An author's impact?
Starbucks chief Howard Schultz blames his company's current troubles on the United States being in an economic "tailspin." But is that the whole story?
This is the week for Starbucks' annual shareholder meeting, and Schultz has trotted out no end of changes to try to bring business back — a new espresso machine, a new blend, more benefits for holders of its loyalty cards. Curiously, though, there was no mention I could find about expanding its $1 coffee experiment that began in Seattle a couple of months ago.
That's a signal that Starbucks is sticking with the fundamental strategy that first made it a success:
Starbucks has long said its $3 to $5 coffee is an "affordable
luxury," but that assumption is being challenged because consumers are
spending less on everything, from dining out to buying clothing, as
home prices fall and the cost of necessities such as gas and fuel
continue to rise.
"We're an affordable luxury, but there are forces of nature here that we can't control," Schultz told journalists.
All of which makes me wonder: Did it take an economy in a "tailspin" to finally make the "latte factor" kick in?
The "latte factor" is a term coined by personal finance author David Bach a few years back in an attempt to get people to cut back on "affordable luxuries" and put the money into savings instead — illustrating his point with figures about how much a foregone $5 latte every day could compound over 40 years. But in fat times, fed by the dot-com bubble and then the housing bubble, it just didn't sink in with a widespread audience. (And it was a flawed concept to begin with, as Michael Masterson pointed out in his book Automatic Wealth.)
Now, though, it is sinking in. Both my wife and I run into "latte factor" references pretty regularly, independent of Bach or his books. But not in the context of saving money. Rather it's in the context of scraping money together to put into the gas tank instead. Oh well.
Starbucks shareholders were unimpressed with Schultz's plan. The stock closed down yesterday 4%.