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1.0 Executive Summary 2.0 Situation Analysis
Starbucks Coffee has been established as one of the most recognizable and successful coffee brands in the world. The coffee market is drastically changing on a daily basis and this section of the marketing plan is designed to show where Starbucks is in this current market. 2.1 Starbucks’ Vision and Mission Statement Mission Statement: “The mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” 1) Provide a great work environment and treat each other with respect and dignity. 2) Embrace diversity as an essential component in the way we do business. 3) Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4) Develop enthusiastically satisfied customers all of the time 5) Contribute positively to our communities and our environment 6) Recognize that profitability is essential to our future success. Vision: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Objectives: • Our Coffee- It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done. Starbucks Coffee Marketing Plan 2010 1

_______________________________________________________________________ _ • Our Partners- We’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard. • Our Customers- When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection. • Our Stores- When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity. • Our Neighborhood- Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers, and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead. • Our Shareholders- We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive.

2.1.1 Review of Mission Statement and Vision Entry-level baristas at Starbucks get a full 24 hours training, which better prepares them to stay calm and courteous in high-traffic situations. To keep improving service, managers’ incentives are tied to the ratings they receive from disguised Starbucks “quality assurance” agents, who visit at least three times a quarter. In a 2009 Study by Business Weekly Starbucks ranked tenth in customer service, top in both the food and coffee industries. The study was based upon aggregated scores for each individual brand across the complete studies in J.D. Power's 2008 database. To supplement the brands in J.D. Power's database, Starbucks Coffee Marketing Plan 2010 2

_______________________________________________________________________ _ 3,000 BusinessWeek readers were surveyed and asked to nominate three companies they felt were best and three they felt were worst at providing customer service. More than 1,000 readers responded with 2,423 "votes" and 1,850 "complaints." Finally, Both sets of date were combined, the people and process scores to establish the "Service Score.” Starbucks received a B+ in both the peoples grade and the process grade and 62% of respondents said they would definitely recommend the brand to a friend. Judging by this information, Starbucks is meeting its customer service goals set forth in the mission statement and the company vision. A highly emphasized goal of Starbucks is to maintain good relations with employees and make it a pleasant place to work. Since Starbucks began with a single store in 1971, its overriding philosophy has been this: "Leave no one behind." With that in mind, new employees get 24 hours of in-store training, steeping them in information about coffee and how to meet, greet and serve customers. Full health-care benefits (medical, dental, vision and alternative services) are offered to all employees, including part-timers who work at least 240 hours per calendar quarter. As a result of such measures, Starbucks employees have an 82 percent job-satisfaction rate, according to a Hewitt Associates Starbucks Partner View Survey. This compares to a 50 percent satisfaction rate for all employers and 74 percent for Hewitt’s "Best Place to Work" employers. The company also encourages community involvement by donating $10 for each hour that an employee volunteers to a nonprofit or charitable organization. Profits from sales of the company’s logo-emblazoned "coffee gear" are channeled into clubs and services for employees, which include everything from running groups and bowling leagues to quilting and book clubs. Employees can donate an amount of their choice to a voluntary "CUP (Caring Unites Partners) fund," which is used to provide grants to fellow employees who fall on hard times. And every year, as part of its Earthwatch program, the company selects a few employees to travel to coffee-producing parts of the world, where they learn firsthand about environmental and conservation issues from the growers. Last year two were selected; this year five are going. In review, Starbucks is meeting all goals set forth in both the vision and mission statement, however, this brings forth the question of whether or not that translates into success/profit. Starbucks Coffee Marketing Plan 2010 3

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2.2 Major changes to the external environment of the coffee industry Potential changes in the market include, new market entrants, changes in the price of coffee, changes in buying habits of both the company and consumers, and whether or not the market has become saturated through continuous expansion. 2.2.1 New Market Entrants and Market Share Analysis It is clear that the coffee market is rapidly growing and changing due to new market entrants and continuous changes in consumer habits. Fierce competition and exponential growth in the coffee segment keeps operators on their toes, but recent years appear to have started a vibrant new chapter in coffee’s long history. Quick-service operators are taking advantage of the growing popularity of coffee-based beverages by launching new products. Traditionally, Starbucks and Dunkin’ Donuts have vied for market supremacy in the category, however, with the launch of McDonald’s McCafe specialty coffee line, as well as surprising entries into the category from Coldstone Creamery, Emerald City Smoothies and 7-Eleven, the race for market share is heating up. "We stayed away from the coffee thing for years, trying to stay on brand," stated Al Schriber, a partner at Emerald City Smoothies, which added a line of hot nutrient-enriched coffees called "JavaFit" in February. In testing the coffees, the company found that consumers were interested in a hot coffee that fit with the brand's emphasis on healthful living, reported Nation's Restaurant News (June 1). Whether a broader line of specialty coffee is in the company's future remains to be seen. Cold Stone's recently launched line of Sweet Cream Lattes is part of a plan designed to grow the chain's average unit volume sales from $360,000 to $500,000. "We were noticing that if a group of four came into a Cold Stone, three might get ice cream or a shake, but the fourth would go down the street for an ice-blended coffee," stated president Dan Beem. Mr. Beem also stated that the coffee drinks are expected to increase the chain's overall traffic. Since 2002, the number of coffee transactions in foodservice outlets increased 24%, according to the NPD GROUP. The quick-service segment is the driving force being that trend. More recent NPD surveys, however, indicate that foodservice operators traditionally known for hamburger and donut offerings may Starbucks Coffee Marketing Plan 2010 4

_______________________________________________________________________ _ be gaining market share from gourmet coffeehouse chains. Looking at data from the period January through March 2009, compared with the same period last year, the total number of coffee servings within the quick-service segment was estimated to total 1.4 billion. Of that, 653 million servings were reported as specialty coffees. The number of specialty coffee transactions from hamburger restaurants was up 61%, accounting for 10.9% of specialty coffee servings within quick service. For the comparable period, specialty coffee transactions at doughnut outlets were up 26%, accounting for 18.7% of servings. Meanwhile, the number of specialty coffee servings at coffeehouse concepts declined 10% for the same period to 49.2% of servings.

