Starbucks going back to grinding beans

ByABC News
March 19, 2008, 1:21 AM

— -- Starbucks customers soon can take a deep breath.

Coffee again will be freshly ground and scooped in most U.S. locations so that the stores smell like coffee shops again.

Think of this as a hobbling Starbucks' annual checkup.

Schultz acting as both doctor and patient will try to convince shareholders that he can fix what ails the chain. In an exclusive interview with USA TODAY, he made clear that a key first step is grinding beans for brewed coffee, reversing the switch to sealed bags of preground coffee that barely got time to breathe before use.

That's just for starters.

"Starbucks is going back to the future but that's not enough," says Schultz. "There will be a relentless focus on innovation."

The world's largest coffee shop chain is looking to its core coffee roots to lure back key customers going elsewhere for their coffee fix.

"There will be a fundamental change in the taste and experience of going to Starbucks," Schultz says. He returned as CEO eleven weeks ago and has pointed to this meeting as the moment he would begin to offer substantial details of his revival plan.

Unlike many CEOs these days, Schultz isn't blaming the economy for his troubles. "The problems we are facing have been self-induced. That's why I think we'll be able to fix them."

Wall Street will be listening closely, as will Starbucks fans and detractors. Schultz says upcoming changes some to be announced Wednesday will include new ways to make and sell coffee, new products and redesigned stores.

"We're going to elevate the experience to new heights and new levels, the likes of which Starbucks customers have never seen before," Schultz says.

Clearly, many consumers seem to have lost their love for Starbucks. For the first time, the company suffered a 3% drop in transactions in its first fiscal 2008 quarter ended Dec. 30. Its stock has plummeted about 54% since a high of $39.63 in May 2006. Heads have rolled including that of former CEO Jim Donald, who was replaced by Shultz in a reprise of the CEO role he formerly held. And the chain is shutting 100 of its domestic locations.

To be sure, Starbucks is hurting only by Starbucks standards. More than 45 million customers worldwide buy something from Starbucks every week. Its stock has appreciated almost 2,400% since it was listed in 1992, vs. 269% for the Nasdaq.