Starbuck's Strength--Distribution

I totally agree with my blogmate, Burt, about people not caring so much about the interaction with the barrista. Starbucks fundamental problems are two-fold: that some hard-to-measure number of people are cutting back on $3.00-$4.00 cups of coffee in a Recession and period of job cutbacks; and the fact that people don’t care so much about where they buy their latte.

There was a time when Starbucks enjoyed a unique position—it was the most ubiquitous place around one could get an espresso-based drink. Putting subjective measurements of quality aside, now you can get one at Dunkin Donuts, Panera Bread and anay number of small regional coffee chains, and independent coffee shops. Within a ten minute drive of my house, I count eight places i can get a latte. Two of them are Starbucks.

Three of the places are joints I could envision hanging out in with my laptop. And of the three, Panera Bread is the better-kept, better-priced, friendlier atmosphere.

But the real point here is that while Starbucks has trained palates for Arabica coffee and espresso, few care where they get it. And I doubt Howard Schultz has a formula for changing that. What it gets down to is not the store experience, but the store location.

Price matters too, of course. At best, Starbuck’s needs to burnish its offerings and pricing so that a coffee drinker faced with the choice of eight places to buy coffee (nine if you count my own kitchen)near my office will choose them over the others.

Before it's here, it's on the Bloomberg Terminal.