Starbucks Movement From Fad To Necessity

With all the talk of higher fuel prices and the pain it will instill on consumers, the avid investor knows to look at his (or her) portfolio and see where they will be most exposed. In the past one of the first places consumers cut back was on their daily addiction, coffee. Fads and consumer buying habits change over time. Has Starbucks become a consumer staple, that the masses cannot live without?

Years back when the consumers wallets were first hindered by increasing gas prices experts were saying coffee was the first discretionary item to go. Today coffee seems less and less of a discretionary item and more and more of a American addiction. Americans are addicted to their televisions, entertainment, and so on; Today it seems that coffee (in particular from Starbucks) falls into that category of need. We all know that Americans have a tainted line between the need category and the want category. Today more and more Americans see their Starbucks fix as a need that they can’t live without, even if it means cutting back on other items to pay their coffee bill.

This blurb about Starbucks originated from observing the line out the door at my local Starbucks this morning. Gas has recently peeked in price and may go higher in the coming months. Many of the experts want to claim that consumers won’t cut back, they will, and they have. The question that any intelligent investor needs to as; Is where will consumers cut back? As I mentioned some time ago in The Real Walmart Story, consumers are cutting back from their beloved Walmart and shopping at dollar general to save a few dollars. They do not seem to be cutting back from Starbucks and this could be due to a multitude of reasons. One may be that Americans are cutting back in many aspect of their lives and have been for some time (we are still in the midst of a recession), and consumers want to treat themselves. The easiest and cheapest daily way to treat oneself is in the form of that Venti coffee from Starbucks. Even in the worst economic times Americans will treat themselves because we are spoiled and love spoiling ourselves.

When talking Starbucks nowadays one cannot forget to mention their recent movement to take market share from Green Mountain. What investors should not forget is that Starbucks bread and butter is selling coffee at their coffee shops. In the past few years their coffee has been available in stores and in K cups, but still at the end of the day they make the most of their revenues from their Starbucks coffee shops. Until their coffee machine becomes a leg on which they company stands on, one should not be overly concerned with that aspect of the company. At the end of the day Starbucks is Americans’ coffee shop and will continued to have a line out the door, even with rising fuel prices.

“Starbucks represents something more than a cup of coffee.” – Howard Schultz

Photo by Cherrysweetdeal

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