The Character of Starbucks

DISCUSSION TOPIC

Starbucks Takes on the Egg McMuffin – 2/2//09

TOPIC SUMMARY:

While Starbucks last week announced another round of job cuts, a bigger surprise to many was that the upscale coffee chain was entering the breakfast value-meal race. Using uniform national pricing, Starbucks in March will begin offering “several breakfast pairings” at “attractive price points.”

The move represents an about-face for Starbucks. Last July, chief executive Howard Schultz said the company was “not going to go down the fast-food lane” in offering combo-meal discounts. He argued that Starbucks’ customers were willing to pay a premium for the Starbucks “experience.”

But last Wednesday, Mr. Schultz indicated that more of a value-proposition would be added to its breakfast offerings starting in March “to correct misperceptions and drive stronger offers into the market.”

News of breakfast-value offerings came on the same day Starbucks announced it would layoff 6,700 employees, close 300 more doors, and scale back store openings for 2009 on the heels of weak earnings in its quarter ended Dec. 28. Same-store sales were down 9 percent in the period.

Discussion questions:  What do you think of Starbucks’ plans to offer value breakfast deals? How can Starbucks offer a better value-proposition without affecting its premium positioning?

My post: 

I find this announcement disheartening.  I have long enjoyed the Starbucks breakfast (and lunch) food offerings – high quality, consistent, tasty and reasonable for what it is.  In fact, when I moved to Hong Kong last year I was happy to find even more offerings in the stores here.  I am more than willing to pay more for a quality quick-service meal in the Starbucks environment than a cheaper meal at McDonalds.  Of course McDonalds is doing well.  Their strategy to upscale their offering hit at just the right time. The bottom of the Starbucks customer base is certain to give Mickey D’s a try.  However, most will return to Starbucks when the economy improves – but only if Starbucks is still perceived as a premium aspirational experience.  This ongoing search for a vision is scary for a brand that had strayed little from it’s core message until times got tough.  You always find out what a company’s character truly is when sales slump. I guess we’re finding out.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13529

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