As the Wall Street Journal writes (subscription required), "The move could backfire. Despite the ubiquity of its stores, Starbucks still likes to think of itself as a collection of thousands of corner cafes that sponsor the local zoo and have baristas who know their customers' favorite drinks. Executives at Starbucks often say they built the chain by word of mouth and are proud of the fact that they made limited use of traditional media, long before 'stealth' and 'viral' marketing became the rage."
Exactly. Investors should be extremely skeptical of this move. Generally, a company embarking on a strategy that it has resisted for decades is a sign of desperation. Wal-Mart (NYSE: WMT) grew without acquisitions forever -- now, desperate for growth, the company is becoming a buyer.
And Starbucks, also scuffling, has decided it needs to advertise on television. Think about it: Starbucks knows advertising like that will be bad for its brand -- otherwise it would have done it a long time ago.
The ad campaign is a sign of desperation: And owning desperate companies is rarely a good idea.