Friday, January 25, 2008
Starbucks tests $1 coffee, free refills
"Tall" and pricey is becoming "short" and cheap at the world's largest gourmet coffee chain as it grapples with a cost-conscious consumer and competition from fast-food outlets.
Starbucks Corp. confirmed yesterday it is test marketing a smaller, cheaper $1 (U.S.) cup of coffee, as well as free refills, at some U.S. stores.
The chain that made millions selling high-priced designer brew said the new "short" coffee comes in an eight-ounce cup and is available at some Seattle outlets.
No decision has been made yet about bringing the product to Canada, a spokesperson for the company said yesterday.
Starbucks also said it frequently tests new products, but doesn't comment on the results until it makes a final decision. The move is not indicative of any new business strategy, the company added.
However, it comes amid increased competition from low-priced fast-food outlets and signs that financially strapped U.S. consumers are "trading down" to cheaper retail outlets.
The gourmet chain grew to 15,000 stores worldwide mainly on the strength of large, customized brews that are priced accordingly.
But now cheaper chains, such as McDonald's, have moved more aggressively into the category.
McDonald's has plans to add coffee counters to as many as 14,000 U.S. locations.
The suggested retail price in the United States for a slightly larger 10-ounce cup of premium roast coffee at McDonald's and Dunkin' Donuts is $1.07 (U.S.) and $1.39, respectively, those companies said yesterday.
Shares in Starbucks lost nearly half their value last year as problems in the U.S. mortgage and credit markets dampened consumer spending.
The company also shuffled its senior management team, bringing back chair Howard Schultz as chief executive officer, and vowing to close underperforming stores and boost international expansion. Two-third of its outlets are in the United States.
In New York yesterday, the price of coffee fell on the futures market as many traders sold on fears the global economy is headed for a recession.
"Large hedge funds are saying, `Everything is going down – get me into cash,'" said Jaime Menahem, a broker with Alaron Trading Corp. in Miami. "There's no confidence in the economy."
Coffee for March delivery fell 3.7 cents, or 2.7 per cent, to $1.313 a pound on ICE Futures U.S., formerly known as the New York Board of Trade. The price for coffee has dropped 3.6 per cent this month.
Starbucks Corp. confirmed yesterday it is test marketing a smaller, cheaper $1 (U.S.) cup of coffee, as well as free refills, at some U.S. stores.
The chain that made millions selling high-priced designer brew said the new "short" coffee comes in an eight-ounce cup and is available at some Seattle outlets.
No decision has been made yet about bringing the product to Canada, a spokesperson for the company said yesterday.
Starbucks also said it frequently tests new products, but doesn't comment on the results until it makes a final decision. The move is not indicative of any new business strategy, the company added.
However, it comes amid increased competition from low-priced fast-food outlets and signs that financially strapped U.S. consumers are "trading down" to cheaper retail outlets.
The gourmet chain grew to 15,000 stores worldwide mainly on the strength of large, customized brews that are priced accordingly.
But now cheaper chains, such as McDonald's, have moved more aggressively into the category.
McDonald's has plans to add coffee counters to as many as 14,000 U.S. locations.
The suggested retail price in the United States for a slightly larger 10-ounce cup of premium roast coffee at McDonald's and Dunkin' Donuts is $1.07 (U.S.) and $1.39, respectively, those companies said yesterday.
Shares in Starbucks lost nearly half their value last year as problems in the U.S. mortgage and credit markets dampened consumer spending.
The company also shuffled its senior management team, bringing back chair Howard Schultz as chief executive officer, and vowing to close underperforming stores and boost international expansion. Two-third of its outlets are in the United States.
In New York yesterday, the price of coffee fell on the futures market as many traders sold on fears the global economy is headed for a recession.
"Large hedge funds are saying, `Everything is going down – get me into cash,'" said Jaime Menahem, a broker with Alaron Trading Corp. in Miami. "There's no confidence in the economy."
Coffee for March delivery fell 3.7 cents, or 2.7 per cent, to $1.313 a pound on ICE Futures U.S., formerly known as the New York Board of Trade. The price for coffee has dropped 3.6 per cent this month.
# posted by Buck @ 10:52 PM 
