Starbucks - The coffee giant under attack?

Since founding an entire industry around brewed coffee 15 years ago, Starbucks has enjoyed roaring success - and the success continues. The third quarter results in 2007 showed that the revenues increased 20% to US$2.4 billion and net income increased 9% to US$158.3 million.
But as always, such success attracts competitors. Starbucks has no dearth of competitors. McDonald's, Dunkin' Donuts and Burger King are some of the fiercest of competitors of Starbucks in the United States. So serious are these other players that a 2007 Consumer Reports' head to head comparison of coffee from all these four brands declared McDonald's the winner. McDonald's, a new entrant into the coffee sector beat Starbucks. Such reports beg the question: Is Starbucks under attack?
Competition is the reality of business. Successful companies and their brands have always attracted competition. Well managed companies have always thwarted such competition and have succeeded. But in this case, it is not just competition. An underlying change in Starbucks' main customer base is altering the strategic landscape for the coffee giant.
Affluent women and professionals earning an average US$92,000 a year were the core customer base of Starbucks. These customers bought the Starbucks' idea of coffee with a context rather than just a product. As such, they were not too price sensitive. But over the years, Starbucks' quest for growth both within the United States and also globally has acquired a new set of customers. Compared to the original group, this new generation of customers is less educated, less affluent and more price sensitive. To complicate the matter further, many of the aforementioned competitors have decided to compete on price. Given the combination of factors, Starbucks seems to be under attack.
What can Starbucks do to retain the leadership position? For starters, Starbucks will have to strengthen the brand, its brand equity and its many touch points. In many affluent cities in the US such as New York City and Boston, Starbucks outlets get too crowded and customers just walk out to a competitors' café. That has to be corrected right away. More importantly, Starbucks should focus the attention once again on the brand experience. Starbucks is not just about a cup of coffee, but is about the ambience, a third alternative between home and work. Such a focus on the overall brand experience will divert the customers from a singular focus on price.
Finally, Starbucks should launch new products (new combinations of coffee) to cater to its changing base of customers. These actions should allow Starbucks to continue to have a strong hold on the coffee market, refresh its brand and gain new territory for its brand equity.