Target and Starbucks are both looking for a turnaround. They’re teaming up on an exclusive new drink
By Jordan Valinsky, CNN
New York (CNN) — Two of America’s most embattled retail chains are working together to drum up some excitement from customers this holiday season. They sure could use it.
Beginning Monday, a Frozen Peppermint Hot Chocolate drink will be available exclusively at Starbucks cafés inside Target stores. The vast majority of Target’s 2,000 locations include a Starbucks, but this marks the first-ever holiday drink collaboration between the two companies.
Retailers have been under immense pressure this year as inflation and tariffs drive consumer sentiment near record lows. A number of consumer brands said on their quarterly earnings calls with Wall Street analysts that low-income consumers in particular are growing increasingly cost-sensitive, and they’re cutting back on non-essentials.
That trend has hit Target and Starbucks particularly hard: Target, because it specializes in discretionary items, including impulse buys and home decor; and Starbucks, because it sells expensive drinks that consumers increasingly perceive to be lower value than a wide array of hipper coffee chains and cheaper alternatives.
Target is also contending with two consecutive quarters of slumping foot traffic, partly because of backlash over its reversal on diversity, equity and inclusion programs. Plus, Starbucks’ new CEO is one year into his turnaround plan but is closing stores, laying off employees and facing ongoing strikes from disgruntled workers.
Nevertheless, the two brands hope the fandom around Starbucks’ specialty drinks is strong enough to lure customers into Target stores during the all-important holiday shopping season.
The Frappuccino-based drink is positioned to be the “perfect companion for holiday shopping runs,” Target said in a statement.
The exclusive drink is “part of a strategy to inject a bit more novelty back into the store experience,” Neil Saunders, managing director and retail analyst at GlobalData, told CNN. “We also know that consumers love exclusive menu items, particularly in beverages, so this could nudge people into visiting Target just to try the drink.”
Prices for the drink start at $5.95 for a grande size. Members of Target’s paid loyalty program can buy it Monday before it’s available to the public on Tuesday.
The beverage is just one of the ways Target is trying to attract customers to stores in November and December: It’s also hosting in-store toy, makeup and tech demonstrations scattered throughout the two months. Employees are also reportedly being told to smile more at shoppers in an attempt to make the stores feel more welcoming.
Target (TGT) reports earnings Wednesday. The company announced last month that it laid off around 1,000 corporate employees. Sales have fallen for three consecutive quarters, and the stock has lost more than a third of its value this year.
Saunders doesn’t think an exclusive drink alone will “move the foot-traffic dial in a major way,” he said. But, he added, “every little bit helps,” – especially since Target needs it.
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