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Starbucks suffers profits dip

20 November 2006

Starbucks has suffered a significant drop in profits over the past three months, causing shares in the retail brand to slump overnight.

The coffee chain made profits of $117.3m (£62.1m) over the past quarter, compared with a figure of $123.7m (£65.5m) in the same period last year.

Starbucks blamed the fall on new accounting measurBy es, with chief executive Jim Donald claiming that global demand remained "strong".

The company said that sales of mugs, books and DVDs were healthy, while sales at outlets which had been open for at least 12 months rose by 5%.

Starbucks has conducted aggressive marketing campaigns in new markets over the last year, especially in Asia and the Far East.

Earlier this month, the brand launched the latest flavour of its Discoveries range of ready-to-drink coffees, Qandi Caramel, in Taiwan. Advertising agency Saatchi & Saatchi-created print ads running in fashion magazines and Starbucks outlets to help gain a foothold in the market.

Starbucks launched the Discoveries range, which has been made available in supermarkets, last year.

However, the company is facing increasing competition, not only from emerging European coffee chains, but also in the newly-opened Far East frontier.

Hong Kong's Pacific Coffee has attempted to combat Starbucks' expansion by launching its own television channel, created by New Digital Noise. Canon, SmarTone and Nokia have already been signed up by advertisers.

By Oliver Milman

This article originally appeared on mad.co.uk, the website which delivers business insight to professionals in marketing, media, new media, advertising and design.To subscribe to mad.co.uk and receive full access to their database of articles on these industries, click here.

Source: mad.co.uk

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