Starbucks (Nasdaq: SBUX) just announced plans to upgrade many of its ingredients. While that's a nice angle, I'm not convinced it'll make much of a strategic difference for the coffee giant.
The company touted the addition of premium ingredients such as whole bananas, Oregon blueberries, and Michigan cherries to its offerings, so that its food can become "more as nature intended." Starbucks also recently decided to ditch high-fructose corn syrup from its food (a move that may cheer most consumers, but could incite the ire of the Children of the Corn). Will going au naturel to differentiate its brand help the ailing coffee giant?
All-natural fare at Starbucks certainly makes sense -- but what took so long? Whole Foods Market (Nasdaq: WFMI) has always focused on the natural and organic marketplace to differentiate itself from more conventional rivals. I thought Starbucks was shrewd to convert some of its stores into eco-friendly, locally oriented venues, but like its new shift toward higher-quality fare, that idea should have been a no-brainer from the start.
Among shareholders, a move toward upscale ingredients doesn't always garner resounding approval. While Chipotle (NYSE: CMG) (NYSE: CMG-B) focuses on "food with integrity," seeking high-quality natural and organic ingredients, its management reports that many customers don't realize that its burritos' fancy ingredients are crucial to their overall tastiness.
And Starbucks is hardly breaking new ground with its all-natural approach. Last summer, the company took on Jamba Juice (Nasdaq: JMBA) with its Vivanno smoothies, and it's long offered light versions of its drinks for the diet-conscious.
I shouldn't complain too much, though; differentiation is better than flat-out copying the competition, especially on low-margin products that conflict with Starbucks' core high-end brand. I've been left cringing at too many of Starbucks' recent initiatives, which have made the java juggernaut look more like McDonald's (NYSE: MCD) than its former distinctive, high-class self. Value meals? Dollar items? Yikes. What next -- an Espresso Gordita Crunch to compete with YUM! Brands' (NYSE: YUM) Taco Bell?
Starbucks' "back to nature" approach isn't a bad idea -- but it's not particularly exciting, either. Alas, our current economic woes make this a particularly tricky time for any company to take a risk on innovative efforts. If, like me, you're hoping for a daring renaissance from Starbucks, you may be in for a long wait.
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