Earlier this month, McDonald's began heavily promoting their new selection of cappuccinos, lattes and mochas. This, after Starbucks' sales are down about 6% for the 4th quarter (after it posted its first quarterly loss in the 3rd) and it has closed 600 stores and laid off 1000 employees in the last year. What has happened to not only make Starbucks fall from it's once insurmountable position as the premier coffee purveyor in America, but to also make McDonald's — home of the Big Mac — a viable alternative for premium coffee?

I think it comes back to something I talked about a week or so ago: line extension. If you expand your brand so much that it no longer represents what once made you unique, you're in trouble, mister.

There was a time when, if you walked into a Starbucks and didn't like coffee, you left thirsty. They were proudly snobbish about their love for coffee, and had no intention of pretending otherwise. Employees were required to taste every variety of coffee in the store so they were ready to describe any of them to a customer. They even had to be able to identify any one of their two dozen roasts by taste alone. Hardcore! (Full disclosure: I actually used to work at Starbucks back in the late 90s. Hence, the "insider info.")

But, as time went on, Starbucks realized there were people coming into their stores with their coffee-loving friends and leaving with just a pastry, or just a Tiazzi (once the only non-coffee beverage on the menu). What harm could it do to provide some coffee alternatives for them?

And so began the downfall of Starbucks. What began as a justifiable expansion into teas and fruity beverages has snowballed to include chocolates, music, small appliances, plush toys, Christmas ornaments, sandwiches and clothing — most of it conspicuously overpriced. With a product lineup like this, how could they honestly keep positioning themselves as the leading authority on coffee? Are they awesome at everything? Plus, if we can fairly assume their $12/pound coffee enjoys a similar markup to their $5/bar chocolate or $10/box biscotti, then they might just be selling the same coffee as everyone else (a skeptical, cost-conscious consumer might suspect).

Not only this, but the decision to expand their offerings has changed the culture of Starbucks. Used to be, if you went to a Starbucks, you expected a coffeeshop. Intelligent-looking people talking politics over mugs of coffee, with a copy of the Wall Street Journal sitting on the table between them. Obscure jazz and indie music playing on the speakers — and you felt really cool if you recognized a song that came on. You got anxious about asking for your order "right." After all, Starbucks knew coffee best, so you'd better order it correctly according to their system, right? Now, Starbucks no longer feels like a coffee shop. They're something on the menu for everyone. You're likely to hear the same song in the store that was just playing in your car as you drove there. They no longer brew three different coffees a day. They no longer brag about how often they throw out their coffee and keep brewing fresh stuff. They don't have to. No one cares. People aren't there for premium, fresh-roasted coffee. They want Frappuccinos.

And so, enter McDonald's. If a hodge-podge Everyman-pleasing joint like Starbucks can still sell a latte for $5 a cup, who can't?

In abandoning their position as being passionate about coffee above all else, in expanding their product line way beyond coffee, Starbucks changed consumers' expectations for what a coffee shop should feel like — even though they were the ones who originally defined it. They stopped selling us a unique experience and started selling us products. And they day they gave up on their unique experience, they gave up their position on the top of the coffee world.

I'm willing to bet that you visit Starbucks less than you used to. It's a statistical probability. So where are you getting your coffee instead? Has Starbucks convinced you that you can probably find the same quality at your local supermarket, or have you sought out a more authentic feeling coffee house experience? Either way, blame it on Starbucks.

Now, could Starbucks turn it around? Could they rally and reclaim their former position as the best premium coffee retailer? Perhaps, but they'd need a really good retail marketing team. Someone who can develop their brand while staying true to a very specific brand strategy. Say — that's what we do! In fact, we consider Meyer & Wallis to be somewhat of a turnaround specialist. We love helping struggling brands right a sinking ship. Do you feel like the Starbucks of your industry?

We can help.