So, Starbucks Corporation (NASDAQ:SBUX) has announced a wacky new initiative called “Race Together.” Apparently, the idea is to get people involved in discussions about race relations in the country, driven by writing “Race Together” on people’s cups as they get their coffee.
Allegedly, SBUX wants its baristas to initiate these discussions as well. It’s not quite clear if this is going to be verbally initiated, or if other missives will be written on the cups.
Either way, it is dumb.
In fact, it is the biggest dumb idea in the history of dumb ideas, and it’s from one of America’s most visionary CEOs, no less.
But as a Starbucks stock holder, I want to talk about this from an investment standpoint, because that’s what we all care about.
SBUX Has Nothing to Gain From “Race Together”
The problem is that this campaign runs counter to what Starbucks is about: coffee. When you order your coffee, you want your coffee. You often don’t want a discussion about even the weather, much less a societal issue. If you happen to be single, and so is the barista, and the place isn’t busy … well, fine, then some casual flirtation is acceptable.
Beyond that, just give me my damn coffee.
People want to order their product, pay for it, pick it up and get on with their day. At the very least, this dumb idea has the potential to hold up the line and slow business down. If people get frustrated because the barista is saying anything other than “Next, please,” they are going across the street to Peet’s.
I feel sorry for the baristas. They just want to make coffee and get paid. They didn’t sign up for this, and I’m concerned SBUX will lose efficient employees. How long before they write “Race Together,” with a smiley face, and someone who hasn’t had their coffee yet blows up at them in a profanity- and epithet-laced tirade?
I wouldn’t want to be SBUX vice president of communications that day.
Then there is the contingent of consumers who do not tolerate this kind of “social awareness” nonsense. They are the people who are quite serious about boycotting Chipotle Mexican Grill Inc. (NYSE:CMG) because of the political messaging on its to-go bags. These same people might very well leave SBUX, and if so, it won’t be in insignificant numbers.
This is where I, as an investor who is long Starbucks stock, get really annoyed.
The stock market is about capitalism. Save your political efforts for your 501c3, regardless of what side of the political spectrum you’re on. I don’t want my shareholder returns put in any danger because you want to save the African nano-beetle.
The reason is because there is no possible upside to this strategy.
Political efforts like this can only hurt Starbucks stock, at least in the short term. They are a distraction. They are unnecessary. This one is already creating a communications backlash. Go check out #racetogether and see some of the hilarious comments.
Bottom Line
The big upside to all of this is that, in the long run, Starbucks stock should be fine, if only because I see the company running “Race Together” for just a few weeks before Starbucks quietly retires it — especially if comps come in weaker than expected.
And investors can even enjoy a little bit of actual investing news, as CEO Howard Schultz just announced a 2-for-1 stock split. So now I have twice the number of shares I can make money from.
Assuming I don’t sell them because my barista didn’t just give me my damn coffee.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. He is the manager of the forthcoming Liberty Portfolio, has 20 years’ worth of experience in the stock market and has written more than 1,200 articles on investing. He is long SBUX … for now. He can be reached at TheLibertyPortfolio@gmail.com.
