Hold on to your paper cup… and you probably are holding one: Starbucks is losing steam. A little, anyhow.
Last week, Starbucks reported that customer visits to U.S. outlets fell in the quarter ending September 30. Price increases caused profits to rise, but that drop in attendance is something that has not happened, ever, in the meteoric rise of the coffee vendor and its devouring of American street corners.
Starbucks is responding with a new TV ad campaign, although corporate heads insist there’s no connection between falling numbers and new commercials. The ads will emphasize a holiday theme of “Pass the Cheer”… such as an animated commercial showing a man on a stalled ski lift who shares his cup of Starbucks coffee with a deer. The deer then goes to work and puts in the most productive day of his life, although later that night he can’t get to sleep for some reason. Maybe it’s the nightmares about encroaching ski resorts…
All right, I added that last stuff. But we may be seeing the tip of an iceberg aimed at the prow of the SS Starbucks. Money is tightening, so it’s possible that first to go are the $4 coffees, followed quickly by $3 brownies, and $14 Paul McCartney CD’s bearing one “fairly decent” song. Right now Americans are forfeiting their mortgages, and suffering layoffs and high gas prices. There’s little comfort to be found in wiping away a frothed milk moustache.
Still, others would love to catch any customers jumping off the Starbucks Express. McDonald’s is adding upscale coffee drinks to its menu, although I’d want to be there when assistant manager Chuck explains to the troops that they are no longer French fry jockeys; they’re baristas! A hand goes up. “Why are we doing this, boss?” Chuck: “Because, as McDonald’s, it costs us about 13 cents to make a frappe. Check the margins on beef, kid. The cows are killing us!”
Some observers think that rather than run ads emphasizing the mystic link between all of nature and a cup of “Christmas Blend,” Starbucks should wake up and smell the Frappucino… then lower their prices. Imagine a TV commercial where that same deer returns and announces “Latte… for a buck.” For a buck. A male deer walks in with foam on his snout – oh, man, there’s a strike on and I just gave that sweet beauty away for free!
Fast food chains have created so-called “value” deals where they marry a thousand empty calories of cheeseburger and fries with another thousand from a plastic flagon of cola, then convince customers they’re saving money. Depending on what it costs later to have your pants let out. Starbucks could follow that template, since a “Tall” of brown water and a “Venti” of brown water may have roughly the same raw cost; something akin to the cost differential of regular and super-sized French fries.
If a giant like Starbucks did price down, it suggests that a depressed economy could result in something we might later refer to as “The Great Turning” for outsized profits on convenience and fast foods. Imagine this scene: You buy a sandwich at the airport and instead of costing $8 or $10… the price is more like the price of a sandwich. More the price of bread and cheese, less like the price of sophisticated weapons technology. Eyes brimming with tears, you take the dollars you’ve saved and stuff them into a red Salvation Army bucket. God bless this airport, God bless each and every one of us!
That won’t happen. But there may be some kind of eclipse taking place over the green rooftops of Starbucks. Right this minute somebody is typing a memo subject-lined, “Why do we give them free Half and Half?” Down the hall, the R&D boys are working overtime on a “black box” project with the cover name “Green Tea Nachos.” And Starbucks music division, Hear Music, is busy putting together new Starbucks-exclusive CD’s featuring duets and even trios, such as the forthcoming McCartney/Celine Dion/Willie Nelson collaboration tentatively titled “Please Kill Me Now.”
Or, you dudes could just lower the prices. Many of us have given up bottled water recently, replacing it with tap in a reusable bottle that doesn’t leach chemicals. Maybe you could bring down your prices before word gets out that people can make their own coffee at home using a so-called “pot” and some ground beans. I’ve been doing it for years… leaving a mug out in the backyard for the deer.