Almost two weeks after Christmas, Starbucks Corp. (NASDAQ: SBUX) still has inventories of Christmas coffee. Like most retailers, it has taken the only logical way out. It has priced this inventory at 50% off to clear away products that have lost their popularity. The problem exists among many other industries. Educated guesses about demand can be costly.
Among the examples of the discounts, Starbucks Christmas Roast Blond is available online for $7.48 per pound, down from a retail price of $14.95. Holiday Blend Brewed Coffee Verismo Pods are $7.77 for 12, compared to $12.95 earlier. And VIA Ready Brew Christmas Blend is $7.17 for “12 counts,” down from $11.95. Finally, Via Latte Peppermint Mocha costs $4.17, down from $6.95, for a “5 count,” whatever a “count” is.
For some reason, Starbucks offers a number of products online — at discounts — that it tags as “New.” It is a mystery why the company does this, unless the “New” products have been an instant failure. If so, Starbucks has reason to rid itself of the inventory as well.
Most large discounts raise the issue of whether the company doing the discounting makes money on the discounted products. When inventory hits the point when it must be sold or wasted, the answer to the question is academic. Better to get some money than no money at all.
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The “End of the Year” sales at Starbucks show that even the most successful company can get caught with unwanted products. It is also a reminder that, in some businesses, inventory decisions are important, while in others the problem does not exist at all. Among retailers the problem is common. With companies like Apple Inc. (NASDAQ: AAPL), keeping up with demand for inventory is an ongoing problem (although troubled smartphone companies like Samsung are more like Starbucks than like Apple).
Poor inventory management is expensive. Even a company as well run as Starbucks has trouble gauging demand for products it thinks will sell well.
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