes that the global chain carries towards its customers and one he is determined to make sure they are up to delivering on.
Faced with five years of losses, the former aide to Bill Clinton has been quick to make his mark since he took over from Darcy Willson-Rymer last October. Already under his watch the chain has put an extra espresso shot into its lattes, started taking the customer’s name when the place an order, is retrenching from prominent London positions, refurbishing stores and has set out plans to launch the global brand’s first franchise operation.
If there one was thing Engskov learnt from the former president is that “you don’t always have the answers”. Therefore feedback from customers and partner businesses has played a significant part in the chain’s development in the UK over the last eight months. A stint as regional director for London between 2005 and 2007 also gave him an insight into the UK market and the challenge faced in a market he believes is the most competitive in the world.
“Put it up against Seattle, Portland or San Francisco, this is one of the most competitive marketplaces in the world, which is flattering for London. Therefore we had to listen to what people wanted and immediately set out on an extensive round of consumer research,” says Engskov. This led to what he describes as one of the “most significant days” in the chain’s history, 14 March, with the addition of two shots of expresso instead of one in its “tall” lattes.
Engskov says: “People’s taste profile had evolved, we had to change the recipe to match that evolution, the results of that move have been very positive.” Sales of lattes since that morning have risen 9%. As has the move to take the customer’s name, although Engskov admits it may not be to everyone’s taste, but then again he doesn’t subscribe to the idea that there are not talented British people available to retail to make this initiative work.
He says: “It has been good for us operationally and in building up interaction between the consumer and barista. There is a sea of mediocrity that is service right now, but I don’t subscribe that those working in the UK are part of that. When service is delivered well it works fantastically and can deliver a new level of appreciation between consumer and vendor.”
However, further measures are being taken to make sure that the group’s bottom line matches the work being carried out to bolster its top line. Starbucks UK made a pre-tax loss of £32.9m for the year to 2 October 2011, which was its fifth consecutive year of losses in this country.
When Starbucks arrived in the UK in the late 1990s, it cemented its place on the high street by taking the most prominent positions, for example Oxford Street. However soaring rents and stronger competition have challenged this stance and it is now looking to concentrate on locations off London’s main streets, in search of more upmarket, and cheaper, venues. It is thought to have placed c15 such London-based sites on the market over the last six months.
Engskov says: “Fourteen years ago when we came to the UK, we needed to be on Oxford Street to build our brand but now people know us we don’t need to be there.” The chain is moving towards more “neighbourhood” stores, those that can still have a “community feel” even in the capital.
There are currently c260 Starbucks branches in London and group recently announced it was to invest £8m on refurbishing 70 of its stores in the capital by this summer, before looking at upgrading a further 50 sites outside the capital. The first revamped store opened in Vigo Street, Mayfair, complete with stripped back design, and the group is three-quarters of the way towards having all 70 stores refurbished by the start of the Olympics, a key shop window for the brand here and globally.
Food will also play a part, with the chain set to increase its investment in its offer over the next 12 months. As Engskov admits: “The high street here is probably the most competitive in the world, therefore we need to, and will be, investing in not just our coffee, but our food offer over the next year.” However, Engskov says that the group would not be going down the route of acquiring a food chain, such as Paul, after parent company recently announced the acquisition of the San Francisco-based artisan bakery business Bay Bread and its La Boulange brand. The first stage of the investment in its food offer will be the launch of a new muffin range next month.
In January, the chain announced plans to add 300 stores to its c700-strong estate over the next five years, including 200 drive-thru sites, which it expects will create up to 5,000 new jobs. The chain said that around half of the drive-thrus will be operated under license by petrol forecourt retailer Euro Garages, with many of these stores set to open in the Midlands and the north of England.
The group, which operates around 10 drive-thru sites in the UK, is currently developing a new drive-thru format that it said would “bring new levels of comfort and environmental performance to the roadside”. It is thought that the group is close to announcing a deal for a package of drive-thru sites, and is believed to have had a look at a number of the former Little Chef sites currently on the market.
However, it will be the launch of the group’s first franchise in the South East later this year that will be most closely followed not just here, but in the chain’s Seattle headquarters. Engskov says that he expects the group’s franchise partners to be able to operate five to 10 or more sites in their territories. He said: “We are looking to work with talented, multi-site operators who we can support fully in their territories. It’s a great time to be investing in smaller towns. It’s a big country and there are lots of opportunities out there.”
