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The VIth Sense - Starbucks Continues to Trip Over Itself

Posted by Tim Berney

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2015-07-19-roman-002_copy.jpgWe hate to continue to beat up Starbucks. But, they continue to be a case study in poor strategic marketing. The latest: A branding campaign that tolls the virtues of buying fair-trade coffee beans and providing health care for part-time employees (no mention of the employee benefit cuts from last year). This follows up recent decisions to further discount most of their beverages. So, a branding strategy, as flawed as it is, that would support more premium pricing coupled with further discounts at the store level. Go figure.

We applaud them for actually raising the price on some of what they refer to as 'more complicated' drinks. But, this was needed a year ago when they began having troubles and should have returned to a more exclusive brand in the first place.

Last year's additions of ice cream, chocolates, bottled beverages, and the introduction of value-based Pike Place roast are all extensions of a brand that no longer has focus. A sub-brand or two would protect the Starbucks brand, while allowing for the additional revenue. Premium brands have a revenue ceiling. Squeezing that extra nickel out of them is usually what gets them in trouble. More trouble in this case.

It is very possible that Starbucks new instant coffee brand, Via, will add significant revenues. But this step-child product also weakens the brand. In the end, Starbucks is going to be just another coffee brand, selling a commodity. What a shame. By the way, same-store sales were down 8% in the most recent quarter and 9% in the one before.

Most likely this won't be our last article on this troubled brand...

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