STARBUCKS SERVES MORNING COFFEE WITH THE NEWS: THREE-CITY PROMOTION KICKS OFF THIS WEEK FOR GROCERY STORE LINE

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Starbucks Coffee Co. is giving away almost $800,000 worth of its upscale coffee with morning newspapers in a three-city promotion launching Aug. 12.

The promotion is aimed at boosting awareness of Starbucks' line of packaged coffee, now being sold in grocery stores in 12 major markets.

It comes as the Seattle-based retailer -- which traditionally eschews big-budget media advertising -- showed some unexpected weakness last month in its core cafe business.

`GRASS-ROOTS MARKETING'

"Starbucks is about grass-roots marketing. This is just a continuation of that philosophy," said Rob Volpe, account supervisor for Kratz & Co., New York, the promotion agency handling the supermarket promotion. "We want people to be able to enjoy coffee with their morning paper."

The giveaway, to 400,000 targeted newspaper subscribers who match Starbucks' customer demographics, includes a 2.5-ounce bag of ground coffee in one of three blends and a coupon for 50 cents off a 2.5-ounce bag of ground coffee or a 12-ounce bag of whole or ground beans.

It launches in the Rocky Mountain News, Denver, and will follow in the Los Angeles Times Aug. 19 and the San Francisco Chronicle Aug. 22.

PAPER GAINS AN EDGE

Linda Sease, VP-marketing for the Rocky Mountain News, said the promotion stands to give the paper an edge against its archrival, The Denver Post, and a toehold should Starbucks increase newspaper advertising.

"We love to be able to bring a value like this to our subscribers," she said.

Both Ms. Sease and Mr. Volpe declined to discuss spending on the project, but Ms. Sease said revenue would be higher if Starbucks had bought a page newspaper ad because of the labor involved in the sampling project.

"With Starbucks, you have to become very creative like this to figure out ways to move them into your core product," she said.

The promo comes as Starbucks' July same-store sales were up a tepid 2% compared with a year ago. That's the softest increase since December 1996, and growth in revenue for the month slowed to 25%, to $101 million, from the 30% or higher monthly boost the company has seen during the past two years.

AUGUST'S IMPORTANCE

"August is going to be a very important month for them," said Mitchell Speiser, a restaurant analyst with Lehman Bros. He said the softness may be an anomaly. "This company has been very resilient to weakness and to skepticism. The question is can management keep on renewing this brand and building on its equity."

Although not national, Starbucks' supermarket coffee posted sales of $3 million in the 52 weeks ended June 21, according to Information Resources Inc., garnering 1.3% of sales in the $239 million supermarket whole-bean coffee category. The category leader is Eight O'Clock Coffee, owned by the Great Atlantic & Pacific Tea Co.

Starbucks, seeking to expand the reach of its brand, has been rolling it into additional markets in the West since Februrary.

The company's advertising agency is BBDO West, Los Angeles.

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