Starbucks Strikes Back

Starbucks will start introducing $3.95 breakfast-coffee combo deals next month, in a move that many see as attempts to compete with McDonald’s roll out of espresso coffee drinks in its restaurants.

As part of the plan, the company announced that it will launch two new egg sandwiches that can get paired with drinks.

Some are calling this a move of desperation. “At some point, it seems too much of a value element might tarnish the brand, which is what differentiates Starbucks from its rivals in the first place,” writes Motely Fool columnist Alyce Lomax.

Or is this lower-priced strategy, coupled with planned store closings, just what Starbucks needs to get back on track?


24 Responses to “Starbucks Strikes Back”

  1. 1 James February 10, 2009 at 7:45 am

    When you engage in competiton whether business or warfare you tend to become like your enemy. Forced to respond to their tactics you risk losing sight of your founding principles. Guantanomo?? No, but we already have the drive thru, what’s next?? A Stacy Starbucks character in a fish suit?? Please Starbucks, close a few stores, you made some location mistakes, but please don’t make this branding mistake. Why wrestle with the 800 pound Gorilla?

  2. 2 Mike J February 10, 2009 at 8:30 am

    When you go from several premium drip coffees to one “Pike Market” stale mediocre one, when you go from being a specialty coffee house to a tea house, and when you continue to serve the most sugary, high fat and so 1980s pastries as your primary food…then I think that you are in trouble…most importantly, you have forgotten who your customer is.

  3. 3 dan February 10, 2009 at 8:38 am

    the new world order dictates businesses to seperate themselves from others with exclusivity and unique concepts. I don’t believe starbuck’s tact accomplishes that task. how about offering their loyal frequent shoppers value promotions. this would bring stability and stop the bleeding from their core. unfortunately, they non exclusified their original concept. you can buy starbuck’s ground coffee at discount food stores. drastically scale back the stores…build upon non breakfast hours via a “community” meeting place concept and vacate all product from non store locations. start franchising some existing company owned stores which are non profitable similar to the direction YUM brands took with taco bell. owner/operators are generally better operators due to being hands on.

  4. 4 Laura February 10, 2009 at 8:53 am

    Especially now, who doesn’t love a bargain? All whom were won over by this brand will be thrilled with the new deals. Who wants just carbs in the morning, anyway? Once Starbuck’s added sandwiches I have often purchased one for breakfast. Before this option was available I’d skip Starbuck’s in favor of a local deli offering an array of breakfast choices.

    I’ve long thought that Starbuck’s would benefit by following some concepts used by an Italian outlet called “Autogrill” that can be found along Italy’s highway system known as the Autostrada. They serve delicious panini’s along with espresso, cappuccino and other treats. It’s a great place to stop any time of day.

    Starbuck’s can easily adapt it’s upscale image to embrace an international flair that McDonald’s and Dunkin Donuts won’t ever be able to achieve. This can prove to provide it’s market differentiation to transcend concerns about going downscale, if only in price.

  5. 5 Phenfen February 10, 2009 at 9:13 am

    I have to agree that Starbucks does need to have a better menu selection. Its food is too “guilty pleasure” to eat there other than on a “coffee & desert” kind of basis. Right now, I believe people are in the mood to skip desert, even if they can’t skip the coffee. I think of a good coffee shop like a good bar — a personal touch, a friendly barista & a bit of personality. Starbucks has made itself too generic & mechanized. Sure they serve a lot of coffee drinks quickly & reliably & commodity-like, but…that leads them open to being destroyed by McDonalds (who doesn’t offer decaf espresso drinks, at least not at my McDonald’s — what’s with that?). The only time I go to Starbucks is when I am travelling, because I know what I’m getting…hmmm sounds a lot like the whole concept upon which McDonald’s & Howard Johnson’s were first founded! I guess what I am saying is that Starbucks did itself no favor by over-extending the brand.

  6. 6 Dealmaker February 10, 2009 at 9:22 am

    What’s next….??? A 27 page spiral bound diner menu? Breakfast Burrito’s? Breakfast Pita’s? Star shaped bisquits and sausage? I think we can all clearly see that they’ve figured out it’s a morning business and increasing average transactions is easiest accomplished in the morning. However…The brand has already started to lose it’s luster…So now we watch the temple of coffee stoop to conquer? My advice….do one thing and do it right, do it the very best. It’s coffee..keep it simple. It might be time to franchise….co brand…etc…but keep the brand value untarnished.

