Will Starbucks be Affected by Its Poor Decision?

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Starbucks Coffee shop

Recently, it was reported in international media that two black men were arrested in a Philadelphia Starbucks after the store’s manager called the police. It was later reported that they were waiting for an associate for a business meeting. A video recording of the incident went viral as customers expressed outrage and disbelief at what happened.

According to YouGov Brand Index, Starbuck’s reputation has been damaged as the company’s Buzz score fell from 13 to negative 8 since the news of the incident became public. YouGov measures the public’s perception of company brands based on what they hear or experience. Scores can range from -100 to +100 with zero being neutral. YouGov interviews 4,800 people every day and conducts over 1.5 million interviews per year.

Starbucks has since been trying as hard as possible to tackle the ‘negative press.’ They first apologized and then reported that all 8000 plus stores in the US will be closed in the afternoon on May 29 in order for employees to undergo anti-bias training. They will be trained on how to make all customers feel welcomed. This training will be critical to the future success of Starbucks.

Surprisingly, Starbucks’ share price did not fall significantly. On Monday, the stock closed at USD$59.43 and on Thursday closed at USD$59.22. Evidently, the company’s response to the incident has somewhat appeased customers and investors. However, the company’s bottom line may be affected as it is estimated they may lose between USD$6 million to USD$8.7 million in sales once the stores are temporarily closed.

Many persons describe Starbucks as a ‘third space;’ a comfort space which is neither home nor work. The coffee may be expensive and not well known for being of superior quality but customers enjoy the brand and the space. This is why it is crucial for Starbucks to effectively address the situation and ensure it does not repeat itself.

Even though the incident is not a one- off situation, we at SSL continue to recommend the stock to our clients as it has consistently performed well over the years.

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