The indefatigable Starbucks (NASDAQ: SBUX) has made another strategic business decision ... it has decided to raise the price for some beverages and reduce the cost for others.

What is the line of demarcation? Complexity. Drinks that take more of a barista's time to make (such as Frappuccinos) will now be priced 10 to 30 cents higher, while simple drip coffee and lattes will be priced 5 to 15 cents lower.

Starbucks (NASDAQ: SBUX) reported earnings after the bell on Wednesday. Today, shares are up almost 10% on active volume in early afternoon trading as I write this. What does the market see in the numbers that is making it so happy?

Well, it's difficult to say precisely. As we all know, Starbucks has been having its problems, and data in Q2 indicate that the status quo essentially remains. Sales: down almost 8%. Operating income: down 77%. Adjusted earnings per share: down two pennies to $0.16. Cash from operations: down 6%. Same-store sales: down 8%. See what I mean? I hate using the word "down" so many times.

When McDonald's (NYSE: MCD) went into coffee, the fast-food giant went whole-hog (or bean?). The chain planned to add separate coffee bars to every one of its about 14,000 U.S. stores, and got to about 3,000 when the credit crunch hit and Bank of America pulled back on the availability of funds for its franchisees. This would be a relatively minor setback if it weren't for a problem:

McDonald's customers don't really like coffee.

In a Wall Street Journal article today, which examines whether the coffee rollout came at a bad time, I was struck by a couple of "tweaks" McDonald's has made to its coffee strategy. One, changing the title of the employee who prepares the coffee drinks to "beverage specialist" from "barista" betrays a generality that would indicate a widening of the strategy (if not baldly changing the strategy away from coffee to other drinks). The other is that McDonald's is testing drinks made without coffee (think blended cream beverages at Starbucks). "The strategy is to appeal to customers who like the idea of coffee drinks but not the actual taste. Chocolate "gives people permission to introduce themselves to these drinks," says Darci Forrest, a McDonald's senior director of marketing."

In addition to Wendy's (NYSE: WEN) management's recent hiring of JP Morgan (NYSE: JPM) and Lehman Brothers (NYSE: LEH) to help review strategic options for the company, the fast-food restaurant has decided to throw its hat into the breakfast ring by signing an exclusive deal with Proctor & Gamble (NYSE: PG). The deal allows Wendy's to be the only major fast-food restaurant chain to offer a proprietary blend of Folgers Gourmet Selections coffee and will become part of Wendy's new breakfast menu.

What's that you say, "Breakfast menu?"

Yes folks, Wendy's just isn't for lunch or dinner anymore (or dessert – mmmm Frosty's). You can now eat Wendy's for every meal of the day. By the end 2007, Wendy's expects to have 20-30% of its North American restaurants serve breakfast along with premium Folgers coffee.

Wendy's is definitely throwing its hat into a very crowded ring. The fast-food breakfast market is growing at almost three times the rate of the overall market, with Burger King (NYSE: BKC), McDonald's (NYSE: MCD), Arby's, a unit of Triarc Co. (NYSE: TRY), Carl's Jr and Hardee's, both owned by CKE Restaurants (NYSE: CKR) and even Starbucks (NASDAQ: SBUX) offering similar on-the-go breakfasts to consumers. Papa John's (NASDAQ: PZZA), Dunkin Donuts and Chick-fil-A are planning new breakfast products as well. What's going to be so different to make me go to Wendy's?

When looking at the coffee aspect, one has to recall last year's Canadian Business magazine taste test between McDonald's "Café Roast" and Starbucks coffees. I'm sure all the companies I mentioned above serve some brand of coffee. Wendy's is really walking into a competitively caffeinated situation. We also can't forget about Seattle 's "Sexpresso" baristas, but that's competition on a different level.

Where do you go to get your morning cup o' joe? And would the chance to have Folgers Gourmet change your mind?

In an area where good coffee is ubiquitous, how does one business stand apart from another? A diverse selection of low-fat bran muffins? Not for me. Free Norah Jones CD samplers? Nope. Sheer, baby-doll negligees with thigh-high boots? Sold.

According to The Seattle Times, along the cluttered roadsides of Seattle's commuter towns, drive-through espresso bars are going to creative lengths to attract business, well, male business at least. These caffeinated joints feature "bodacious" baristas offering not just double macchiatos with almond biscotti, but "flirty service and revealing outfits" (including lingerie and "fetish" ensembles) at establishments with names such as Moka Girls, Bikini Espresso and Natté Latté.

While drive-throughs have long been part of Starbucks Corp (NASDAQ:SBUX)'s business, many independent espresso stands popped up after the state's smoking ban went into effect a year ago. Says Lori Bowden, owner of Tukwila, Washington's Cowgirls Espresso stand, owners of bars, casinos and convenience-stores at that time began renting parking lot spots to espresso stands. And while the debate rages over who started the whole Red Light District element, no one argues that the Git-R-Done nation -- who might never have entered a Starbucks -- are now frequenting their establishments many times a day.

Offended local businesses have set up surveillance but no laws have been broken, as private parts -- including buttocks -- are always covered. Says Bowden, in spite of customer requests "there will be no 'Thong Thursdays.'"

