Responding to recession
As the recession causes more people to turn to payday loans, Starbucks is responding to the economic downturn with a “value menu.” The coffee shop chain, once viewed as a symbol of trendiness and affluence, will start offering product pairings to ease costs for customers.
Palatable pairs
Starbucks’ new product pairings will go for $3.95 each. One option includes a tall latte and oatmeal or coffee cake. Drip coffee drinkers can now get a breakfast sandwich with their drink at the value menu price.
Starbucks says customers will save an average of $1.20 compared to what it would cost to buy both items at regular menu price. With those prices, people certainly won’t be needing payday loans to cover breakfast.
Starbucks struggle
Starbucks is facing a couple of obstacles in addition to general economic downturn. Lowering prices is a bit of a catch-22 for the coffee giant, who has always marketed itself as a high-class, high-quality brand that was worth the extra money customers spent there. It must lower prices to keep customers, but it also must maintain its image to keep customers.
Also, other companies famous for having the lowest prices in the food sector, such as McDonald’s, are moving in on the coffee market. Starbucks’ profits have been hit since McDonald’s started offering and advertising specialty coffee drinks. This also might be part of the reason Starbucks’ profits sunk last year while McDonald’s profits jumped.
Payday loan paradox
The opposite phenomenon seems to be taking place in the payday loan industry. In the past, payday loans have generally been marketed to individuals with lower incomes. Now people with higher incomes are starting to use payday loans, too.
Related articles
- Starbucks slashes jobs and stores (news.bbc.co.uk)
- Starbuck’s closes 300 more shops in US as recession hits coffee market (guardian.co.uk)
- Starbucks misses estimates, cuts 6,700 jobs (money.cnn.com)
- Brewing Battle: Starbucks vs. McDonald’s – TIME (time.com)
Since I am a Starbucks freak, I am absolutely thrilled about this “value menu.” $3.95 is the average cost of a tall latte. I usually stop in at the local downtown Starbucks to get a cinnamon dolce latte and a bite to eat. Now I can be saving more money on one of the few things I love the most to spend money on. Sounds like a sweet deal to me!
I can’t say that I’m surprised by the move. Starbucks’ losses were pretty heavy, and in order for them to be more competitive in times like these a value menu is definitely a good idea for them. If people can’t justify paying more than $4 for a coffee, then a high end coffee house is going to suffer as a result.