Starbucks falling on hard times

In falling economic times, some of the inevitable casualties are the luxuries in life. As discretionary spending grinds to a halt, consumers cut back on the extras in life. Not
even coffee is safe. Especially when you brand yourself as upscale and trendy.

The Starbucks story is a microcosm of what is happening in the overall economy. It
appears that Starbucks' extreme growth saturation strategy has finally caught up to
it. When times require restraint, luxuries take a hit.

Starbucks plans to lay off 6,700 workers and close 300 more stores.

In the short-term the move will cost the company a whopping $230 million. However, once completed, it will save the company $100 million annually. The company better hope it's a good move given those figures.

I frequent Starbucks quite a lot and can attest that at least the stores I go to are doing
relatively fine. But Starbucks is and always has been, an acquired taste. And when the
economy starts slowing down, acquired tastes get bitten.

The benefactors at Starbucks' expense are the Tim Horton's and McDonald's of the world.
When disposable income starts to tighten up, suddenly McDonald's coffee doesn't seem half
bad. You can have 3 McDonald's coffees for the price of one Starbucks coffee.

Or, if you need flavored coffee badly, even a coffee machine over time will be cheaper than Starbucks.

Bottom line. Giffen goods are in now. Starbucks and other luxuries are in danger.