"Hello to a new day," reads a sign at my neighborhood Starbucks Corp. (NASDAQ: SBUX). On the sign is advertised one of the "breakfast pairings at an attractive price," or what many critics have called Starbucks' attempt at "value meals": a Bacon Artisan Sandwich and a Tall Pike Place Coffee. No price is listed on the chalkboard, although new static-cling signs on the windows advertise a latte and "Perfect Oatmeal" for $3.95.The question on everyone's lips, of course, is: will this work? Will customers buy it, figuratively, and, by taking out their wallets and buying? While I was impressed with the good taste of the sandwich, giving a thumbs up (and deciding that I would, indeed, choose to have breakfast instead of just coffee with the new meal deal -- at about $2 more, it seems to approach "bargain" status), the reaction of customers who don't typically shop at Starbucks; the real target of this campaign (along with those who've defected to McDonalds) was not encouraging.
Variously, comments from the Starbucks un-faithful cover the gamut from those who'd buy their coffee at a convenience store (Wawa is always a popular option), to those who brew at home and scoff at the idea of paying a few dollars for oatmeal, or an egg sandwich, when it's far cheaper to make it at home. But these consumers aren't the focus of Starbucks' new offerings, arguably.
Those who are?
May be too savvy to fall for the mis-match of "artisan" sandwiches with value pricing, and along with all that, instant coffee. As one of the 'Bucks watchers on StarbucksGossip.com wrote, the company "is starting to look more like Old Navy when it should be like Lacoste." In other words: this brand is spinning out of control and who can be sure where it will end up?
Investors are not just cautious; they're plain disgusted, and each day the stock closes lower than the one before. Yes, the stock is trending down with the market, but it's more than that: this stock was already depressed before the market began its decline. Investors are distressed and befuddled by the wild Hail Mary's being thrown by come-again CEO Howard Schultz. While each and every product launch and corporate move might make sense alone -- after all, the new sandwiches are good -- together they look the result of pin-the-tail-on-the-donkey.
Starbucks closed down yesterday, the launch of the breakfast pairings and VIA instant coffee, but was up 18 cents today to $8.76. I still think the stock looks cheap but I'm unwilling to buy until I see some smarter brand management coming from Seattle. For now, I, too, am brewing my coffee at home.
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