Starbucks snapped up Seattle's Best Coffee six years ago. It has subjected the chain to what is essentially a death sentence, limiting expansion to primarily in-store locations inside Borders Group (NYSE: BGP) bookstores. Are employees there covered for tumbleweed pokes and deafness resulting from chirping crickets?
However, given Seattle's Best Coffee's cheaper menu and wider food offering, it appears
to be just the ticket for Starbucks to tackle both the recession and
the proliferation of mainstream fast-food companies beefing up their
bean-water brews.
The premium coffee marketplace is being altered during this recessionary downturn. McDonald's (NYSE: MCD) is in the process of introducing espresso-based beverages throughout its chain. Burger King (NYSE: BKC) jacked up the quality of its BK Joe and rolled out an iced version with chocolate syrup.
It doesn't get any easier for Starbucks once patrons pull out of the
fast-food drive-thru windows. The premium java experience has also come
home.
Green Mountain Coffee Roasters (Nasdaq: GMCR) sold 711,000 of its Keurig at-home coffee brewers over the holidays,
a 121% spike from the number of single-cup appliances it sold a year
ago. How likely is someone to return to Starbucks when they know they
have a $0.40 K-Cup refill just a push of the button away? Starbucks
will continue to attract the occasional splurge, but it's being
replaced as an everyday indulgence with many consumers.
Several quarters of freefalling comps bear that out. Unfortunately,
I don't think jacking up the presence of Seattle's Best Coffee will
help. Sure, franchisee revenue is a juicy high-margin commodity, but
there seem to be as many potential pitfalls as there are ways to order
coffee.
repeat its mistake of rolling out aroma-whacking meals?
One
can argue that Seattle's Best Coffee caters to a different segment of
the market with its milder brews. One can also suggest that it's better
for Starbucks to profit from a competing concept than to simply let
someone else fill the void. That may all very well be true, but what
does it tell you if Starbucks is more comfortable growing Seattle's
Best Coffee instead of its own namesake brand?
There are worse things than a temporary retreat. Shooting yourself in the foot as you backpedal is one of them.
How do you feel about Starbucks as a long-term investment?
instant coffee move?The company's latest quarterly report wasn't very aromatic. It reports again tomorrow.Do You Still Own This Garbage?
© 2009 UCLICK, L.L.C.
have you ever heard of
have you ever heard of diversification? or are you just too bitter from your own personal losses that you have to harp on others who are still trying to remain profitable in uncertain economic pressures?
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