Why Starbucks $1 Coffee Is Dangerous

Starbucks (NASDAQ: SBUX) announced that it will be testing $1 coffee in some of its Seattle stores. I have to admit, when I first read this, I got a little excited. However, this is a terrible idea for a company built on its reputation and brand as a premier coffee destination in the US. Starbucks accomplished the rare feat of maintaining the view of its stores as the 'elite' of the coffee shops, despite growing and opening stores like wildfire. By opening its doors to $1 coffee drinkers (McDonald's customers), it risks debasing its brand past the point of return. No one would suggest Porsche sell a $12,000 sedan or would they?

I'm not saying the answer is for the company to languish in its current state or leave its growth to Russia and its other international endeavors -- this will not satisfy investors.

No, what Starbucks needs to do is to either buy a separate chain (brand) catering to the Dunkin Donuts crowd or create its own. It is a proven leader in rolling out a brand, expanding it, and building a loyal customer base. Could they do it and take on D&D? I am not talking about a faux branding play, something like Borders and Border Express, but a truly independent brand and theme - the type that could successfully draw in $1 coffee customers.

Perhaps with $1 coffee, we can literally take the 'bucks' out of Starbucks and get Star* Coffee.