Starbucks: A Fallen Empire?

Bad news for Starbucks, the brand I love to blog about. It seems that profit forecasts won’t be quite so perky, leaving stockholders disappointed. The BBC has a quick study of how the sluggish US economy has hurt the coffee giant.

I guess they haven’t been selling enough of those $1 Short brews.

Business types will analyse this in 15 different ways, but I’m looking at the brand. For Starbucks and other large brands, a slow economy is a time of great anxiety. Will the same giants weather the storm or will it give new opportunities for upstarts? I am of the firm belief that a slow economy is the perfect time to invest in your brand and solidify your core businesses. Gimmicky products and cheeky advertising campaigns will seem like a glorious waste of money if it doesn’t produce long-term, loyal customers who will stick with a brand for years, not weeks.

And Starbucks has been doing this. Aside from their throwback logos, they’ve been making a number of smart moves aimed at focusing, not expanding, the business. But still, when times are tough, Americans are less likely to spend on luxury items, even coffee. Spending becomes more cerebral, more calculated, and less impulsive. Considering the so-called “Starbucks Effect” is based on folks not keeping tight track of their finances, this isn’t a good sign. But perhaps this is a good opportunity for Starbucks to grow its supermarket and retail coffee businesses. Buying by the pound, instead of by the cup, is always more economical. And with the US dollar in flux, maybe now is a good time to stockpile a warehouse of coffee bricks. Hey, it could be the next currency.