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CEO says Starbucks 'will succeed' despite recession

March 19, 2009|ASSOCIATED PRESS

NEW YORK — Starbucks Corp. Chief Executive Howard Schultz on Wednesday promised shareholders the gourmet coffee company would succeed despite the global economic downturn by taking on its competitors and offering customers a better deal.

During a webcast of the company's 18th annual shareholder meeting in Seattle, Schultz said he planned to dispel the myth that all Starbucks coffee drinks cost $4 -- a perception that has helped competitors such as McDonald's Corp. break into the espresso beverage market. A tall Starbucks drip coffee goes for a bit less than $2 a cup, depending on the market, for instance.

"We've allowed other people to define us," he said.

Schultz also took on naysayers who have said the company is showing signs of desperation in its offer of deals on breakfast pairings and its introduction this month of instant coffee.

"We're doing everything we can to be sensitive to the needs of our customers," Schultz said. "We can no longer sit back and ignore the pressure that our customers are under."

Unlike previous meetings, which were marked by exuberant shareholders and celebrity sightings, the event was somber. Starbucks shareholders have been battered this year by a 36% decline in the stock's price, and Schultz gave them a nod in saying "not a day goes by" that he forgets the company's responsibility to restore shareholder value.

Recent months have been punctuated by a drop in U.S. sales as consumers have shied from small luxuries such as lattes. In its fiscal first quarter, which ended in December, same-store sales -- or sales at stores open at least a year -- dropped 10%. The company has announced a total of more than 900 store closures, and it plans to cut as many as 6,700 jobs.

To fight the perception that its products are pricey, Starbucks introduced the pairings, which combine a latte or drip coffee with a food item; it created the line of instant coffee, which sells for less than $1 per one-cup packet; and it launched a gold card discount program.

Starbucks shares rose 36 cents, or 3.2%, to $11.50.

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