Tuesday, February 3, 2009

Misted-over news from Starbucks--and some's good

We’ve all heard Starbucks’ latest tactics for surviving the economic downturn: Cut more staff, close more stores, generally retreat and retrench. But the plan goes much further than that, particularly in regard to its secondary brand, Seattle’s Best Coffee.

An admittedly late reading of the transcript from last week’s investor conference call indicates the 300 stores slated for closing may not actually end their Starbucks affiliation. CEO/godfather Howard Schultz revealed plans to find franchisees willing to keep those stores open under the Seattle’s Best banner.

That effort, he said, is part of an overall ramp-up of franchising for the brand, which is also extending its reach through supply deals with other chains. This month marks the introduction of Seattle’s Best coffee in 2,800 Subway units, Schultz noted.

He also disclosed plans, albeit cryptic ones, to launch a bargain-priced, bundled breakfast. Starting in March, “we will offer several breakfast pairings in company-operated stores at attractive price points,” he revealed. Schultz noted that the pricing of the packaged deals will be uniform nationwide. That standardization would facilitate a full-scale ad blitz.

Investors also learned of a plan to press all of Starbucks’ landlords for a rollback in rent.

There was also some good news obscured behind the reports of 700 more people being laid off—or “separated from the company,” in Schultz’s euphemism. For instance, the Steve Jobs of coffee said, Starbucks’ gift card sales increased during the holiday sales by 8%, with $560 million loaded on electronic wallets usable only at one of the chain’s outlets.

He quantified the savings from defrocking 300 Starbucks stores and laying off 700 people at $100 million

1 comment:

Orrick Nepomuceno said...


You may also be interested to know that Starbucks is looking for more franchisees for the Seattle's Best brand. See the Reuters posting today at http://tiny.cc/U4k2j. Would be interesting if this may be a future sign that Starbucks may be thinking of perhaps franchising the flagship?