Nicolas Pirog: February 2008 Archives
It seems like the past few months have been unkind to Starbucks. After experiencing slow sales growth, a rise in the price of milk, and returning founder Howard Schultz to the position of CEO; Starbucks announced on January 23rd that it would slow construction of new stores and even shut down close to 100 under performing stores.
The in-store experience is set to change as well. After experimenting with warm sandwiches, the company has decided to give up on the egg-and-cheese and concentrate on its core business, namely coffee. Speaking of coffee, it would appear that Starbucks is testing $1 cups of coffee, in a move that is surely designed to counter the likes of McDonald's and Dunkin Donuts. For the company that built an empire by selling $4 frappucinos, this could be a radical move, made necessary by increased competition and a lagging economy.
After a few years of branching out and experimenting with new items (sandwiches, cd's, etc...), Starbucks is being challenged on its own turf, which is why company is looking at ways to get back the upper hand. But is undercuttind Dunkin' Donuts on the price of a cup of coffee really the way to go? Starbucks currently stands for premium coffee drinks and a premium store atmosphere. $1 cups of coffee run the risk of cheapening the company brand, and might also cannibalize sales of the more expensive (and more profitable) drinks.
One thing is for sure: Starbucks is going to face a lot of competition in the next few years, and if it intends to keep building thousands of stores per year, it will have to come up with something new.
-"Starbucks Tests $1 Cup, Free Refills in Seattle", 01/23/08, The Wall Street Journal
The in-store experience is set to change as well. After experimenting with warm sandwiches, the company has decided to give up on the egg-and-cheese and concentrate on its core business, namely coffee. Speaking of coffee, it would appear that Starbucks is testing $1 cups of coffee, in a move that is surely designed to counter the likes of McDonald's and Dunkin Donuts. For the company that built an empire by selling $4 frappucinos, this could be a radical move, made necessary by increased competition and a lagging economy.
After a few years of branching out and experimenting with new items (sandwiches, cd's, etc...), Starbucks is being challenged on its own turf, which is why company is looking at ways to get back the upper hand. But is undercuttind Dunkin' Donuts on the price of a cup of coffee really the way to go? Starbucks currently stands for premium coffee drinks and a premium store atmosphere. $1 cups of coffee run the risk of cheapening the company brand, and might also cannibalize sales of the more expensive (and more profitable) drinks.
One thing is for sure: Starbucks is going to face a lot of competition in the next few years, and if it intends to keep building thousands of stores per year, it will have to come up with something new.
-"Starbucks Tests $1 Cup, Free Refills in Seattle", 01/23/08, The Wall Street Journal
