Shop Talk

Starbucks adds spice to Via

Starbucks is expanding its Via instant coffee line this autumn with cinnamon spice, vanilla, mocha and caramel flavors.

The move comes on the heels of the Seattle company’s rollout of Natural Fusions, a line of flavored ground coffees, at U.S. grocery stores this summer.

Starbucks for years avoided selling flavored brews, leaving the niche to its more mainstream Seattle’s Best Coffee brand. But it changed that high-brow stance when the U.S. economy hit the skids and consumers started saving money by drinking more home-brewed java.

The world’s biggest coffee chain is focused on growth following a restructuring that slashed costs and shuttered hundreds of mostly new, but poorly performing stores. It hopes to boost profits by introducing products — like flavored coffee — that appeal to a broader range of consumers and expanding its reach beyond its cafe walls by selling more products at grocery stores and other retail outlets.

Flavored Via and Natural Fusions are key to making those strategies work.

“We know 60 percent of our customers drink coffee with flavor, and now they will have access to high-quality arabica coffees with natural flavors as only Starbucks can deliver,” Annie Young-Scrivner, Starbucks chief marketing officer said in a statement. 

What do you think of Starbucks move into flavored  coffee?

Check Out Line: Warning, slow recovery ahead

Check out signs that a slow recovery is in the offing.

Retail executives see only gray skies ahead as U.S. shoppers are still spending cautiously, giving weight to the notion that a recovery will remain weak beyond 2010.

“The economic backdrop is not optimal,” Ken Perkins, president of retail research firm Retail Metrics, told Reuters. “It’s not catastrophic like it was in 2008 and the first quarter of 2009, but it’s just very sluggish.”

Indeed, Wal-Mart Stores posted its fifth consecutive quarterly drop in U.S. same-store sales (sales at stores that were open for at least a year) and said that trend may not reverse itself in the current quarter, Home Depot cut its full-year sales view and Kohl’s, which caters to middle-income consumers, and BJ’s Wholesale cut their profit forecasts.

“The landscape hasn’t changed, and you can make the case that perhaps it has worsened,” Kohl’s Chief Executive Kevin Mansell told Reuters last week.

 Consumer spending accounts for two-thirds of U.S. economic activity and was a key driver in the country’s rebound from its deepest recession since the Great Depression.

But with the housing sector, crucial to U.S. household wealth, still in a rut, and volatile stock markets pinching even those at the upper end of the income scale, the drivers of spending appear dangerously absent.

Check Out Line: Frugality — Part Two?

Check out the apparent return of the frugalista.

Worries about stubbornly high U.S. unemployment and a tempermental economic recovery has shoppers reeling in spending on all but the essentials.

The 28 retailers tracked by Thomson Reuters reported an overall 2.9 percent rise in July sales at stores open at least one year, missing Wall Street forecasts of 3.1 percent. Seventeen of those retailers reported lower-than-expected sales, while nine — including Macy’s and Kohl’s — beat estimates.

“We are now in an environment where the dollars in consumers’ pockets are fewer, so the competition for those dollars has increased,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors.

U.S. consumer sentiment hit its lowest level in nine months in July on bleak prospects for jobs and income, according to Thomson Reuters/University of Michigan’s Surveys of Consumers.  On Thursday, the government reported that new U.S. claims for unemployment benefits unexpectedly rose in the latest week.

Also in the basket:

Barnes & Noble draws interest, but a tough sell

Check Out Line: Retailers need to step up the sucking up to consumers

Check out an American Express survey that shows that quality service matters more than ever, suggesting U.S. retailers may want to start sucking up to recession-wary consumers even more.      Sixty-one percent of Americans polled said quality customer service is more important in today’s tough economy and that they will spend an average of 9 percent more when they think a company is providing that. Important points when some analysts and investors worry the economy may be at risk of dipping back into recession.      In a disconnect, however, many businesses seem to be missing the message as 28 percent of those polled believe that companies are paying less attention to good service and 27 percent have not changed their attitudes, according to the American Express Global Customer Service Barometer (which sounds like a weather vane for customer service).   “Customers want and expect superior service,” AmEx executive vice president Jim Bush said in a statement. “Especially in this tight economic environment, consumers are focused on getting good value for their money. ”       “Many consumers say companies haven’t done enough to improve their approach to service in this economy, and yet it’s clear they’re willing to spend more with those that deliver excellent service – suggesting substantial growth opportunities for businesses that get customer service right,” he added.

