Many have complained that Starbucks is way too expensive for coffee. At the same time, Starbucks has become one of the most sucessful businesses in the world. Now though with the current financial situation, people are cutting back thus demanding less or substituting other alternatives like McDonald’s McCafe. This from the Wall Street Journal:
“Starbucks Corp. Chief Executive Howard Schultz said the coffee giant is ready to fight back against rivals’ claims that the company’s coffee drinks are expensive and the notion it is losing share to cheaper coffee makers.
As it reported a 77% drop in quarterly profit, the company on Wednesday also said it will adjust its pricing in some markets, raising prices of some of the more complicated drinks, while lowering those on basic drinks. For example, Starbucks will offer a “grande” size iced coffee for less than $2, shaving as much as 45 cents off the price, depending on the market.
The moves come as Starbucks is struggling to attract and retain consumers in a recession. Starbucks said U.S. comparable-store sales fell 8% in its latest quarter as traffic fell 5%, and average transaction totals fell 3%.”
This is how competitive markets adjust prices to be the most efficient. The rest is here.