The most notable news from Starbucks' (NASDAQ:SBUX) annual meeting may have been Howard Schultz's indignation at the coffee champ's reputation as a purveyor of high-priced goods. Funny, that mystique worked so well for the company when its business looked perkier. But now, according to media reports, Starbucks wants to shed its image as the coffee equivalent of Tiffany (NYSE:TIF) or Nordstrom (NASDAQ:JWN).
This move's not exactly surprising. Luxury's in a free fall these days, as consumers reject a lot of the brands and products that have become emblematic of past lush living. Clearly, Schultz recognizes that's a danger to his business now: "We've become the poster child for excess ... we are going to dispel this myth about a $4 cup of coffee," he said at the meeting.
True, $4 isn't the going rate for all coffee beverages at Starbucks; regular drip coffee isn't nearly that pricey. But judging by what I pay for my venti latte every day, you can indeed walk out of Starbucks having paid very close to $4 (without a tip for your friendly baristas) for a beverage. Just sayin'.
I've been concerned by Starbucks' new efforts to prove it can provide "values" and "deals." That strategy strikes me as a bit too envious of McDonald's (NYSE:MCD), and I do worry that it may tarnish the java giant's brand forever. The company's already debuted value meals, and -- sacrilege! -- it's even launching instant coffee.
Whole Foods Market (NASDAQ:WFMI) also shifted strategy when the economy started to show signs of tanking, attempting to shed its "Whole Paycheck" image by emphasizing values in its stores. For some reason, that gambit seems less risky for Whole Foods than it does for Starbucks. Given the organic grocer's breadth of selection and specific merchandise mission, it never feels anywhere close to run-of-the-mill rivals such as Safeway (NYSE:SWY) and Kroger (NYSE:KR), even if it is emphasizing good deals in its stores.
But Starbucks simply sells coffee, with a few additional items on the side. In the past, Schultz has talked about reigniting the romance of the coffee experience that originally distinguished Starbucks from its rivals. I'm not sure how well that approach will mesh with a bevy of lower-priced offerings.
In its zeal to prove that it can be a "value" in these tough times, I remain concerned that Starbucks could dilute the style and class that made it special. Given how many people like coffee from rivals like McDonald's and Dunkin' Donuts just fine, I fear Starbucks can ill-afford to surrender any competitive advantage. If its brand loses any of its luster, Starbucks could lose some of its former customers for keeps.
What do you think about Starbucks' strategy? Feel free to air your thoughts in the comment boxes below.
