Starbucks Addresses the Price Issue, and Breakfast

SEATTLE — When Starbucks begins serving a new line of breakfasts early Tuesday morning, the coffee shop chain is hoping its egg sandwiches achieve more than just the perfect balance of smoky bacon and salty parmesan cheese.

Starbucks is also trying to pull off another balancing act: the meals must be inexpensive enough to draw in frugal customers, yet fancy enough to appeal to those who care more about quality than price.

The $3.95 breakfasts — coffee and an egg sandwich, cup of oatmeal or coffee cake — represent Starbucks’ latest effort to recast itself as an affordable brand. The value meals, which Starbucks calls “breakfast pairings,” save customers $1.20. As part of a broader effort to appeal to the value-conscious, Starbucks is also offering discount cards and training its employees to suggest bags of whole beans and instant coffee to people who are cutting back on $4 lattes.

About those lattes: the company is fed up with the characterization that it only sells $4 specialty drinks. “The $3.95 price point is a backhanded way to go at the four-buck perception — it’s less than four bucks, and it’s not just a drink, but food to go with it,” said Terry Davenport, Starbucks’s chief marketing officer.

Starbucks is adjusting the menus that hang in stores, too. Expensive specialty drinks like Frappuccinos used to be front and center, but new menus will highlight $2 brewed and iced coffees instead. It is teaching servers that the majority of drinks are under $3, so they can tell consumers who complain about pricing. http://www.nytimes.com/2009/03/03/business/03sbux.html

Starbucks Coffee, Now in Instant

The New York Times - In Howard Schultz’s 1997 book about developing Starbucks, he wrote, “Nothing pains me more than hearing critics compare Starbucks to a chain of discount stores or fast-food operations.”

On Tuesday, the man who set out to improve Americans’ taste in coffee, unveiled instant coffee bearing the Starbucks brand. Packages of Via Ready Brew will appear in Starbucks shops in Seattle and Chicago on March 3, the same day that Starbucks will begin offering breakfast value meals in stores nationwide.

Selling instant coffee and serving value meals might sound more like the purview of an American convenience store and less like that of an Italian espresso bar. Water-soluble coffee is a gamble, marketing analysts said. It could lure customers who drink fast-food or grocery store coffee, or it could water down the Starbucks brand.

But Mr. Schultz said he was ready for the critics who say, “This is desperate, this is a Hail Mary pass, this is off-brand for Starbucks.” http://www.nytimes.com/2009/02/18/business/18sbux.html

At Starbucks, A Tall Order For New Cuts,Store Closures

The Wall Street Journal - Starbucks Corp., posting a 69% drop in quarterly profit, said it will close another 300 stores and cut 6,700 workers as it continues to reel from overexpansion and a sharp sales slowdown amid the recession.

Looking to share the pain, Chief Executive Howard Schultz asked the board last week to reduce his annual base pay of $1.2 million, according to a spokeswoman. Mr. Schultz suggested a token salary of $1, but the board's compensation committee ultimately decided to cut it to $10,000. Once benefits costs are deducted from his check, Mr. Schultz will earn less than $4 a month in base salary, though his pay package includes compensation in stock.

Mr. Schultz said the closures are happening in places where Starbucks built stores under the assumption that the economy would remain strong. "That economic environment no longer exists," he told investors on a conference call. The company has been particularly hard hit by home foreclosures in California and Florida, he said.

Under its latest plan, Starbucks will close an additional 200 locations in the U.S. and 100 locations internationally by this fall. That is on top of more than 600 store closures the company announced last year. The chain currently has nearly 17,000 outlets and 167,000 workers.

Starbucks plans to lay off 6,000 store workers because of the closings, though some will be placed at other stores. It also will cut 700 nonstore workers at its Seattle headquarters and other field offices. Starbucks is still finalizing the list of stores that will be shuttered.

Once one of the fastest-growing retailers -- and hottest growth stocks -- Starbucks has had a spiraling fall from grace. In its zeal to hit an expansion target of 40,000 locations globally, the company made poor selections for new sites, distracted itself with forays into movies and music, cluttered stores with too much merchandise and lost its focus on coffee.

High prices, meanwhile, are going out of style fast. Starbucks grew by creating a luxury image with lattes and Frappuccinos that can top $4 apiece. Among Starbucks' biggest challenges now is how to reposition its brand in a recession.http://online.wsj.com/article/SB123317714771825681.html