Starbucks walks into Chinese Buzz Saw. Does cultural icon get it? $SBUX

Starbucks (Nasdaq:SBUX) is expanding all over he world. Starbucks is pretty cool and has been reasonably clever with cultural issues. But they just stepped on a Chinese land mine. State owned media has criticized Starbucks for over charging compared to other prices for comparable products around the world.

Normally who cares? Charge what the market will bear. It is free choice.

China is not a free market. There are reactionary forces who are suspicious of globalism and western influences. Apparently they have some editorial influence in state media.

Starbucks may be guilty of the same mistake Google experienced in China. Not understanding the game properly. Starbucks is in a consumer business where PR and public perception is critical to short and long-term success.

Starbucks has walked into a Chinese buzz saw. They should have seen it coming. The question becomes how do they fix it? How fast can they fix it?

China is too big for Starbucks to abdicate.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Starbuck’s Gun Control Hypocrisy. Read and Sip this. $SBUX $KKD $DNKN

Starbucks (Nasdaq: SBUX) just brewed up a non fat no gun latte. In case you haven’t heard SBUX doesn’t want you to bring your guns into the stores. Your gun and their caffeine not going to work out.

So a few points to consider. First the NRA member is not an important demographic for Starbucks. Not sure where the NRA gets their coffee but it’s probably either Dunkin Donuts (Nasdaq: DNKN) or Krispy Kreme (NYSE:KKD)

Starbucks just branded itself as anti gun and anti violence. After the Washington DC shootings by a gunman with obvious mental health issues Starbucks wants people to feel safe. The hypocrisy of it all is that crazed gun men are just that “crazed gunman”. They will not pay attention to the rules as Starbucks lays them out. Crazed gunman pay attention to the voices in their heads.

For all you know the gun free policy may annoy a gun crazed individual who gets tired of extra sprinkles on their premium coffee.

Soon Starbuck’s has to go back and compete in the coffee market again.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Starbucks Big Caffeine Clever Communications Plan. Coffee Tea or Lawyers. $SBUX $TEA

Teavana logo

Teavana logo (Photo credit: Wikipedia)

Starbucks (Nasdaq:SBUX) has a rather clever communications plan in play. Off it’s 52 week highs set last March it may occur to some to perhaps sell and stick it to the tax man. The dividend is anemic at 1.74%. Short interest is 1.16% of float which means short covering will not drive the price in the near future.

Starbucks decides to spend $620 million to buy Teavana (NYSE:TEA) and get into the tea business. Wall street runs more on coffee so the deal logic does not seem strongly compelling. Green tea benefits aside. They let it be known that a head count reduction is in the works. So they look like they are focusing on costs.

Then the icing on the cake is a new buy back plan for some 25 million shares is announced. This tops up the 12.1 million still unexecuted share repurchases. So at 37.1 million shares at just under $50 @ share may easily hit the $2 billion mark. Which is the equivalent of three Teavana acquisitions.

So by reducing the share float and engineering a supposedly better EPS any stumbles from the Teavana acquisition will not be as transparent. Pretty clever eh? All this when the money flow ratio stands at 2.97. Would that continue and for how long to drive the price up.

Just to stir the pot a little,  law firm Levi & Korsinsky announces an investigation into Teavana. You see as recently as the end days of Feb 2012 Teavana was trading just under $24.00. So the Starbucks offer of $15.50 is not as good a deal as one would think. The shares were trading around $10 just before the offer. But breach of fiduciary obligation is being investigated. You see it’s not $24 and that’s a damn fine point.

Starbucks has to tap dance very carefully. So the communications plan is clever and nuanced. Because someone has to drink a lot of coffee

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

 

Tim Hortons kidney busting changes to addictive behaviour $THI $MCD $SBUX

Tim Hortons Coffee & Bake Shop

Image via Wikipedia

Tim Horton’s (NYSE:THI) recently announcing some drastic kidney busting changes to the Java strategy. Namely a cup of coffee is no longer the same cup of coffee that the consumer is used to purchasing. Whats he talking about? Tim Horton’s one of North America’s largest quick service restaurant operations is introducing a new 24 oz cup of coffee. Not sure of the exact total and most kidneys would not find it relevant.

Here is what is relevant.

If you have a coffee addiction and are used to a double double or even a triple triple x-large to go, you now have to order it up in a different way. Same with the large, medium and small. When you finish understanding the changes you may go running out screaming for a Star Bucks (Nasdaq:SBUX) or even a McDonalds (NYSE:MCD).

Tim’s is trying to change a fundamental consumer behaviour based on addictive habits. Good luck buddy. Why take the risk? If you want to introduce a new large mega size just do so. Rearranging your entire sizing is confusing and will disengage the customer. Small will now be called x-small and so on. Consumers will now get stupid looking stickers on their coffee lids explaining what new behaviours are required.

If you were to introduce a new size why not come up with a separate new name that really hits the nail on the head. I’m thinking “kidney buster”.  Have your lawyers call my lawyers and we’ll get it all going. I’ll take payment in kind for the rest of my life if it makes it any easier for you.

George Gutowski writes from a caveat emptor perspective.

Starbucks Sneaky Bagel Service $SBUX #starbucks #QSR

Cream cheese on a bagel.

Image via Wikipedia

Starbucks Corporation (Nasdaq:SBUX) is so cool right? So I slip in this morning for a quick Grande [Pikes Peak if you must know] and I decide on a toasted bagel with cream cheese. To go. I’m going to munch in my car and hope for no accidents. Been working for years. I drink my coffee black in part because I am not that complicated. I open the bag to find one toasted bagel, one plastic knife encased in more plastic and two microscopic servings of cream cheese in those individual packs just like jam at a dinner. Except I’m driving a car and this does not meet my needs for immediate nutrition. Trying to be green I am not impressed with the plastic which I must now responsibly re-cycle.

To the VP finance today this was high margin because they did not have to spend labour hours for a barista to spread cream cheese on a bagel. Although you have to question the costs of each packet versus restaurant sized tubs.

To the VP marketing you have a disappointed customer. I expected the food to be ready to eat. I was not aware that I was to be part of the kitchen staff. At your prices I do not expect to spread cream cheese on  a my bagel.

When will customer experience disappointments intersect and overwhelm margins which are not sustainable. Deep strategic issues for Starbucks. I’m still OK with Pikes Peak but not the bagels. Starbucks you are vulnerable. Soon you may have a bagel protest. 

George Gutowski writes from a caveat emptor perspective. This was personal but then it became business. I hold not positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.