Struggling Starbucks unveils initiatives aimed to perk up sales

Starbucks will acquire Seattle-based Coffee Equipment Co., maker of the highly regarded Clover single-cup commercial brewer, and will introduce the machines to many U.S. stores, CEO Howard Schultz said today at the company's annual shareholders meeting.

Among other initiatives to revive Starbucks' flagging growth is a rewards program for Starbucks Card users.

And for the first time in eight years, Starbucks is switching the espresso machines its baristas use to a new automated model that will allow less margin for error in pulling shots and steaming milk.

Schultz unveiled a handful of new measures at the company's annual meeting today at Seattle Center's McCaw Hall, which drew its usual overflow crowd of about 6,000 cheerful, coffee-drinking shareholders and employees.

He said baristas will quit using flavor-locked bags of pre-ground coffee next month and get back to grinding beans in most of its U.S. stores.

Also in April, Starbucks will introduce a new "everyday" drip coffee — a signature brew called Pike Place Roast that baristas will serve up daily in all its stores, rather offering new blends from day to day.

To get a better idea of what customers want, the company is launching its first-ever social networking site. Chris Bruzzo, Starbucks' chief information officer, said mystarbucksidea.com will be "about sharing ideas, voting, getting into a conversation about sharing those ideas, then putting those idea into action."

Another new element is an "expanded relationship" with Conservation International focused on sustainable sourcing of coffee beans and climate preservation, the company said.

Schultz said more changes are in store, including an entry into the fast-growing energy-drink market later this year, though he said no details would be announced Wednesday.

The moves are part of Schultz's effort to turn around the company, which has suffered from a slowdown in U.S. traffic. Its stock hit a four-year low last week.

Shares on Wednesday were down 34 cents or 1.8 percent to $17.96 as of 11 o'clock, after trading as high as $18.50 earlier in the day.

Schultz said he first drank coffee from a Clover machine in New York, where a cup was selling for $7. "And there was a line. I was really not happy."

He asked someone to find out where the machines were made, and when he learned they came from Ballard, "I thought it was a joke. It can't be Ballard. I saw it in New York."

Clover machines custom-brew coffee using a unique method that is similar to a French press, but is automated and uses a special vacuum technology.

The new espresso machines, called Mastrena, will be manufactured in Switzerland by Thermoplan, the same company that makes Starbucks' current machines. Officials are not disclosing the cost of switching machines.

They will begin rolling out next month, replacing the Verismo automated machines that Starbucks introduced in 2000. Before that, it used manual machines from La Marzocco, which are still in stores in some international markets.

Starbucks expects to have the new machines in 30 percent of U.S. company-owned stores by the end of this fiscal year and in more than three-quarters of those stores by the end of fiscal 2010. The Mastrena machines also will go into all new stores worldwide beginning this spring.

The company has worked on technology for the new machines for more than five years. A version of the new machine has been tested at Swiss stores sinced August and some Seattle stores since October.

"This gets us to a new gold standard for espresso equipment," Rob Grady, head of Starbucks' beverage development team, said in an interview. "It's like a high-performance Italian sports car."

The Mastrena is about seven inches shorter than Starbucks' current machines, allowing baristas to interact with customers more easily while they make drinks.

The new machines also have a built-in mechanism to time the length of each shot, which tells baristas whether the coffee is being ground correctly. If it falls outside the ideal 18- to 23-second range, baristas can adjust the grind.

The machines have upgraded steaming wands that are adjustable, allowing baristas to decide how much steam comes out at a time.

They hold five pounds of coffee beans, up from about two pounds for the Verismo machines, so that baristas will not have to fill them as frequently. The side of the machine that faces customers has a new look, including brushed copper, light and dark woods, that can be changed depending on a store's decor.

Starbucks regularly upgrades its Verismo machines, with the most recent upgrade at U.S. stores coming this year. The machines last an average of four to six years, but Starbucks will speed up the rate at which they are rotated out to make way for the new Mastrena machines.

The aroma of coffee is about to make a comeback in Starbucks cafes.

In an interview before the meeting with AP, Starbucks executives said they want to bring back some of the romance and theater that's been missing from stores since the company switched to using sealed ground coffee years ago.

Michelle Gass, Starbucks senior vice president of global strategy, says she expects the change will improve sales, which have been slipping amid a softening economy and growing competition from cheaper rivals.

The new Pike Place Roast drip coffee to be served every day will be suppplemented by two other choices: one other caffeinated variety and one decaf.

"As we talked to customers over the last year, what we heard was that morning occasion was very, very habitual and they want a taste they can count on," Gass said in an interview before the meeting. "Once in a while I might choose something different and go on an adventure, but 90 percent of the time, I just want to go and get my great cup of coffee."

Andrew Linnemann, director of green coffee quality and operations, said his staff has spent the past month workingaround the clock to perfect Pike Place Roast, named for the company's first store in Seattle's storied public market.

Gass and Harry Roberts, Starbucks' chief creative officer, described it as a smoother, sweeter, more buttery-tasting blend than most of the other brews the company serves.

"We all love this coffee — we can't get enough of it," Gass said.

Pike Place Roast will only be produced and sold by the whole bean to preserve flavor freshness.

It's the first coffee made entirely of beans purchased through the company's sustainable growing practices program _ its version of fair trade and organic. Starbucks currently buys about 65 percent of its beans from farms that win higher prices for doing things like paying its pickers well and growing their coffee in shade without using pesticides.

The company plans to open new coffee-sourcing offices in Africa and Indonesia in the coming years to help it achieve its goal of having all of its coffee meet those standards.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

The Associated Press contributed to this report.