They needed a poll for that?
Let’s think about it. Let’s assume the coffee is as good as or better than that had at Dunkin Donuts or McDonalds (MCD). Well, if people aren’t going to Starbucks (SBUX) anymore (or are in increasingly fewer numbers) and sales of coffee at the other two are exploding, then it has to be the price.
Here are the survey results:
“76% of American adults say they rarely or never visit one of the shops, and only 14% say they visit occasionally.
A new survey by Rasmussen Reports shows that 73% of Americans say Starbucks coffee is overpriced. Only 6% disagreed and 21% said they were unsure.”
It continued:
“Along with the perception of high prices, only 38 percent of the 1,000 adults polled gave the coffee behemoth a favorable rating, while 27 percent had an unfavorable view of the chain. About one-third of respondents had no opinion.
Younger adults have a more favorable view of Starbucks than older adults. Just under 50 percent of respondents 18 to 29 give the chain high marks, while only 28 percent of seniors shared that view. And those who make more than $100,000 a year view the chain more favorably than those who make less than $20,000 a year, the survey said.”
So, notice one word that was not there? Value. High prices are one thing if you feel like you are getting what you pay for. I do not expect the same service and food at Denny’s as I do at Morton’s. As long as I feel like the service and food were great when I leave Morton’s, I fell like I got my money’s worth. Starbucks problem is people by in large do not feel that way.
The service is non-existent (worse than McDonalds) and the overwhelming majority of folks, by the time they add milk or cream, flavoring and syrup to the coffee, have no ability to ascertain the quality of the bean they are drinking. I will take it a step further and say that unless you are drinking pure coffee or espresso, in 99% of the drinks could be made with the same beans McDonalds and DD uses and no one would be able to tell any difference. If Howard wants to take me up on it, we can arrange a taste testing here in Massachusetts.
Starbucks could then sell the drinks at reasonable prices and finally shut me up.
Now, Howard Schultz, Starbucks’ Chief Snob will look at the results and say “educated people who know better prefer us”. That, Howard may be true. But, you have 14,000 locations. There are not enough $100,000 plus a year folks out there to sustain the growth you need at all those locations. You’ll need to appeal to the “lesser folks” for lack of a better phrase to accomplish what you want. Either that, or you need to admit you need to close another 1,000 plus locations (minimum) to force feed current traffic to existing locations.
Howard has misjudged his market..
Something has to give, right now it is stockholders brokerage accounts…
Disclosure (“none” means no position):Long MCD, none
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