February 9, 2009
Starbucks' problems may have begun when fast food chain McDonald's invaded its space, promoting its coffee as just as good, but a whole lot cheaper. Now that the recession has slammed the Seattle-based coffee chain, Starbucks is trying to hit McDonald's where it hurts.
You might call it "the Starbucks Value Meal." The upscale coffee chain, where a cup of coffee can easily cost $4, has rolled out what it more elegantly calls "breakfast pairings." Beginning March 3, consumers will be able to get a tall latte and slice of oatmeal or cinnamon coffee cake for $3.95. If you prefer a regular cup of Joe to a latte, your "pairing" comes with a breakfast sandwich.
The "pairings" will become a feature at all company-owned stores. Starbucks says the "pairings" will give consumers as much as a $1.20 discount.
Starbucks is also adding a bacon, egg and gouda cheese breakfast sandwich to its menu, along with a ham, egg and cheddar sandwich. The appeal is to consumers who like the Starbucks brand, but have lumped a daily visit to the coffee bar into the discretionary spending category, and therefore subject to budget cuts.
Starbucks problems have deepened as the recession has worsened. Just a few weeks ago Starbucks announced plans to close 300 more stores and layoff 6,700 employees in the wake of disastrous first quarter earnings. The move followed the announcement last summer that the coffee would close 600 of its stores, as the declining economy began to make its presence felt.
McDonald's, meanwhile, appears to be doing quite well. In spite of the recession, the fast food chain reported Monday that January same-store sales were up 7.1 percent.
