Starbucks junkies take note: battered by a bad economy, competitors such as McDonald’s and Dunkin Donuts now selling designer coffee blends and a decline in its stock value, there are a latte grande changes brewing at Starbucks.

It’s enough to make you flip your frappuccino:

The initiatives are designed to restore an authentic coffeehouse experience to the company’s stores and, in turn, re-energize an ailing stock that has lost half its value in the past 15 months.

Before 6,000 investors, employees and analysts at the company’s annual shareholder meeting, the chief executive, Howard D. Schultz, unveiled an improved automated espresso machine that grinds coffee for each drink and has a lower height — so customers can see baristas making their beverages. He said the company would roll out the Swiss-made Mastrena machines to three-quarters of Starbucks stores by 2010.

Mr. Schultz also announced the company’s acquisition of Coffee Equipment Company, the four-year-old Seattle-based maker of the Clover coffee brewing machine, which brews one cup of coffee at a time. The price was not disclosed. The company will roll out Clover systems to select markets.

The New York Times also notes some other big changes, such as:

–A “pungent” new coffee blend.

–Partnership with Conservation International to certify environmentally sound coffee beans.

–A rewards card for customers who have Starbucks cards. This includes being able to customize your own coffee (adding vanilla, soy etc) for free.

The Times notes the challenge facing the over-expanded company:

The company faces a hurdle that may be impossible to overcome in the short term: the economy. Will penny-pinching Americans, in the steely grip of a recession, still pay $4.10 for their daily dose of white chocolate mocha?

And you can tell how big the challenge is by this lead in the USA Today story:

The company faces a hurdle that may be impossible to overcome in the short term: the economy. Will penny-pinching Americans, in the steely grip of a recession, still pay $4.10 for their daily dose of white chocolate mocha?

The text of the announcement is here.

But the plans — and announcement are unlikely to provide an immediate fix. The initial response on Wall Street was what Starbucks’ coffee never is: lukewarm:

Warning of an economic “tailspin,” Starbucks Corp outlined long-awaited plans to turn around its U.S. business on Wednesday, but details from new coffee machines to a rewards program for frequent customers failed to excite investors, who sent shares down 4 percent.
Chief Executive Howard Schultz told the company’s annual meeting there was no “silver bullet” for fixing Starbucks, whose stock has dropped 40 percent over the last 12 months.
The company’s blazing U.S. sales growth stalled in the most recent quarter, when a decline in traffic caused sales at domestic stores open at least 13 months to fall 1 percent — the first quarterly fall in company history.

Schultz returned as chief executive in January, promising to change what he had called the “commoditization” of the brand, but John Langston, a senior analyst at Hodges Capital Management, said he did not hear anything that made him want to buy the stock again.
“I didn’t really hear anything that blew my skirt up,” he said.

Part of the Starbucks reorganization also involves layoffs. Some 200 support employees who worked at the company’s headquarters and in the field will be given the ax and some 380 positions will remain unfilled — a total cutback of 600 jobs.

What’s behind the big announcement? According to reports, Schultz wants to get Starbucks back to basics — essentially selling the Starbucks experience. Drinking coffee at a donut shop or hamburger restaurant won’t be the same thing. This includes giving the shops feeling of small, intimate local places — but done in a way to help the company grow. Customers have reported a shift in many years — that Starbucks shops sometimes don’t feel as hometown and give off a corporate feel.

So now the company is trying to get back to basics, get back to the original feeling — and make Starbucks again a place where the experience of drinking a great (but costly) cup of coffee far more desirable than drinking it at a place with artwork of a smiling Ronald McDonald.

A PERSONAL NOTE TO STARBUCKS: I won’t be leaving you for hamburger or donut shops. A LOT of my posts on The Moderate Voice have been done from Starbucks over the years — places where they let me sit for a few hours and nurse cups of coffee. I recently redid my health insurance policy at a Starbucks on El Cajon Boulevard in San Diego. On year I traveled so much on I-5 that the Starbucks in Lebec — which employees told me was the heaviest visited Starbucks in North America — gave me a free cookie.

So I never noticed the corporate feeling. And I’ll ways be there for my business meetings, blogging when I can, and will order your quadruple frappaccino schmappaccino grande venti al dente –or whatever it’s called. Only at Starbucks. (And thanks for letting me sit there and write for TMV on your great Internet connections…)