Starbucks Feels Your Pain
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Earlier this year, Starbucks announced the closing of almost six hundred stores in the United States. This was a move to trim back those outlets that were not meeting the company’s financial criteria. In the face of a poor economy, Starbucks is reporting more bad news:
“Starbucks reported weak quarterly earnings and slightly higher sales Monday, as American consumers cut back on the number of expensive coffee beverages they purchased.
In after-hours trading, shares of Starbucks fell 3%, after closing down 35 cents to $10.20 during the regular trading day. In the past year, the company’s shares have plunged more than 50%…”
link: A bitter brew for Starbucks
Starbucks has three obvious hurdles. There is the economic pressure on its customers, as well as increased competition from fast food outlets like McDonald’s. However, Starbucks may have to overcome its own street reputation as being a semi-elite, expensive coffee vendor. People are forced into watching their dollars and saving for essentials. Starbucks’ challenge is to change public perception and appear to be an affordable indulgence in a stressed economy.
Catherine Forsythe
6 Comments
Kathy Thompson
November 11th, 2008
at 8:20am
A couple of months ago, our boss had us in a meeting about marketing or something. She said something like “We all go to Starbucks every day, right?” It earned her a roomful of blank looks. Not on what she pays US, that’s for sure.
For the price of a couple of cups of Starbucks, I can buy a whole CAN of Chock Full o’ Nuts and brew my own at home. It IS a semi-elite, expensive coffee vendor.
Gary
November 11th, 2008
at 12:50pm
Starbucks clients are paying for a privilege that is based totally on marketing hype. The value of Starbucks is being seen with a coffee cup that says, “Starbucks” - not in the coffee itself. In any case, if I do want to indulge myself in some upper market brew, I prefer Gloria Jeans instead whose coffee is less bitter in taste than that of Starbucks. Most of the time however, I make my own.
Sean
November 11th, 2008
at 4:30pm
What’s this Starbucks of which you speak?
I have this nice cast iron grinder that will process any coffee bean mix I put through it, potent output at 1/2 cup being as potent as a standard cup bought anywhere else. And have been putting the convenience savings into things I need for the last couple of decades.
Hmmm, a better cup of coffee that’s not really that inconvenient to brew vs. wasting less time at work affording expensive liquid candybars over my lifetime. I think they’re in trouble.
swag
November 11th, 2008
at 6:09pm
The argument that consumers are no longer willing to pay for quality coffee is bunk (Coffee Yes, Starbucks No - Forbes.com: http://www.forbes.com/business/retail/2008/11/10/starbucks-mcdonalds-coffee-biz-commerce-cx_tvr_1110coffee.html). Starbucks wants you to believe that as a convenient scapegoat.
The truth is their competition is faring far better than they are, and their competition’s customers are still shelling out good money for good coffee.
Starbucks’ problems are much more internal than external. Better, more nimble competitors make far better coffee and can justify their margins, leaving Starbucks to fight a numbers game against bloodthirsty fast food competitors who know how to rip the competition to shreds with thin profit margins.
Ray
November 12th, 2008
at 8:25pm
Stressed economy you say…got to find the right large city.
Every time I drive by a Starbucks here in my big city, they are
doing a land office business. When I’m at McDonalds or
Sonic Drive In or wherever that serves cold coffee, I don’t see
too many people ordering it. Me thinks Starbucks complains
too much.
Coffee companies tried to get folds into iced coffee back
about 40 years or so ago. Didn’t fly then, don’t fly real well
now.
1fastbullet
November 19th, 2008
at 8:05am
Most of the people who criticize Starbucks are the ones who don’t drink Starbucks coffee.
The fact is, your home brew cannot and will not match the flavor of a Starbucks coffee unless you happen to own an extremely expensive espresso machine and actually know how to use it.
Don’t believe me? Then carry your butt to starbucks and splurge for a one-time Quad Vente Wholemilk Latte and then get back to me about your Chok Full and Folgers’.
Granted, I don’t often buy its brand of coffee beans to bring to the house, because as I stated above, it’s the process used to make the coffee.
And I don’t care if you drink it from a used spitoon or the logoed cup, either.