Starbucks (SBUX) hoped one of the ingredients of getting turned around was its new Pike Place Roast coffee.
The java chain brought the new product to market because it tastes more like Maxwell House, which is what most Americans like. It is an inexpensive drink by Starbucks’ standards, which means it costs less than $4 a cup. By many accounts Pike Place has brought more customers into the company’s stores.
According to The Wall Street Journal, introducing the new cup of joe to market has "touched off a debate about what customers think Starbucks should stand for: bold coffee for connoisseurs or a tamer brew for the masses?"
For the last two years, Starbucks founder and CEO-for-life Howard Schultz has said that the company needs to get back to its roots. In other words, the firm’s store need to be intimate places with coffee that does not taste like the swill at the local Dunkin Donuts. The Pike Place program seems to cut against the fabric of that plan.
The Starbucks turnaround has so far been characterized by a lot of running around without direction. The company "re-trained" many of its store personnel. It brought in AT&T as its WiFi provider, kicking out T-Mobile. Sometimes it sells Apple (AAPL) iTunes, and sometimes it doesn’t.
Selling cheap and crummy coffee is probably not the solution to Starbucks troubles. It may simply want to cut costs on some of the products people like. That would cost it money for a time, but it would bring back some of the faithful along with people who don’t already stop in from time-to-time.
Starbucks’ real issue is that everything it sells is too expensive. During robust economic times, that may be fine. In a recession, it is not. With its shares at a 52-week low, Pike Place is not the answer.
Douglas A. McIntyre