The Philadelphia Video Could Cause Starbucks to Lose Half Its Valuation

I’ve patronized Starbucks for years. The business model – in the US, in Europe and in Asia - is one of getting the stores to look full. I’ve never been to a Starbucks where customers aren’t encouraged to just hang out or loiter. It simply is not unusual to see large groups at their tables where only one member will actually be consuming a Starbucks product. It is also not unusual to see people who aren’t purchasing items but rather sitting and waiting for their friends or colleagues.

It is common knowledge that when the police become unnecessarily involved in a situation, it can quickly become escalated to one which is no longer manageable and where unintended consequences can result.

Just the thought that any Starbucks manager could be inclined to involve the police into a circumstance where customers – black or white or yellow or green – are doing precisely what Starbucks encourages is entirely unimaginable. One might assume that even a rogue or terribly sick Starbucks manager would receive basic training explaining not to involve the police in these circumstances. If it is not good business judgment, it is plain human judgment.

I’ve read Starbucks’ CEO Kevin Johnson’s letter. I am encouraged that he said that this will never happen again. He certainly went further in the day immediately after the incident that Mark Zuckerberg went in the year and half after Facebook’s failings. Yet, it remains terribly distressing that this could even happen in the first place.

But the video is floating around. Anyone with any sense has a hollow pit in their stomach and will seriously consider alternatives to Starbucks for the next few months. If Starbucks sees slightly fewer customers for a few months, its valuation could easily contract from a lofty 20x to a more reasonable 10x.