December 17, 2008
December 17, 2008
The Starbucks Corp. may need to cut $400 million of costs next fall to prevent further sales decline, but Howard Schultz, Starbucks chairman and chief executive, maintains that the company shouldn’t change its business toward the type of discounting performed at fast-food chains. Schultz needs to take another look at the MacDonald’s Corp., whose cheap meals increased sales by 7.7% in November. The reason is clear, breakfast items, chicken sandwiches and value menu options.
Starbucks may have offered a loyalty card and other promotions for cheaper drinks, but when customers typically pay $4 for a cup of coffee, people are going to buy less in an economic recession. More faithful costumers are making fewer coffee runs to save money.
Instead of bottoming out in October, as predicted, Starbuck’s same-store sales have gotten worse. Meanwhile, McDonald’s same-store sales increased 8.2% percent in October.
However, Starbucks is still evolving and will plan on emphasizing more tea lattes and selling its Seattle’s Best Coffee brand in 1,900 locations of the Subway sandwich chain early next year.
The company also keeps close watch on the McDonald’s Corp. restaurants that were the first to introduce lattes, cappuccinos and other espresso drinks in the fast-food chain. For now, Starbucks Executive Vice President Michelle Gass, doesn’t believe McDonald’s coffee is cutting into Starbuck’s sales.
When money is low, people just want good food for low prices. From tea lattes to chicken sandwiches, may the best corporation win!
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