Why You Must Sell Starbucks (SBUX) Now

Apr 28, 2009, 11:12 am EDT | By Jamie Dlugosch, InvestorPlace Writer

Reason #5 to Sell SBUX:
Food Will Not Work

Starbucks’ management is convinced that food will be the source of growth. Dream on. What are they going to do — offer premium edibles
at premium prices in devotion to its mission?

Well I for one am not buying it. I’ll make my coffee at home and carry it in a thermos. If I spend my hard-earned discretionary
income on a food item, I want to go to a place that knows food. Putting it on the shelf does not mean quality follows. It may not
be all bad, but I would rather get my bagel at a bagel shop.

Case in point is their failed attempt at healthy smoothies in the food section. It was an attempt to perk up the summer season (when casual coffee drinking drops off) and go after the health market. They made a big deal about the smoothies being high fiber — and unfortunately they tasted like it because they used powdered fiber instead of the real thing from real fruit.

It was a case of foraying beyond what they knew best and failing miserably. And their value menu idea is even worse for the brand. A bit like Tiffany trying to get into Wal-Mart’s business. I mean, this is a company that built its business on charging three times more than necessary on coffee — it’s about premium and luxury, and now they’re selling food in the style of Mickey D’s? What’s next? Asking if you want fries with that?

I think you get my point. Food is not the growth driver that management is making it out to be.

For more stocks to sell, check out my Top
10 Stocks to Avoid in 2009.

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