Starbucks Says It's All About You

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This summer, Starbucks (Nasdaq: SBUX  ) is taking aim at the Me Generation, launching frappuccinos that customers can design themselves. While that sounds like a nice innovation, its ability to perk up Starbucks' revenue remains to be seen.

Although the coffee giant is known for its vast array of customizable coffee drinks (as anybody who's ever stood in line listening to someone else rattle off a long, long list of drink attributes can attest), Starbucks' icy frappuccino drinks were previously only available in six predetermined flavors.

U.S. frappuccinos already bring in a little less than $1 billion in annual revenue, but sales have been slowing lately. According to The Wall Street Journal, Starbucks' plan is basically an appeal to the younger generation of Millenials, the kind of kids accustomed to a world where they can have any music they choose on Apple's (Nasdaq: AAPL  ) iPod, according to a company spokeswoman. It's also hoped that the customer-improved frappuccinos will help boost revenue in a traditionally difficult part of the day for Starbucks: the afternoon.

Anybody who has followed Starbucks for a long time may recall the year that frappuccinos' popularity actually held Starbucks back. Demand for the icy, relatively labor-intensive drinks made for slow lines in many stores. Apparently, Starbucks has tweaked its production process to let baristas sling frappucinos more quickly this year (and quietly, too).

Whether or not a customizable frappuccino gives Starbucks a major boost, the company should undoubtedly take any opportunity to differentiate itself from its loads of competitors, including Peet's (Nasdaq: PEET  ) , Caribou (Nasdaq: CBOU  ) , Green Mountain Coffee Roasters (Nasdaq: GMCR  ) , and mom-and-pop shops.

At least one of those rivals isn't taking Starbucks' new initiative lying down. McDonald's (NYSE: MCD  ) , which has enjoyed surprising success with its own forays into coffee, just today announced $1 drinks for summer. Mickey D's hopes to lure customers into trying its icy frappe drinks and smoothies, which are launching nationally around the middle of the year. Its McCafe drinks have boosted the coffee segment to 5% of the Golden Arches' total sales, double the level of 2006.

In the face of this increasing competition, highly customizable drinks could help Starbucks stand apart. What do you think? Is the idea worth a sip or two? Let us know in the comment box below.

Apple and Starbucks are Motley Fool Stock Advisor selections. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool's disclosure policy will take a venti half-caf nonfat soy latte with a shot of hazelnut, whipped cream, and cocoa powder on top.

Read/Post Comments (3) | Recommend This Article (10)

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  • Report this Comment On March 17, 2010, at 4:36 PM, sas912 wrote:

    The beauty here is that McDonald's is selling coffee produced by GMCR! It is a special Newman's Own blend made by GMCR specifically for Mickey D's. So stop drinking your latte mochachinos at SBUX and go to McDonald's for a fraction of the price and drink GMCR.

  • Report this Comment On March 18, 2010, at 3:30 AM, ET69 wrote:

    Look , I got nothing against McD's but I don't want to sit with some Mom with a bunch of kids playing on swings and with Ronald McDonald posters all around when I drink a cup of coffee. More importantly the food at Starbucks is healthier and better. So if you want to save 20cents that bad bubba go for it and "NO" I don't own any SBUX stocks.

  • Report this Comment On March 18, 2010, at 3:31 AM, ET69 wrote:

    I will gladly pay the extra $ for the better food at Starbucks.

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