Over a decade ago Starbuck's went from a niche market in Seattle to become a household name. They did this by selling extraordinarily high quality, $3 cups of coffee in a world where a cup of Folger's coffee cost 20 or 30 cents a cup.
Now it appears as if there may be an end to how much money people are willing to spend on coffee. US sales have slowed significantly for Starbuck's coffee as consumers reduce spending on luxuries like specialty coffee in the face of a weak economy and rising prices for food and fuel. Other companies seem to believe that they can take a piece of the premium coffee market as Starbucks reduces the number of stores that serve their goods. An interesting example is the fact that McDonalds now sells an iced "Premium Roast Coffee" for a fraction of Starbuck's price and I have to say that it tastes pretty good. I wonder if their sales will grow the market overall or if they are taking some purchases that would have gone to Starbucks or other premium coffee businesses?
Are there similar examples of premium products in your market? Are there indications that the current conditions may be changing the balance of power in these categories and could they represent a risk or maybe even an opportunity to your business?
Chris Hawkes