  7. 7 Bassman February 10, 2009 at 10:49 am

    When women stop shopping Nordies, coldwater, chico’s and other “high profile” retailers realizing that they can live without the margin, and now trend towards value at Target and the like… well stands to hold true for Starbucks. They have to respond or they’ll be dead. Plain and simple. The few remaining “your worth it” types won’t keep them afloat. The world is “waking up” to the fact that good coffee doesn’t have to cut into your child’s allowance.

    I like Starbucks coffee, but can be very comfortable with McD’s, Dunkin, and even a doctored up personal blend at the local BP wild bean cafe, or at the Speedway when I fill up with gas.

    I WILL go back to Starbucks for a coffee and egg sandwich with a “value” price point.

  8. 8 john February 10, 2009 at 10:56 am

    “do one thing and do it right, do it the very best. ”

    They can’t..which, at this point, should be apparent. These are “egg sandwiches”. I would assume there’s a penny to be made in this move. I understand brand integrity, but that of SBUX has been deminishing for a while now…like the recession as a whole–mistakes have been made, now adapt.

    Now–the real question is–who’s going to back-fill these spaces, and who is going to step in and become something that– TRUTHFULLY–starbucks never was to begin with.

  9. 9 NottoMentionUnprofitable February 10, 2009 at 11:38 am

    I’m for adding the breakfast burrito, at a discount, too. Good move, Starbucks, even trendy people long for a little eggs and potatoes.

  10. 10 NottoMentionUnprofitable February 10, 2009 at 11:46 am

    To Laura: I like your Euro Starbucks bent, and your idea would add “panache” to differentiate its brand from Mickey D’s and the Dunkin’ Man. Good thinking.
    To all Yum fans, Yummies (i.e. Taco Bell), the Bell wasn’t franchising for the brand, they were doing it for the CHING CHING $$$$ LICENSEE FEES. Wake up and smell the coffee, then tell me what the color 9 tastes like.

  11. 11 CoffeeVenture February 10, 2009 at 11:57 am

    What’s next? StarBacon?
    I would agree there is potential for breakfast items, if they are quality products and reasonably priced.
    Starbucks and sugary half-assed items do not a breakfast maketh, but might work well at Walmart.
    The consumer is price conscious but like any mass mentality, waiting in the bushes to be told and convinced the “new Starbucks” is worth flocking to again.
    Just look at the discount stores and McD’s success in value with selection and its clear Starbucks could rise again from the ashes with the RightStuff.

  12. 12 James February 10, 2009 at 12:06 pm

    Well folks, it looks like Stacy Starbuck the socially concious mermaid was a good idea where can I copyright that??

  13. 13 Derrich February 10, 2009 at 2:07 pm

    It looks like they already sell breakfast in Malaysia…on Ciabatta bread. Mmmm.

    “Welcome to Starbucks. How may I help you today?”

    “Yeah…lemme get uh…a Siren Sausage Sandwich and a tall caffe latte…non-fat, no whip, double trouble…no, no…make that a black eye…and half caf.”

  14. 14 James February 10, 2009 at 6:06 pm

    Here in lies the rub, when dancing with the Gorilla one learns that it has very big feet!!

  15. 15 Tom February 11, 2009 at 8:14 am

    I drink Starbucks only becasue I have no other viable options at times — particularly when I travel for business. If I had better choices I would not return. Their coffee/espresso tastes harsh and burnt. Once you have tasted what real espresso is supposed to taste like you too will want to add a half gallon of half & half and a half cup of sugar to mask the taste. I happened to be in one yesterday where the manager of the store was toalking to a regular about how good certain coffees are that they do not sell. I have an automatic espresso machine at home that takes little to no time to make a great espresso.

    However, the most important reason I choose to go elsewhere is that my personal values are different and more conservative than those of Starbucks Managementand I do not want my money going to support those liberal agendas.

  16. 16 E February 11, 2009 at 10:06 am

    Don’t know how it will go over. Starbucks is putting best foot-forward, but they lose a bit of their “rarified” customer snob factor in this adaption. Two challenges:

    1) C.F.A. — can they continue to deliver the “Starbucks” experience (Coffee, Food, Ambience), however they package it, at a margin they can profit on?

    Been to a Starbucks, and everybody will tell you of the wait-in-line they have just buying coffee at peak times — can you imagine what the queue will be like waiting for food? It’s a huge turn off, and barista personality or no, people aren’t going to wait longer than 5 minutes (if that) to get a coffee and egg sandwich. McDonald’s has them beat there.

