Starbucks Baristas Have a Secret You Should Know

You may have heard some Internet buzz over the years about secret specialty drinks pop up at Starbucks (NASDAQ: SBUX  ) but are nowhere on the menu. What a cool factor, if you can get your hands on one -- most of us love the feeling of being a first adopter who's "in the know." However, lots of baristas hate these secret drinks.

Baristas' negative opinion of the drinks has nothing to do with the drinks themselves, which sound delicious as well as clever. With autumn upon us, they could conceivably include seasonal stealth offerings such as Candy Corn, Fall Mashup, and Perfect Pumpkin Frappuccino. Names like Cap'n Crunch and Oreo, not to mention favorite tastes Red Velvet and Cake Batter , sound fun and delicious. What about some of the treats people love, like Samoa Frappuccino, Kit Kat Frappuccino, and -- wait for it, hazelnut addicts -- the Nutella.

A site called Starbucks Secret Menu offers up the skinny on a whole slew of cool beverages like those. However, such revelation sites may actually be tantalizing us with the cool factor while doing baristas a disservice. In August, Buzzfeed named quite a list of Starbucks' secret offerings, but its structure was an Internet quiz asking "How many have you tried ?"

Sadly, these revelations and even quiz challenges may theoretically be good buzz for Starbucks, but not necessarily for baristas. There's a perfectly logical reason why some baristas hate or even despise the secret drinks.

The customer isn't always right
A few of my colleagues and I recently talked about Starbucks' awesome corporate culture. Its employees receive many great benefits that rarely show up in retail, such as health care coverage and a stake in the company called "Bean Stock." Many of Starbucks' initiatives, such as fair trade and artisan coffees, as well as increased environmental efforts, give many employees a sense of working for a company that cares about the world.

When I study companies to consider as investments, I include cultural attributes in my analysis. I loved the idea of secret, basically exclusive drinks at Starbucks. Front-line innovation is an awesome thing, and it illustrates pride in one's work as well as offering customer-pleasing products.

However, one of my colleagues, who did some time as a Starbucks barista, brought up an interesting thing most of us wouldn't suspect: many baristas hate them. Much like any art, they're usually one individual's creation that, of course, is not available in Starbucks' 10,000+ cafes. When baristas don't know the recipes to these specialized creations and turn down customer requests, it's not an "I won't" situation -- it's "I can't."

Meanwhile, customer reactions generate dread of what should be fun. Many customers become irate or even enraged if a barista can't fulfill a "secret drink" order. Examples of customers' extreme expressions of anger would shock most of us.

The downside of creativity
Maybe Starbucks could use the idea as a business builder while making employees happier, if it's handled in some different ways.

Employees who work on extra tasks show engagement, and studies reveal that engagement with one's work boosts happiness and productivity. From the business perspective, employees can find efficient ways to do things, or take it upon themselves to delight customers in creative ways. When they're recognized and rewarded for their talents, it can be as strong or stronger an incentive than huge paychecks. Creating a product of one's own is a pretty engaging activity.

I had a few thoughts off the top of my head on how Starbucks might be able to take the situation and flip it into a positive.

Make it clear that "secret drinks" are "secret" for a reason; they may not be on the menu. For baristas' happiness and sanity, this would be the most important element. Occasionally offer some "secret" drinks in some cafes for a taste test "beta." Use chalkboards, social media, and other ways and to reveal the opportunity to taste an exclusive, secret drink; this could be an exciting store-by-store exclusive offering. Compile information and feedback from means like social media, trying to identify the most popular or promising ones. The most popular secret drinks could be rolled out on a widespread basis, with clever names and barista attribution. Take a page from many modern companies and allot some time once a month or so in which baristas are paid to work on concocting secret drinks instead of in the fray. Drinks that make it to a test phase or some other goal could yield a monetary bonus incentive.

Testing a way to reduce elements that frustrate or upset workers is a big deal, given the importance of morale. Public-facing jobs can particularly degrade morale even among the most culturally sound companies, particularly jobs that are so frantically fast paced and so close to customers. Turning the negative feelings into a positive initiative turns into a win-win-win situation.

The most important thing is to hope some angry, impatient customers can start exercising respect for baristas who work hard in a stressful job, regardless of what their complaints are. Whether this type of situation is one that Starbucks deems necessary to address, everyone has a choice as to how they treat others, and treating people poorly is a win for no one.

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Herbalife: ‘Messier Than Expected and We Had Expected Messy’

Even those who weren’t expecting great news from Herbalife appear taken aback by its results last night. Canaccord Genuity’s Scott Van Winkle and Mark Sigal, for instance, call Herbalife’s earnings “messier than expected.” They explain:

Bloomberg News

The Q3 results and guidance revisions were messier than we expected and we had expected messy. We expected that more pronounced headwinds in the US and a Venezuela devaluation could materialize and saw these items as the risks to the quarterly report. However, the negative surprise relative to our estimates wasn't confined to these two markets. Similar to Q2, China continues to drive strong growth (China was the only market to meet our revenue forecast), while underlying strength in EMEA (+15% in constant currency) is being masked by foreign exchange. Beyond these two regions, growth is modest or disrupted. The impact of the Herbalife business model debate has clearly impacted the US, but major markets outside of the US, such as Mexico and Brazil, were softer than we would have thought. The net result was a 5% miss in sales and volume points vs. us that was several percentage points worse than we expected, even after adjusting for Venezuela. Moreover, Q4/14 and F2015 guidance came in significantly softer on a volume point basis.

Van Winkle and Sigal also explain the impact of changes to Herbalife’s business that were made following allegations by Pershing Square’s Bill Ackman:

The guidance is set partly as a reflection of a phased implementation of changes to the global compensation plan (fully effective by February 2015) that are anticipated to temper near-term growth. The plan changes include a first order limitation (previously in 18 markets, now to be global), a sales leader qualification restriction whereby all volume for qualification must be purchased directly from Herbalife rather than from upline distributors (implemented November 1), and a lower threshold for supervisor qualification (4,000 volume points over a 12- month period rather than the historic 5,000-point qualification where large volume purchase were front-end loaded). The net result of these changes is greater line of sight on distributor purchases, as well as more gradual and sustained distributor participation; but of course it's a slower build. The prior roll-out of the 12-month volume point qualification program in the original market resulted in ~60% gains in distributor activity and retention for new qualifying supervisors a year later, but impacted initial volumes. Near term, these plan changes will create a sales headwind until fully anniversaried in Q1/16. But also, any compensation plan change carries disruptive risk.

Despite the disappointment, Van Winkle and Sigal maintained their Buy rating on Herbalife’s stock, though they did slash their price target to $60 from $73.

Shares of Herbalife have plunged 18% to $45.75.