A Business Publication Questions Starbucks' Strategy

The current issue of Business Week contains an article questioning Starbucks' current marketing strategy. As noted in the sub-title: "By itself, instant coffee could work... But coupled with word that value meals are coming, it suddenly feels... ill-advised." Amen to that!

I certainly don't agree with BW's conclusion that Starbucks should refrain from lowering prices during a recession. I do concur, of course, that the 'bucks should try to retain its former luster by returning to its old mission of serving good, strong, bold coffees.

Here's an excerpt from the article by Rick Wartzman:

The Seattle-based company has been in the news a lot lately. ...It announced that it would soon introduce discounted pairings of coffee and breakfast food. It also launched a new line of instant Joe. ...It's hard to imagine that one won't affect the other.

In isolation, peddling packets of VIA Ready brewe would be a chancy - but potentially rewarding - move for Starbucks. But the company's effort could be tripped up by its other recent goal: Persuading recession-weary consumers that its offerings are, in fact, light on the wallet. Though VIA was in the works for many years, (Howard) Schulz said, its unveiling "happens to... coincide with the downturn of the economy."

It feels as if the company is simply trying to reposition itself as a place to find a "good deal" - an image that... runs directly counter to what made it so special to being with. "I think they run the risk of confusing the brand," says a professor of marketing, "(when) Starbucks no longer competes in the coffee connoisseur market... it competes in the convenience market - a very cluttered and highly competitive space."

Whenever an executive "tries to impose what he considers rational on an apparent irrationality... he is likely to lose the customer," (Peter) Drucker (once) cautioned. This is precisely the danger for Starbucks. While the company may attract some folks with its new approach, it could alienate just as many - or more - who feel as if Starbucks has compromised its character. What Starbucks should do, even in this downbeat economy, is to keep prices where they are and focus instead on retaining its fast-fading luster.

What the holy heck is Starbucks up to? (continued)

For those of you who may have missed it, an Associated Press (AP) article on Starbucks ran on Wednesday, February 18, 2009. My local paper ran this article with the headline: "Struggling Starbucks puts image at risk by offering instant coffee."

Before running the abridged summary of the article below, I need to ask the question - Is it still possible to buy stock in Peet's Coffee? OK, here's the short version of the AP article:

Starbucks Corp. has delivered a jolt to its devotees and rivals: It's embracing instant. The chain that helped create the gourmet coffee industry and became the industry leader began selling its new instant coffee online Tuesday, ahead of a nationwide launch to coincide with the company's first major ad campaign.

Called Via, the water-soluble product sells in packets of three for $2.95 or 12 for $9.95. Just Columbia and Italian roast varieties will be available at first.

Critics say the move smells of desperation as the chain closes locations in the United States and overseas and cuts about 1,700 jobs.

Andrew Hetzel, the founder of coffee consulting group Cafemakers, said the new product could denigrate the premium positioning that helped establish Starbucks. "I see it as... a very short-term approach to a long-term brand problem. They're throwing things out there to see what hits."

Even competitors seemed surprised. Micheal Fell, president and founding partner of Biggby Coffee, a premium coffee chain of about 100 stores mainly in the Midwest, said he follows the company closely so he knows what his biggest competitor is up to. He called the announcement "shocking."

"We try to make sense of out of everything that they do," McFall said. "This one I'm having a hard time making sense of."