Starbucks Takes on the Egg McMuffin
By Tom Ryan
While Starbucks last
week announced another round of job cuts, a bigger surprise to many was
that the upscale coffee chain was entering the breakfast value-meal race.
Using uniform national pricing, Starbucks in March will begin offering
“several breakfast pairings” at “attractive price points.”
The move represents an
about-face for Starbucks. Last July, chief executive Howard Schultz said
the company was “not going to go down the fast-food lane” in
offering combo-meal discounts. He argued that Starbucks’ customers were
willing to pay a premium for the Starbucks
But last Wednesday, Mr.
Schultz indicated that more of a value-proposition would be added to its
breakfast offerings starting in March “to correct misperceptions and
drive stronger offers into the market.”
shift to national pricing from a market-to-market approach in particular
represented a “significant strategic shift,”
said Mr. Schultz. But he said consumers are looking for more value.
Mr. Schultz, “This is an attempt that we think
is a very strong sign of the things that we need to do around value and
the research that we’ve done strongly indicates that the appetite from
our customers to respond positively is there.”
Mr. Schultz lamented, “The
question of value often gets tied to the competition. How are we competing
with traditional QSRs who are offering cheap coffee in dollar menus? How
can a premium brand like Starbucks be competitive when customers are trading
down on everything from houses and travel to clothing and lunches out?”
But he said that Starbucks
has a number of “differentiating factors” outside price. These
include its long positioning as an “experienced (sic) oriented brand and
retailer,” its Starbucks Shared Planet initiative, and the ways it
connects with customers at a local level.
“What all of these
efforts have in common is their relevancy to the values and lives of our
customers and that is what we believe will help us remain resilient both
during challenging times and long into the future,” said Mr. Schultz.
News of breakfast-value
offerings came on the same day Starbucks announced it would layoff 6,700
employees, close 300 more doors, and scale back store openings for 2009
on the heels of weak earnings in its quarter ended Dec. 28. Same-store
sales were down 9 percent in the period.
What do you think of Starbucks’ plans to offer value
breakfast deals? How can Starbucks offer a better value-proposition
without affecting its premium positioning?
- Starbucks to cut up 6,700 jobs,
close more stores as profit falls – USA Today
- Starbucks eyes breakfast bargains,
dumps the jet – Reuters
- Starbucks Q408 Conference Calls
– Seeking Alpha