Consumer confidence fell in March and remains "fairly fragile," according to Starbucks Chairman and CEO Howard Schultz. "Every business small and large has to be incredibly thoughtful and disciplined right now about trying to create relevancy and loyalty with the consumer, who is under tremendous pressure right now."
That said, Schultz isn't worried about competition from McDonald's and Dunkin' Donuts, and rejects the conventional wisdom that Starbucks coffee is an expensive indulgence.
"At Starbucks you can get the world's best brewed coffee for $1.50," he says. "McDonalds and Dunkin' Donuts are very good companies in a different business. The more money those companies spend creating awareness and trial around the category, the better for us."
More to the point, Schultz says the headlines from recent years about how McDonalds would "destroy" Starbucks simply proved wrong, as evinced by Starbucks' record-setting 2010.
Schultz says the company's recent success is less because of an improved economy and more because Starbucks transformed and improved its operations, as detailed in his new book, Onward: How Starbucks Fought for Its Life without Losing Its Soul.
Having reestablished Starbucks' core retail business, Schultz says the company is now "on precipice of transforming" into a consumer packaged good (CPG) company. Between grocery stores and its single-cup coffee business -- the company recently inked a deal with Green Mountain Coffee Roasters -- Schultz believes the CPG business "can rival the scale of the retail" stores, which generated about $8 billion in sales in fiscal 2010. "We are going to do things that have not been done before," he says.
Editors Note: Stay tuned for more of this interview!