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Alex Steer writes:

Starbucks hasn’t had it easy, at least for the past decade. But whether being attacked by Naomi Klein for alleged anti-competitiveness in No Logo in 2001, or more literally attacked by demonstrators during a rally in London in January, Starbucks has always toughed it out. Until the recession, that is.

In late 2008, McDonald’s set up a giant billboard outside Starbucks HQ in its home town of Seattle. Proclaiming that ‘Four Bucks Is Dumb’, it advertised McDonald’s new line of (less expensive) espresso coffees. It was a well-timed campaign, and to judge from its share price, Starbucks spent three months in shock.

Its new strategy, announced last week, suggests that the coffee giant still has the caffeine jitters. It has opened three new outlets in Seattle – without any Starbucks branding. 15th Ave. Coffee and Tea and its sisters look and feel like independents. The muted press release from Starbucks says that the unbranded stores offer ‘new opportunities for discovery, a high level of interaction and a deep connection to the local community’.

But these things – experience, interaction, community – are central to Starbucks’s brand. Hiding the brand suggests a company with an identity crisis. Perhaps Starbucks has been told that, in a recession, consumers retrench to the familiar and local. This may be true, but research from the US and elsewhere suggests that reports of a ‘bonfire of the brands’ are somewhat exaggerated.

The fuller story is that, for American consumers, price matters more. It’s no longer the poor relation to quality and convenience. But price isn’t everything. The brands that thrive in the downturn will be those that offer quality and experience at a fair price and give consumers what they want – for example, acting on the recessionary trend towards going out for breakfast, not dinner (good news for coffee houses).

So four bucks may not be bad – if they come with a little bit more of a bang. Starbucks needs to show its consumers that it understands this. But to build this trust, it needs to keep on being Starbucks.

The picture at the top is of Rob Brandt’s ‘Crushed Coffee Cup’ design, and is used with thanks.

One thought on “Hiding out in the coffee wars

  1. Alex Steer says:

    Follow-up: Trends website PSFK now has some photos taken inside 15th Ave. Coffee and Tea, the unbranded Starbucks outlet in Seattle.

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