    2) Alienation factor — lower prices are going to bring in a non-Starbucks crowd that they won’t be able to upsell – the newbies will only be there for the current deal de-jour.

    Can the “Frasier Crane-Cafe Nervosa” habituees of Starbucks be expected to rub elbows with commoners for any length of time before there’s a revolution? Said very much tongue in cheek, but you get my point.

  17. 17 Laura February 11, 2009 at 11:13 am

    To: NottoMentionUnprofitable

    Upon further investigation of Autogrill (also considered the “McDonald’s of Italy”) it seems that they are licensing Starbuck’s as well as expanding into North America. From their website
    “The Group’s growth strategy is based on extending existing contracts, on widening operations in existing location and in securing new contracts. Acquisitions of concession operators and joint-ventures with similar companies have helped open up new markets. Autogrill’s growth, whether organic (new or extending contracts) or external (acquisitions or agreement), has always been based on its policy of seeking alliances with primary operators in the sector who are firmly rooted in their territories.”

    Perhaps a merger to accelerate Autogrill’s penetration would be a viable strategy.

  18. 19 FastFoodStarbucks February 11, 2009 at 5:37 pm

    Starbucks needs to have a vat of scrambled eggs and pre-sliced croissants. Simple, fast sandwich that must be served fresh and quick.

  19. 20 CoffeeVenture February 11, 2009 at 7:34 pm

    Don’t worry, Starbucks.
    Obama will save you.

  20. 21 Marlboro February 12, 2009 at 9:40 am

    I have never understood why it is so expensive to get a coffee in Starbuks. Not only in the US but in Europe as well. What do they put in the coffee, gold coins??? And I don’t think the quality is so great either…
    Now Sturbacks are coming up with the idea of a combo breakfast coffee for $ 3.95. I am afraid to say that it is still too expensive. Haven’t they analyzed their competition prices??

  21. 22 Bassman February 12, 2009 at 10:52 am

    anyone worried about starbucks diluting their brand by adding an egg sandwich is dilusional.

    Mcdonalds is a hamburger joint..thats how it started and at first they kept it simple.. they added Ice cream, they added Mc rib, they added salads, they tried pizza, they sell hotcakes and scrambled eggs, they always sold coffee, and yes they added egg sandwiches. somehow despite all that I don’t see their “brand” Diluted.

    Sbuks will always be known as a “coffee” place they have claerly established that brand recognition world wide. More ove it is still primarily a morning, or shall i say “breakfast” place… Bring on the egg sandwiches baby!!!
    I am diabetic and teed off that EVERYTHING they currently sell to eat has high carbs and sugars.. Egg mcmuffins have been a life saver for me.

  22. 23 Philip February 12, 2009 at 1:20 pm

    The absolute tuth is that aSTarbucks lost its uniformity. No drink taste thing same from one unit to the next. There is no “authentic”training. In the absence of this peolple find it rather inconvenient to drive to the store than can produce the PROPER drink. A mocha is a Mocha but wedid a test and 3 stores were pretty much the same. seven stores offered everything from hot chocolate to strong coffee. Not a simple Mocha. In canadqa, if it took beyond a certain time limit, it was free. Here people wait in vast lines all too manyy give up.I could make a unit profitable just be picking up the customers who leave because of timing or walk up see the line and leave. I own a chain of franchises and I have learned what not to do from STarbuck. Not ennough functioning employeesm, not near ebough equipment to increase the cups made per minute. Any reasonale person can see the defeciencies, they are blatant. Why cant the founder. Reduce units, increase productivity, initiate proper training to manintain consistency and for my Lords sake, dont get off on long lines any franchisor knows that. Eventiually, you lose them and scrwew the eggs, this is a coffee placeMr. Founder. Fire the guy who came up with this moronic idea. He is exactly what is causing your stock to do what it has done. YOure all fired! Bet you in siz month, STarbucks has field creditor protection. ANy bets?????

  23. 24 James February 13, 2009 at 8:19 am

    They sell 8 Billion world wide and have no debt to speak of. I agree fully with what you have added to this discussion. What nut case at corporate thinks that Starbucks is compelled to compete with McDonalds? You don’t have to wrestle with the Gorilla just because he’s out there. Starbucks is supposed to be a refuge from Mickey D’s and the rest of the salt and grease purveyors of the fast food industry! Ramp up delivery, comfort, Wii Phi, and ambiance. Who would want to discuss books and the latest smooth jazz album in a McDonalds!!

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