Starbucks meeting still steamy, if a little weak

Starbucks also has found success transporting its brand to China, France, Japan and a host of other countries. Schultz lamented Wednesday that such ubiquity also has brought its own challenges, making the company a symbol of U.S. capitalization and globalization.

Starbucks has been targeted by union organizers and anti-development activists. Most recently, it became part of a public dispute over Ethiopia’s efforts to trademark names of certain coffees there, drawing yet more unwanted attention to the brand.

Meanwhile, Starbucks also has sought to expand its brand far beyond coffee.

The company recently announced plans to start a record label, extending its existing foray into the music business, and on Wednesday said Paul McCartney would be its first recording artist. It also has featured books in its stores and last year struck a deal to co-promote a movie.

Starbucks also has added more non-coffee items at its stores, such as hot breakfast sandwiches, lunch items and its own brand of bottled water.

Schultz said Wednesday that Starbucks plans to continue such expansion, although he did not say what kind of Starbucks-branded products might come next.

For now at least, the expansion is paying off with continued strong sales growth. But Starbucks still could be at risk of finding its brand diluted or marred going forward. Robert Passikoff, president of the brand consulting firm Brand Keys, believes it may already be happening.

For four years, Starbucks ranked No. 1 in Brand Keys’ customer loyalty engagement index, in the coffee and donuts category. But in this year’s survey, the company fell to second place, after Dunkin’ Donuts.

Passikoff doesn’t think Starbucks has been indiscriminate in its brand expansion. Still, he worries that Starbucks has perhaps taken its eye off the ball by adding things like CDs and books to its roster.

“I think they’ve moved too quickly,” he said.

Others disagree. Analyst Dan Geiman with McAdams Wright Ragen, points that Starbucks continues to turn in consistently strong financial results, and notes that the coffee company still makes the vast majority of its money from coffee sales, not other items.

“I happen to think the brand’s as strong as it’s ever been,” he said.

At Wednesday’s meeting, Schultz sought to convince investors of the same thing. Over the years, he said, he’s repeatedly asked shareholders the question, “Can a company get big and stay small?”

Not surprisingly, he still thinks the answer is yes. The question is whether customers will always agree.

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