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Starbucks hopes to reel in costumers with cheaper brew

Faced with growing competition from cheaper rivals, Starbucks Corp is selling small cups of drip coffee for US$1 with free refills as part of a test in its hometown.

That's about US$0.50 less than the Seattle-based coffee retailer normally charges for a 2 deciliter cup of joe, though prices vary from store to store.

The suggested retail price for a slightly larger cup of premium roast at competitors such as McDonald's and Dunkin' Donuts is US$1.07 and US$1.39 respectively, the companies said on Wednesday.

Starbucks said in a statement e-mailed on Wednesday by spokeswoman Bridget Baker that the test "is not indicative of any new business strategy."

Starbucks would not say when the test began, how many stores are part of it, whether it's considering a promotion for any other brews or whether any new test markets are on the horizon.

"Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience," the statement said.

Starbucks chairman Howard Schultz, who recently returned as chief executive after the company fired CEO Jim Donald as part of efforts to revitalize the company, has acknowledged the faltering economy appears to have contributed to the decline.

But Schultz said he believes the company's main problem was it lost its focus on customers in recent years as it concentrated on growth. He has downplayed the threat from a growing cadre of competitors, saying the company has always faced tough competition.
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