Starbucks Ignores Schultz

“We will return to what made us great and focus on coffee,” Howard Schultz. New says different Howard and Starbucks (SBUX) shareholders may just benefit…

This summer, Starbucks will add fresh fruit and whey powder smoothie drinks in the U.S.. They say they’re the first stage of a broader push into healthier drinks and food offerings. “It’s also what we believe to be a huge differentiator,” said Rob Grady, Starbucks’ vice president, beverage. “You cannot get [them] from any fast-food establishment.” The flavors Starbucks has developed include chocolate banana and orange mango.

OK. Let’s just ignore that for the last year Starbucks has been saying McDonalds (MCD) Dunkin Donuts and their ilk were “not the competition”. Clearly this statement is an admission they are. We also need to ignore that I can get a smoothie from Dunkin Donuts. Let’s also ignore the runs polar opposite to what CEO Howard Schultz has been running around saying since he re-assumed the CEO post that it was going to be “all about the coffee”. Now that those nagging details are out of the way, it is a good move. But, it is only a good move if the smoothies are actually priced reasonably. If they run $4 to $5 a glass, nice idea, lousy execution.

A reasonable smoothie will bring people in the door. A high priced one will be yet another in a long list of fiascos by the company in the past year and a half.

Listening to Schultz describe the drinks as “visually beautiful,” one can only be wary of its pricing. Howard, if I am getting a smoothie to go out in the 90 degree summer heat, its “visual beauty” will last 3 to 4 minutes. What will matter far more when it comes to the purchasing decision will be the price because if you think the “competition” will not come up with something to compete at a fraction of what you will want to charge, you are yet again dreaming.

Starbucks has an opportunity here, I hope for shareholders sake they do not blow it…

Disclosure (“none” means no position):Long MCD, none