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Starbucks' Howard Schultz will 'fight to the death' for coffee dominance

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there is a place in hell for all of starbucks competitorsIn the annual meeting today, Starbucks chief Howard Schultz vowed to "fight to the death" against Dunkin' Donuts, McDonald's, and other competitors for coffee-and-baked good supremacy. While we've already seen many of the weapons he plans to use in this battle -- better-smelling stores, for instance (without warmed breakfast sandwiches, with fresh-brewed coffee), a reduction in the number of stores too near one another, and a campaign to increase the quality of the baristas -- today marked the introduction of several yet newer and even more desperate ones.

Chief among today's weapons is the loyalty card. Starting in about a month, Starbucks Corporation (NASDAQ: SBUX) will introduce a number of discounts for customers who use their Starbucks card to pay, and register it on the web site. (Excuse me while I run to my junk drawer to unearth my card that has $0.16 left on it.) Free "customization" is one perk -- extra syrups and milk substitutions will be gratis. Another perk is free refills on brewed coffee, and the possible expansion of the $1.00 coffee test. Schultz didn't mention whether or not the company would be offering free drinks upon the purchase of 10, or 15; though this is a perk already in place used, and discarded, at licensees in Safeway stores (the data comes from the Safeway Rewards card) and, of course, is working with punch cards at just about every single independent coffee shop in the nation.
Along with Schultz' frightening war imagery was the very real specter of the looming recession. Schultz said the economy is in a "tailspin," his consumers, "in a recession." The way we're all responding to the "tough" times, evidently, is by refusing to pony up $3 or $4 for a beverage on such a regular basis -- I, too, have avoided the coffee shop far more frequently these past months.

It hardly seems that a new coffee blend and an automated beverage machine will be the cure-all for your economic woes (maybe all the time you save waiting in line for the barista, you can spend looking for a new job?), but it's certain that changes are still needed. Investors aren't the least bit impressed; they sent the stock down another 74 cents, or 4.06%, to $17.50 today, only a touch off the 52-week low of $16.77.

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Last updated: November 25, 2009: 06:29 AM

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