B. Brandon Barker is the author of Operation EMU

While I'm occasionally offered refills at no charge at my local independent coffee shop, I'm never offered free drinks at either that establishment or my local Starbucks Corporation (NADSAQ:SBUX) outlet. (And I'm nice, really I am!) Yet many customers, if a recent thread at Starbucks Gossip is any indication, are. One (must be extremely nice) customer writes in to say that she's comped as much as 2/3 of her drinks.
The post started quite a discussion about free beverages, with one angry district manager writing in to claim that this was theft, and if he were their boss, he'd fire the whole lot of 'em. Some other equally angry and righteous commenters agreed, but the general consensus was that occasional free beverages were good for business -- "Surprise and Delight" 'em, the concept goes, and they'll keep coming back and spending their money in your store. And putting lots of extra bills in your tip jar!

Sure, if a customer is getting most of her drinks free, and putting the $2 in the tip jar instead of the till, that equation is pretty straightforward: sorry guys, that's just a tiny bit of bad ethics there. But a once-a-week freebie for great customers or even (as one barista mentioned) confused out-of-towners? I'm thinking that it will serve to increase business and customer goodwill.

The top news for Starbucks Corporation (NASDAQ:SBUX) today? "Starbucks Recalls Barista Coffee Brewers." Immediately my brain lept to a strange but fascinating mental image, of Starbucks officials walking into stores worldwide and leading the black-aproned baristas back to green vans, loading them up and taking them home to Seattle.

But no. These are the "Barista Aroma" coffee brewing machines, 73,000 of the eight-cup stainless steel variety. Defective wiring can cause overheating, burns, and melting, and could potentially be a fire hazard, although no fires have been reported. It's a sad day for home coffee lovers, who raved about the machine on review sites.

SBUX shares were down 59 cents on the news, to $37.81, a drop of 1.54%.

Starbucks Corporation (NASDAQ: SBUX) breakfast buzz, for what it's worth, seems to have died down for the moment, -- at least I'm no longer getting four or five news alerts daily in my email inbox. Like Portland, this offerings are not new in my hometown of Seattle, and I failed to credit the interest their introduction would generate in the mainstream media. Online, some customers posted their pictures and comments of the breakfast purchase on Flickr. Warning: these are not professional, studio produced advertising shots, but actual representations of breakfast sandwiches in all their greasy glory -- not for the faint hearted. Although outside the breakfast area, a Tokyo lunch-goer called this Starbucks tuna melt yummy, and it doesn't look quite so bad.

The Starbucks Gossip blog solicited barista reactions to the NYC rollout of warm breakfast which has turned up a responses from Starbucks employees. "NycBearista" noting that he or she was the "warming partner" (I will not be surprised if that is an actual job title) on roll out day, noted that the new task made opening duties go much slower, and since it's now store policy to "warm anything."

On August 7th, Starbucks (SBUX) fired Daniel Gross, a barista and organizer for IWW's Starbucks Workers Union. The Seattle P-I has that story.

The firing remains top news at the IWW's Starbucks Union website, where details began appearing as early as July 27th when decision over whether Gross would be terminated were still pending an investigation by the coffee retailer, and updates have appeared frequently the past few days.

Gross, who's a co-founder of the union, is appealing, claiming his firing is a demonstration of Starbucks anti-union stance. Starbucks is not giving its reasons for firing Gross, but say that it "doesn't discourage" union organizing.

U.S. companies rarely make termination information public. According to the union the firing stems from a protest held on off* store property earlier this year (not this protest, but another one -- over the status of a shift supervisor facing termination) in which it's alleged Gross made a threatening remark. Starbucks acknowledges that "maintaining a positive work environment" (a nice catch all phrase, that) is one of its "core competency" expectations of supervisors.

Michael Canfield is a private investor, a business and media writer, living in Seattle. He doesn't own stock in Starbucks.

Update: the protest in question was held on the public sidewalk, that is, OFF store property, not on, a fact not disputed by Starbucks or the Union.

Not only is Starbucks (SBUX) developing growers of high-quality coffee crops as we discussed here earlier, the Financial Times is reporting that the Seattle coffee giant is helping to develop a retail skills program for teens within the British schools. I've heard of high tech companies having difficulty finding qualified candidates from the public primary and secondary education systems, but never this. If Starbucks is taking this step I can only conclude they are having trouble finding enough soldiers qualified to don the green apron. To see the company put money and effort in this direction is an indicator that they are committed to continued improvement in their service and workforce. Many commentators here insist that Starbucks is a fad. I heard that five years ago, I heard it ten years ago, and I expect to hear to be hearing it still -- ten years from now.

And don't forget: caffeine's addictive.

Frappucinos have more fat than and a big mac, okay?

Last week, Reuters reported that, the Center for Science in the Public Interest -- having just launching a suit against KFC for frying chicken with trans fat -- now plans  "to campaign against the global cafe chain Starbucks [SBUX] because of the increased risk of obesity, heart disease and cancer associated with high-calorie, high-fat products it sells."

Starbucks is a high-profile company that has come under fire from advocacy groups in the past, leading to the company making changes in, for example, its policies toward coffee growers and an increase in the amount of fair trade coffee it buys. Good products can come from criticism. In fact, in the same Reuters piece, a spokesman said the company "is 'actively researching' alternatives to high-fat products. The company said it plans to eliminate trans fat from seasonal baked goods -- but not necessarily other products -- by this fall. "