Starbucks’ Mixed Messages, Ethical Truthiness, #smfail
“The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”
–Roger ‘Verbal’ Kint, The Usual Suspects
[UPDATED BELOW; THRICE!] Starbucks profited greatly from years of an aggressive and purposeful over-expansion that successfully wiped out many of their independent competitors and established their brand as a counter-intuitive status symbol (it’s just coffee, people; get over yourselves!), but the beaten-down economy has made their overpriced coffees a luxury many are choosing to do without, and the bean counters are starting to feel the heat.
2008 wasn’t a very good year for SBUX, and 2009 isn’t tracking too well, either, as 2nd-quarter net income reportedly dropped 77 percent, while Dunkin’ Donuts and McDonald’s McCafé are threatening to chip away at their market share:
Starbucks has for the last year tried to reverse declining revenue by closing stores and recasting itself as an affordable brand for value-conscious consumers. The company has long been characterized as appealing to affluent professionals, while abandoning the lower end of the market to competitors like McDonald’s, which has begun selling specialty coffee drinks.
So in March, Starbucks began offering a breakfast value meal. Customers can buy a cup of coffee and an egg sandwich, cup of oatmeal or piece of coffee cake for $3.95.
Mr. Schultz said the company’s new value-oriented strategy is paying off…
“Speculation that Starbucks is losing retail market share to competitors has been grossly exaggerated,” Mr. Schultz said on a conference call with analysts on Wednesday. “Starbucks coffee does not cost $4, as people are charging.” The comment was a reference to a recent ad campaign by McDonald’s that says, “Four bucks is dumb.”
Schultz’ optimistic bravado is betrayed by his company’s actions, though, as their “value-oriented strategy” is contradicted by a new, notably defensive ad campaign that suggests they probably agree that “four bucks is dumb”, but realize they can’t say that; nor can they really compete on the value playing field without compromising what their brand has come to stand for.