On Monday, the gourmet coffee chain that’s been losing business at quite a clip of late, will unveil plans for its first value menu: $3.95 will get you a latte with coffee cake or drip coffee with hot sandwich. That’s right, food and drink at Starbucks for less than the $4 the chain is often accused of charging for a cup o’ joe. Consumer savings, in some cases, will exceed $1.20 per order. Yes, change from a $5 bill at Starbucks.
The food and drink “pairing” program — which Starbucks actually refuses to call a value menu — rolls out March 3. It will be offered all day at company-owned U.S. stores. It will be marketed as: “Hello to a New Day.” The move — something CEO Howard Schultz vowed he would never do — comes at a time when the coffee giant is spiraling down. Starbucks, once the model of the New Economy, has been concurrently hit hard by three powerful forces: a recession, changing consumer habits and growing competition from fast-food chains. The $3.95 deal includes one of four hot sandwiches — currently sold at half of Starbucks’ U.S. locations — and a tall, drip coffee. Also offered for that price is a tall latte and either a slice of cinnamon swirl coffee cake or a bowl of oatmeal.
The move by Starbucks is glaring evidence of how retailers and marketers have been forced by the economy to rethink game plans and long-held strategies. Additional price-cutting is expected at Starbucks soon.
The business environment is unlike any Starbucks has ever experienced. In late January, the chain said that sales at U.S. stores open at least a year fell a stunning 10% in its first fiscal quarter, while net income dropped 69%. It also announced plans to shutter 300 additional stores and cut as many as 6,700 jobs.
McDonald’s which has McCafé coffee bars at half of its U.S. stores, says it’s bemused at Starbucks’ value move. “Value has, and will always be on the menu at McDonald’s,” spokeswoman Danya Proud says. (From US Today)