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Starbucks Plays the Name Game

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A rose by any other name would smell as sweet, according to Shakespeare -- but that's not good enough for Starbucks (Nasdaq: SBUX  ) . Apparently, the coffee colossus is hoping that a change of name will help that rose smell sweeter.

The Seattle Times reports that Starbucks plans to rebrand some stores with community-focused names such as "15th Avenue Coffee and Tea." Even more interestingly, Starbucks will wipe its name and ubiquitous logo from these stores; even the bags of coffee for sale will bear the community-based brand.

Starbucks is trying this approach with at least three of its Seattle stores. If the idea pays off, the java giant may try a similar approach in other markets. This initiative should work well with some of the new and improved eco-friendly cafes it's been testing out.

Beyond the simple name change, these stores will serve beer and wine, and host events like live music and poetry readings. None of that can be welcome news for the mom-and-pop coffee shops who must compete with Starbucks. Even though Starbucks was always closer to a traditional coffee shop than the likes of McDonald's (NYSE: MCD  ) or Dunkin' Donuts could ever achieve, it still couldn't offer the eclectic atmosphere found in many independent java joints. Now the indies may begin to lose even this slim competitive advantage to their massive rival.

Playing the name game is a smart and rather ruthless move on Starbucks' part. The company should try to remember its roots, and add more of the personal touch with customers and communities that make people loyal to establishments. That strategy would help it compete not only against McDonald's, but also more similar rivals such as Peet's Coffee & Tea (Nasdaq: PEET  ) and Caribou Coffee Company (Nasdaq: CBOU  ) .

However, the "stealth Starbucks" approach could also backfire in a big way. Smart, cynical consumers may be horrified to suddenly realize that their beloved 15th Avenue Coffee and Tea is just one more corporate clone. Consumers don't like feeling tricked or duped. And I'm sure a lot of independent coffee shops would be quite vocal in exposing Starbucks' masquerade.

Besdies, I always think it's creepy when companies change their names to make people forget "that other thing." The new Ally Bank for which I keep seeing ads actually arose from GMAC Financial Services. AirTran's (NYSE: AAI  ) past as the ill-fated ValuJet is a more ominous example. Starbucks' new idea isn't quite the same thing, but at some point, people may ask what Starbucks is so ashamed of. Perhaps the company's finally feeling bad about building a Starbucks on what feels like every corner?

For good or ill, a Starbucks by any other name is definitely an interesting concept. In the face of flagging customers and more aggressive rivals, I'm glad the coffee chain is trying something new.

What do you think? Is this a great idea, or a possible nightmare for Starbucks? Please let us know in the comments boxes below.

Caution, further Foolishness may be hot:

Starbucks has been recommended by both Motley Fool Stock Advisor and Inside Value, and the Fool owns shares. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool's disclosure policy never tries to disguise itself.

Read/Post Comments (5) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 16, 2009, at 8:25 PM, captainccs wrote:

    I think it's a new way to "diworsify."

    *bux is yesterday's story.

  • Report this Comment On July 17, 2009, at 11:07 AM, SinCityScott wrote:

    Starbucks is not "changing their name"; what they are doing is testing a 'concept' store in some key areas.

    Also, they aren't attempting to hide the fact that it's actually 'owned' by Starbucks brand, just as other retailers have done.

    If not for Old Navy- the Gap would have been gone years ago. Gap includes Old Navy and Banana Republic.

    This is not a tricky move as the author seems to infer- it is a way to have another, different but related business w/ it's own look and feel that brings in a new (to Starbucks) customer.

    Bringing in new customers while keeping the old ones (like me) happy couldn't hurt.

  • Report this Comment On July 18, 2009, at 9:01 AM, MedPeddler wrote:

    It seems SBUX isn't dealing with the real problem - McDonald's. The rise of McCafe's and the coffee business in existing stores is proof that consumption isn't dead, it's just seeking the cheapest price and greatest convenience.

    It begs the question: are coffee shops really destinations all by themselves or are they just a place to get a caffeine fix? My personal habits swing to the latter. In my southern city of 250,000 I just don't see people lining up for a poetry reading or offbeat live music at the local coffee shop. What I do see is plenty of people in suits and ties revving up in the morning or picking up during the afternoon letdown, and doing it with coffee that they know will consistently taste better than what they can get in their offices.

    Two factors are at the heart of this. First, SBUX isn't effectively answering the Mickey D's challenge. Second, while Americans seem to be embracing a new thriftiness, cultural changes like this rarely last. I hate to say this, but we Americans just don't learn. Was it really all that long after 9/11 that most travelers were demanding security restrictions be relaxed at airports? Decades of being consumer sheep won't be erased with one recession, unless it turns into another lost decade. When the economic heat is off, SBUX will be back, assuming they deal with competition, which is not local hippie coffee shops. SBUX isn't dead, it's dormant.

  • Report this Comment On July 29, 2009, at 5:52 PM, ReadEmAnWeep wrote:

    They are definitely just a place with a caffeine fix. Can't even remember the last time I even sat down at a starbucks

  • Report this Comment On August 05, 2009, at 5:32 PM, barbariain wrote:

    I think this is a great idea. In addition to their current line up of coffee shops which are evolving as all businesses do, they can add a line which caters to the true coffee-shop crowd who don't mind waiting for good coffee and atmosphere. I hope they don't use automatic espresso machines and return to the quality espresso I remember from the past.

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