How Much Should a Good Cup of Coffee Cost?

Source Article: Starbucks cuts jobs and stores
www.theappointment.co.uk (view article)

Implications:

1) Starbucks overexpanded store count

2) Product quality became spotty as chain grew; service level stayed high

3) Other players "Upped Their Game" in the coffee sector

Commentary:

Starbucks retrenchment is no surprise given the slowdown in consumer spending, but the seeds were sown for a turn in their fortunes, regardless.

Starbucks started as a "boutique" coffee store, nicely appointed with good quality product and well-trained, polite employees.

As the store count grew, the employees stayed remarkably friendly and customer oriented, but the barista's skill level dropped. Sometimes, you didn't get a perfect cup of coffee. That was a break with the "Brand Cache" they have with their base consumer.

Starbucks has that core following that will always give them "X" amount of business out a certain area, but as stores began to be placed more closely together, they needed to reach out to the "casual" coffee drinker, one with whom price and convenience were keys to repeat business, in order to maintain revenue as stores got more tightly packed.

They never really addressed that market successfully.

The rise of the premium coffee programs at McDonalds and Dunkin Donuts addressed the mainstream coffee drinker in a faster turnover model, and the Convenience retailing sector has made an effort to deliver a very good coffee product as time has gone by. ExxonMobil and BP put lots of time and effort into the coffee offerings in their retail operations, and large convenience store operators like WaWa and Sheetz run great coffee programs.

Everyone "Upped their game" to work at getting some of Starbucks revenue. They worked at being more convenient, faster, and more price friendly, even if the product isn't quite to Starbucks level, although many times, it is.

The current slowdown in consumer spending sped up Starbucks store cutback, but it would have happened sooner or later anyhow.