Weighing Starbucks' Values

Starbucks (Nasdaq: SBUX  ) has seemed a bit desperate at times lately, and today's news might be interpreted the same way. It is following in the footsteps of the likes of McDonald's (NYSE: MCD  ) into "value meal" territory during the breakfast hours.

The cafe giant will offer deals on breakfast "pairings" at $3.95. Examples include a tall latte with an order of oatmeal or a piece of coffee cake, or a brewed coffee with a breakfast sandwich. According to the Associated Press report on the move, while prices can differ based on location, such a combination would usually cost about $5, and Starbucks says the new deals would save customers an average of $1.20.

It has become clear that consumers are seriously tightening their belts and saving money instead of spending, and Starbucks' most recent quarter showed it's not reheated yet.

And of course, Starbucks is not alone in the category of luxury companies that have fallen on tough times. Customers of companies like Coach (NYSE: COH  ) , Nordstrom (NYSE: JWN  ) , and Ruth's Hospitality (Nasdaq: RUTH  ) have also held on tighter to their purse strings.

Personally, I fear Starbucks will sully its high-end image with strategies that sound a little too bargain-basement; a year ago, I was leery about word that it was testing $1 coffee and free refills. At some point, it seems too much of a value element might tarnish the brand, which is what differentiates Starbucks from its rivals in the first place. At that time, I said, "It's bad to lose your soul, but worse to lose heart as well." And of course, busting margins isn't exactly a pleasant thought to us investors, either.

On the other hand, who can argue with the fact that consumers are making it clear they're looking for bargains. It does seem like a quandary.

That's why I'm curious about what our Foolish readers think. Are value meals at Starbucks a brilliant and sensible idea, or should Starbucks stay as true as possible to its brand? Feel free to vote in the poll below, or write in your thoughts in the comment boxes below.

Starbucks is a Motley Fool Inside Value pick. Starbucks and Coach are Stock Advisor selections. The Fool owns shares of Starbucks. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


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