The VIth Sense - Revisiting Starbucks
Earlier in the year, we hammered Starbucks pretty hard for abusing, and ultimately losing, their market position as the exclusive ‘club' that everyone wanted to belong to. Too many stores, too many products, and a suggestion of mass retailer. Obviously, they paid for their mistakes - hardly turning a profit last quarter.
Today, they are in turn-around mode. 1) They have closed stores; 2) they are attempting to deliver more value without affecting the value of the brand; and 3) they are implementing promotions that support the brand very well - some of which have been associated with the social conscience of the day (i.e. Product Red, Election Day, etc). We recommended the first two and like the strategy of the third. Whether it was intentional or not, tying into the social conscience is a pretty good direction for Starbucks as long as they can remain political-party neutral.
Starbucks will never regain the brand position that they once enjoyed. But, being a modern day Benetton keeps the brand in the public eye for reasons that go beyond its products, and can help to prop up the brand. Promotions associated with sustainability, organic efforts and the like, in addition to continuing the current efforts, make a lot of sense. They most likely won't get a third chance, so 2009 is crucial to their future.