Retailers might want to keep all that in mind given the fact that June same-store sales came in slightly below expectations and some analysts see the sector treading water.      The survey was conducted in the United States and 11 other countries.   In the United States, nine in 10 of those surveyed consider the level of service important when deciding to do business with a company, the survey said. However, only 24 percent believe companies value their business and will go the extra mile to keep it.      Contrary to “conventional wisdom,” the survey showed more are inclined to talk about a positive experience (75 percent) than complain about a negative one (59 percent).      And consumers said they are far more likely to give a company offering good service repeat business (81 percent) than they are to never do business with a company again after a poor experience (52 percent), according to the poll.      However, negative feedback online weighs more heavily as almost half of consumers gather others’ opinions about a company’s customer service reputation and they put greater credence in negative reviews (57 percent) versus positive ones (48 percent), according to AmEx.      “Because consumers can broadcast their views so widely online, each and every service interaction a company has with its customers becomes even more crucial,” Bush said. “Developing relationships with customers, listening to them, anticipating their needs, and resolving any issues quickly and courteously can help make the difference.”      In fact, 81 percent of Americans have decided never to do business with a company again because of poor customer service in the past, the poll said. Half of those surveyed said it takes two poor service experiences before they stop doing business with a company.      However, 86 percent will give a company a second chance after a bad experience if they have historically had great service before, according to the poll.      Woe to those who screw the experience up too, as 52 percent of consumers expect something in return after poor service beyond just resolving the problem. Seventy percent want an apology or some form of reimbursement.      So retailers, I expect red carpet treatment and a lot of sucking up this recession or you won’t get any of my limited funds!

Also in the basket:

Chrysler launches money-back guarantee

Hain Celestial to name two Icahn nominees to board

Study: Living Near Restaurants Makes You Fat (Wall Street Journal)

Industry Places Bets on back-to-School (WWD, subscription required)

Check Out Line: Summer job search advice for teens

Check out tough times for job-seeking teens.

Outplacement firm Challenger, Gray & Christmas said teens looking for a summer job will need to dedicate themselves full-time to the search, meaning getting a full-time job will be a full-time job. While many employers have filled summer positions, some may need more than expected while others delayed hiring until summer business conditions became clearer, Challenger CEO John Challenger said.

“The point is, you never know if or when a job opening is going to materialize, so you want to keep pushing,” he said in a statement.

Earlier this spring, the Challenger firm predicted an improved summer hiring outlook for teens compared with last year, when employment among 16- to 19-year-olds grew by less than 1.2 million jobs from May through July.

“It is unlikely that summer employment gains among teens will reach pre-recession levels, but we should definitely see increased hiring compared to 2008 and 2009, which experienced the weakest summer teen job growth since the 1950s,” Challenger said.

The Challenger firm said federal data showed that summer employment among teens last year grew by 1.16 million, slightly better than the 1.15 million added in 2008  between May and July, the fewest since 1954. In 1999, at the height of the dot.com job boom, summer employment for teens grew by almost 2.02 million.

Making matters worse for teens, they are competing with recent college graduates and job seekers who have two or more years of on-the-job experience and are willing to take almost any job to get a steady paycheck, Challenger said.

Coupon use up 27 pct last year-Inmar

U.S. consumers’ use of coupons soared 27 percent last year as they sought relief from a tough economy, according to a report released on Monday by Inmar, which tracks coupon use.

In 2009, consumers redeemed about $3.5 billion in coupons.  Shoppers used 3.3 billion coupons for everything from laundry detergent to cereal, about 700,000 more than in 2008. The internet drove much of the growth, as online coupon redemption spiked 360 percent.

Marketers, desperate to stoke sales, enabled that, issuing a record number of coupons, on and offline, putting out 367 billion coupons with an average face value of $1.44 each last year. But expiration periods were about 10 percent shorter in 2009, apparently in a bid not to make the deals too sweet.

