Monday, February 9, 2009

Starbucks Value Meals

Starbucks announced today the launch of their new value meal program where consumers will be able to purchase a discounted combination of a coffee drink and breakfast food. They are also training their baristas to emphasize the value of Starbuck's drinks including the fact that "90% of Starbucks drinks cost under $4." By refocusing the brand as a "value" product in the consumers mind the chain presumably is hoping to better weather the recession and compete more effectively against McDonalds.

I fear however that the strategy may backfire on the chain. Most consumers consider Starbucks drinks to be a luxury indulgence, something to help sooth an otherwise hectic day. By concocting their own crazy drink, they turn their morning caffeine fix into a statement of their own personality. This brand image has been carefully nurtured by years of carefully coordinated messages through the store, baristas, and general PR.

This new move counters all of that. By offering discounted combos and emphasizing the products value, they risk creating a new brand image of mediocre quality and low prices. Many consumers will begin to shy away from associating themselves so blatantly with the brand and potentially seek out alternatives. Meanwhile, in the value segment, Starbucks will be going up against the McDonalds machine and if anyone can succeed in providing an adequate product at rock bottom prices it will be McDonalds. In the end, Starbucks would lose the high end and fail at the bottom, leaving the chain listless and significantly overbuilt.

Perhaps I am wrong and Starbucks will successful deal with McDonalds while keeping its high end image. It has dealt with every potential competitor so far with no problem and has quite a bit of brand capital to spend. In the meantime, I'll take a number 2 with soy please.


adam hartung said...

McDonald's is far from a "great company." But the company is positioned right for the biggest recession anyone alive can remember. It's taking advantage of that position - and in the process will likely crush Starbucks. When people are ready for a cozy chair and soft jazz with their coffee they won't want to stay with McDonald's. But very likely Starbucks will have killed itself by inviting head-on competition with "value meals" that allows McDonald's to crush them.

armchair traveler never! said...

It is a mystery to me why people drink the 'coffee' they serve in Starbucks and not even that, they do it voluntarily! and McDonald's ... I would never set food on that place, the food/desserts/drinks are simply disgusting and unhealthy :S
Interesting blog though, I like the subjects you write about (economics etc).