Starbucks has had a long tradition (and a formal policy) not to market to children. But, it is now reversing this decision, driven by bottom-line interests rather than by good business practice. In many ways, SBUX’s plan is much like a recent decision by Altria (MO) to assign priority emphasis to increasing sales abroad – and, thus, to increasing the incidence of lung cancer world wide. It is sad to see two major American corporations build out their business at the expense of the welfare of vulnerable children and adults. Investors are not likely to worry too much about the sale of cigarettes in other countries (actually many are likely to applaud MO’s decision), but they should be concerned about Starbuck’s plan to sell caffeine to kids.
They are simply getting greedy. Their stock has traded in a narrow range during much of the last weeks and their earnings have risen 9%. They know, however, that there is money to be made from teenagers and younger children who already have shown interest in their products and creamy drinks. They are talking about adding new drinks and selling smaller drink sizes to respond to the kid market. What they are really talking about is hooking kids early on caffeine. And, isn’t that nice!
It is likely (at least I hope it is) that this plan will backfire on Starbucks. First, adults are not going to be very happy when kids start invading their space in bigger numbers. Second, if they follow through, as I expect they will, they will quickly pick up bad press on loading up kids on caffeine. This is a stock to sell at this time.
Related Articles:
Underhand Pitches, Outfield Fences Moved in for Coke, P&G, United Technologies, MO & Big Pharm This Earnings Season by JRodgers - Oct 15, 2007
Starbucks Brings Schultz Back by JRodgers - Jan 08, 2008
5 Things You Didn't Know About Starbucks by ktexas - Dec 10, 2007
Kraft Going Modern by Marc Freedman - Oct 01, 2007.
Add to reading list
