Buck Starbucks at Your Own Peril
Posted at 11:28 a.m. EDT on Thursday, Sept. 20
To believe in Starbucks (SBUX - Get Report) CEO Howard Schultz or not to believe in him? This morning, in what I regarded as one of the more intense interviews I can recall, Schultz introduced his new coffee machine, the Verismo, a latte/espresso machine.Schultz ducks nothing. Unlike the Trulia (TRLA) CEO we interviewed earlier, Schultz ducked nothing. First he said that despite the Verismo entry, there is no coffee war with Green Mountain Coffee Roasters (GMCR - Get Report), the maker of the single-serve Keurig machine. Second, he said that he is seeing a bit of a turn in Europe, that there's "a glimpse of optimism." Third, while in quiet period, Howard intimated that the slowdown in sales that he saw in this country at the end of the quarter, one akin to what Chipotle Mexican Grill (CMG) saw, might indeed be reversing. Now, I know there are plenty of skeptics about the "separate peace" between Green Mountain and Starbucks, with questions being raised by Herb Greenberg, my colleague at CNBC, about how long the peace can last. I think Herb makes great points. Isn't Green Mountain eventually the lunch that must be eaten by Starbucks, instead of a partner? I think we have a "frenemy" situation that will morph into an enemy when and if Starbucks chooses to. Green Mountain does not have the heft to declare its own war, and the pricing of the Verismo, at a discount to the latest high-end machine from Green Mountain, told me that the war might already be on, much to Green Mountain's chagrin. I don't want to own Green Mountain's stock. But I do want to own Starbucks, and let me explain why. Despite lots of instant catcalls of my positive view on Schultz on Twitter at @JimCramer, I know Schultz as the man who made you one fortune when he brought Starbucks public and then, after the business went wayward under the CEO who replaced him, returned and made you a second one. He's been Jobs-like in that way, and I know you don't make that analogy lightly.