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TMFBomb (91.41)

Yuppie Throwdown: Starbucks vs. Whole Foods

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August 10, 2008 – Comments (3) | RELATED TICKERS: MCD , SBUX , WFM

I just hatched an idea for a new market offering…the Yuppie Index Fund.  It would track all the companies that bring a twinkle to a Yuppie’s eye and a hit to his pocketbook.  Examples of companies in the index: Starbucks, Whole Foods, Coach, Target, Chipotle, Nordstrom, and Tiffany’s.

The idea was brilliant, if I do say so myself.  Who has more money than Yuppies?  And why wouldn’t they want a simple way to invest in the businesses they support?  What a perfect Target audience!   

I hit a snag, though.  My core holdings, Starbucks and Whole Foods, aren’t the darlings they used to be.  So how can I justify my 5% expense ratio (quality has its price)?  Hence, the marketing plan for this new index fund is in shambles!

As I wait for better times to launch this niche killer, I have time to ponder whether Starbucks or Whole Foods will come to my rescue first.  Let’s break it down using 5 semi-relevant factors:

Biggest Fall from Grace

Both Whole Foods and Starbucks were bullet-proof until recently.  Organic food was the new buzzword as McDonald’s un-supersized its menu.  Suddenly, the supermarket industry was hot.  As hot as a Grande Espresso Macchiato.  Starbucks battled McDonald’s to be THE on-every-corner company, culminating in the Starbucks within a Starbucks joke. 

With snickers coming from every corner…

Advantage: Starbucks

The Yuppie Factor

Quite simply, which has more Yuppie street cred?  Like an indie band trying to pay the mortgage, Starbucks sold out.  It sealed its fate when it opened a location within my local Safeway grocery store.  Now, if it had opened one within a Whole Foods… 

Advantage: Whole Foods  

Most Overpriced

Which gives you the least bang for your buck?  I’d normally pick on Starbucks because it’s just coffee, but with Starbucks trotting out lower-priced offerings to ease recessionary worries, this is a close one.  Ultimately, Whole Foods does offer a store full of organic offerings in an environment as nice as a Starbucks.  I keep coming back to it…it’s just coffee…   

Advantage: Starbucks

Least Supersized Competition

Starbucks has McDonald’s and Dunkin Donuts to out-beverage.  The McDonald’s marketing machine is powerful.  It convinced me to crave the paper-thin patties of a Big Mac the day after watching Super Size Me in the theater.  I still can’t square the distinctive smell of a McDonald’s restaurant with the Starbucks Experience, though. 

Meanwhile, Whole Foods has to compete with the likes of Trader Joe’s and normal supermarkets.  The competition from the normal supermarkets feels formidable to me.  If they can combine cheap Cheerios with some expanded organic offerings, many yuppies will forego the additional trip to Whole Foods.  

Advantage: Starbucks

Most Convincing Turnaround Story

There’s no more suspense.  Starbucks has already clinched.  Let me just finish the rout by saying that Howard Schultz riding in on a white chocolate mocha horse and righting the wrongs of yesteryear is a very compelling turnaround story… 

Advantage: Starbucks 

There you have it, 4-1 Starbucks.  But don’t hold your breath on the Yuppie Index Fund.

Full Disclosure:  I own shares of Whole Foods and Chipotle even though I don’t really like either of them.

 

3 Comments – Post Your Own

#1) On August 11, 2008 at 11:08 AM, colonelnelson (42.65) wrote:

An intriguing idea.  We have a tracker of "Big Vice," why not a tracker of "Big Yuppie"?

Future contests might see upscale retailers Nordstrom (JWN) take on Saks, Inc. (SKS) and Macy's (M); and perhaps you could stage a battle royale between fashion houses Polo Ralph Lauren (RL), Liz Claiborne (LIZ), Guess?, Inc. (GES), Perry Ellis (PERY) and Kenneth Cole (KCP).

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#2) On August 11, 2008 at 3:26 PM, TMFCHarris (99.56) wrote:

Is AAPL yuppie? I see an awful lot of iPhones at Whole Foods...

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#3) On August 13, 2008 at 5:19 PM, TMFBomb (91.41) wrote:

Yes, Polo was a HUGE omission on my part...how could I miss it?

Apple may be a Yuppie staple, too.  But it's also big in hipster circles.  Perhaps that will be one of the first discussion points for the Yuppie Index Fund's board of directors!

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