(Reuters photo)

Family Dollar’s keeping the light on

Family Dollar has boosted its sales by stocking more of what shoppers want in a recession — low priced consumables, like food, household cleaners and beauty aids.

The retailer, which sells merchandise priced at $10 or below, is also encouraging shoppers to spend more in its stores by accepting an expanded number of payment options – like credit cards or food stamps.

It has now come up with a new way to ring up more sales — it is extending operating hours in “substantially” all of its stores.

The retailer, which reported better than expected quarterly results on Tuesday, told analysts on a conference call that it had tested expanded store hours in 15 percent of its stores last quarter. Based on the response from customers, it decided to roll out longer hours across the chain.

While it would not say by how much it is expanding store hours, Family Dollar said it expects the move will add to its bottom line very quickly.

(Photo: Reuters)

Check Out Line: Honey, OK if I buy this $300 gadget?

Check out how the recession has redefined what “major purchase” means to American consumers.

Three times the number of consumers said “yes” compared with “no” when asked if they need to discuss a purchase of $250 to $300 with their spouse or partner to determine if they can afford it, according to a survey by BeemerReport.com. It was the first time “yes” topped “no” at that price level.

For many years, the definition of such a purchase that required consultation has been an item costing $500 or more, according to the survey.      “This is the most significant change in the retail business over the last 15 years,” Britt Beemer, founder and CEO of America’s Research Group (ARG), said in a statement. “It’s the first time we’ve seen this kind of basic redefinition over many years of conducting consumer research.”      One thousand consumers were surveyed by telephone on Dec. 5-6 and the poll has an error factor of plus or minus 3.8 percent. 

American consumers are pulling back everywhere it seems as ARG said on Monday another survey showed an unusually low number of consumers plan to shop in the post-holiday week.      Also in the basket:

Kraft stands firm on Cadbury bid

Best Buy shares fall on tepid margin view

Tiger’s troubles seen swiping sports sponsorship market

Check Out Line: Upset tummies in the food sector?

Check out sluggish results in the U.S. food sector.

Fast food giant McDonald’s and Kroger, the largest U.S. grocery chain, saw shares decline 2.5 percent and 10 percent, respectively, after reporting weak results.

McDonald’s said same-store sales at its U.S. restaurants slipped 0.6 percent in November, marking the second straight monthly decline. Following Yum Brands’ recent weaker-than-expected sales, it was the latest sign that the fast-food sector that had performed well through most of the recession was weakening.

Rising unemployment has begun to take a noticeable bite out of sales, particularly at breakfast — where McDonald’s leads the industry.

Kroger reported a much lower-than-expected quarterly profit and cut its full-year forecast as it feels pressure from falling food prices and stepped up competition.

Not everything was dark at the dinner table.

Chicken producer Sanderson Farms posted a quarterly profit compared with a year-ago loss as it benefited from higher poultry prices and lower feed costs. To wash that news down, alcoholic beverage maker Brown-Forman posted a higher quarterly profit and raised its outlook for the current fiscal year.

Check Out Line: Clink, clink! Wine consumption to rise

Check out all the wine drinking going on.

Two-thirds (67 percent) of Americans surveyed said they partake in wine on holidays and special occasions while at home, while another 58 percent drink wine at home with dinner on an ordinary night, according to consumer trend tracker Mintel.

The wine market has grown 20 percent from 2004 through 2009 despite the recession, but at the peak of the slowdown in 2008 it declined 3.2 percent, Mintel said. With consumers slowly feeling better about the economy, the firm expects the wine market to increase by 2.1 percent this year.

“The future of the wine market looks bright, at least for moderately priced segments,” Mintel senior food and drink analyst Sarah Theodore said in a statement. “Value wines have helped consumers rethink their perceptions about wine.”

And how does wine stack up vs beer?

Mintel said so far this year nearly half (47 percent) of survey respondents say they drink beer compared to 35 percent who drink imported and domestic wines. Champagne and sparkling wines are next at 17 percent, followed by port, sherry and dessert wines at 7 percent.

Certainly wine was on the minds of analysts and executives on Hormel’s earnings conference call on Tuesday.