Starbucks Seeks More Frugal Image
As Originally Posted to The Wall Street Journal

SEATTLE -- Starbucks Corp. Chief Executive Howard Schultz said the coffee chain would combat the notion that its drinks are expensive, as he outlined plans to weather an economic downturn.

At the company's annual investors meeting Wednesday in Seattle, Mr. Schultz railed against the notion that Starbucks -- where the menu includes beverages that can cost upwards of $4 -- is "the poster child for excess," pointing out that half of the beverages Starbucks sells cost less than $3.

"Starbucks has got to demonstrate to our customers and the marketplace that we can still be a premium brand and create a premium experience and at the same time create a platform for value," said Mr. Schultz.

He also said new efforts such as the company's Via instant coffee and its $3.95 pairings of breakfast sandwiches with drinks have received a good response.

Mr. Schultz spoke to a nearly packed auditorium in an event markedly more subdued than those in previous years that often included a big musical act and baristas on stage. Most of the efforts Mr. Schultz discussed had been previously announced, compared with past years when he used the meeting to introduce big new ideas.

After years of rapid growth, Starbucks is now focused on cutting costs, making its operations more efficient and introducing new products that might help increase sales at its existing outlets. Mr. Schultz said the company needs to adapt to a shift in behavior that has customers coming to its stores less frequently and brewing coffee at home.

He indicated the company will use more television advertising after years of using very little. He didn't address whether Starbucks's planned campaign is in response to plans by McDonald's Corp. to start advertising its new line of espresso drinks this year, but he said "it is not true that customers are going to fast-food restaurants" instead of buying their coffee at Starbucks.

The company also plans to reintroduce a promotion from last summer that offers some drinks for $2 to patrons who had made a purchase at a store that morning.

During questions from investors, one Starbucks executive said the company is working on a single-cup solution to be able to quickly brew decaffeinated coffee after recently taking decaf out of the regular afternoon brewing rotation at many outlets.