Marketing

Starbucks makes a surprise jump into the value war

The coffee shop chain is joining a growing number of fast-food restaurant chains pushing bundled deals to get customers to come in more often.
Starbucks
Starbucks is now offering a "Pairings Menu," providing an unexpected entrant into the fast-food value wars. | Photo: Shutterstock

Starbucks is apparently serious about reversing its traffic slide.

The Seattle-based coffee shop chain, which has popularized the $3 cup of coffee and made a killing by encouraging people to add 80-cent flavor shots to their cold beverages, is entering the value game with a pair of bundled offers.

The chain on Tuesday started offering customers a “pairings menu,” or bundled deals featuring a tall iced or hot coffee along with a butter croissant starting at $5. For $6 customers can get a tall coffee with a breakfast sandwich. If that sandwich features double smoked bacon or Impossible Sausage, the price is $7.

The brand is hardly the only one taking such a step in a year in which fast-food brands are losing customers to grocery stores. To wit:

  • Jack in the Box earlier this month launched a Munchies Under $4 Menu, featuring lower-priced items like Tiny Tacos, Curly Fries, Chicken Sandwiches and other items.
  • Arby’s this week brought back its classic bundled deal, 5 Roast Beef Sandwiches for $5, though that one is available only through digital channels.
  • Burger King on Monday brought back its $5 Your Way Meal, giving customers a four-piece Chicken Nuggets, fries and a drink and a choice of a Whopper Jr., Chicken Jr., or a Bacon Cheeseburger.
  • Wendy’s recently launched a $3 bundled breakfast deal featuring one of the chain’s English Muffin sandwiches and a small Seasoned Potatoes.
  • McDonald’s, which largely kicked off the value wars by noting in February that grocery prices looked more affordable, is getting ready to kick off a $5 bundled value meal later this month, similar to the Burger King deal. Customers would get a four-piece nuggets, fries, drink and a choice of a McChicken or a McDouble.
  • KFC is marketing a $4.99 meal for one and a $20 family meal and a $10 Tuesdays offer of eight pieces of dark meat chicken throughout the summer.

(Check out RB’s special report on the oncoming restaurant value war.)

Major chains have been alarmed this year as traffic declines worsened. Customers, frustrated by inflation, have visited fast-food restaurants less often. Grocers like Walmart are pouncing on that frustration by lowering prices. And even gas stations have started offering their own value deals.

Starbucks has historically remained above the fray, in part because its customers have traditionally been higher income and less price sensitive.

But the chain watched traffic nosedive in mid-November, continuing into 2024, mostly from occasional customers. And executives have made it clear they believe prices may be a key factor.  

“We see there is still an opportunity as it relates to value perception,” CFO Rachel Ruggeri said at an investor conference last week, according to a transcript on the financial services site AlphaSense.

Much of the chain’s effort on that front, however, had been on the app. The company has been pushing Starbucks Rewards loyalty program at its restaurants, noting that the best deals are on the app. It plans to make mobile order and pay available to everybody starting next month.

But a bundled offer suggests the chain believes it needs to take a further step toward improving its value perception.

Starbucks same-store sales declined 3% in the first three months of the year, with a 7% decline in transactions. The company also expects to finish the fiscal year, which ends at the end of September, with a decline in same-store sales in the low single digits.

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