Recent customer satisfaction surveys indicate that the perception of quality and value for specialty coffees from hamburger restaurants is improving as more chains have launched specialty coffee lines. Last year, Burger King launched its Mocha BK Joe, a cold coffee drink, while Wendy’s announced in May that it plans to launch coffee-flavored smoothies. Other quick-serve restaurants such as Subway and Sonic have launched coffee-based drinks, as well. In hopes of gaining additional market share, convenience store operators such as 7-Eleven are continuing to roll out ice-coffee and other specialty coffee drinks. Iced-coffee has gotten so popular over the last year; it has passed iced tea in sales as a breakfast drink, according to the NPD Group. The number of morning meals that included iced coffee more than doubled over the past five years from 2% in 2004to 4.6% through February 2009, reported USA Today (June 15). Women and teenage girls are the most likely consumers to purchase iced coffee drinks. Teen girls are 84% more likely to purchase iced coffee than the average American, while women age 18 to 34 are 68% more likely. "This is clearly a female drink," according to Harry Balzer of NPD. Last year, coffee passed soft drinks to become America’s number-two beverage after water, according to the annual National Coffee Drinking Trends study conducted for the National Coffee Association. Experts say there’s still room for growth. “McDonald’s getting into it is the writing on the wall,” Inman says. “This trend hasn’t even started yet. It’s where fast food was in the 1960s.” The rise of specialty coffee to widespread popularity mimics that of the upgrading of many other American consumables, including wine, bread, cheese Starbucks Coffee Marketing Plan 2010 5

_______________________________________________________________________ _ or chocolate. In each case, once consumers tasted better quality, for many there was no turning back. Another factor boosting coffee’s popularity is that it’s an affordable luxury. The best gourmet coffee sold in the U.S. today costs perhaps 32 cents a homebrewed cup, says Ric Rhinehart, executive director of the Specialty Coffee Association of America, or SCAA. In hard times, consumers may buy cheaper wine, but coffee is relatively recession-proof. “You can drink specialty coffee anytime and not feel bad about it,” Rhinehart says. Chicago-based market research firm Technomic reports that consumption of hot specialty coffee has grown 14 percent in each of the past three years. Some 82 percent of American adults are coffee drinkers, up from 79 percent in 2004. The SCAA reports the specialty market topped $12 billion at the end of 2008. Additionally, the number of coffee shops in the United States has grown from 1,640 in 1991 to nearly 24,000 at the end of 2008. The bulk of those, about 11,000, belong to the Seattle-based company that coffee-watchers agree almost single-handedly brought specialty coffee to the masses. “Starbucks capitalized on the trend to better coffee by offering a unique new presentation of that coffee,” Rhinehart says. “Americans weren’t used to espresso-type drinks. We were starting to take more meals and beverages out of the home. Starbucks was in that perfect spot of having a unique product, they offered great value, there was a new consumer pattern…and they were cognizant of their place in the social fabric, as a third place for people to gather.”

2.2.2 Coffee production and Pricing Trends As opposed to futures prices, now of US 1.22 (Jan 09), average retail prices during the mid-2000 decade (2005) averaged about US $3.20 per pound. The United States consumes one-fifth of global coffee production - it is the world’s largest consumer of coffee. The U.S. Department of Agriculture's December 2006 estimate for 200607 was that world coffee production had increased to 128.6 million bags, up 4.9 million bags from its June 2006 estimate. Production in 2008-09 was estimated at 13% above the 2006-07 period. Coffee production in 2008 is now estimated at approximately 120 million bags. World coffee exports totaled 7.75 million bags in July 2008, an increase of Starbucks Coffee Marketing Plan 2010 6

_______________________________________________________________________ _ 1% compared with the volume of 7.67 million bags recorded in July last year. Total exports in the first 10 months of coffee year 2008-09 (Oct-06 to Jul-07) were up by 13.3% from the same period last year, totaling 81.52 million bags compared to 71.94 million bags in the prior year. Total annual production of coffee was estimated at approximately 6.8 million tons in 2007 and was expected to grow to about 7.5 million tons during 2010. Coffee is normally shipped in bags weighing 60 kilos or about 130 pounds. The top 5 global producing countries of coffee in 2009 are as follows: Country Brazil Vietnam Columbia Indonesia Ethiopia Estimated Production (millions of bags) 35 18 12 6 5

2.2.3 Changes in buying habits of both Starucks and Consumers Starbucks initiated C.A.F.E. (Coffee and Farmer Equity) Practices to evaluate, recognize, and reward producers of high-quality sustainably grown coffee. C.A.F.E. Practices is a green coffee sourcing guideline developed in Starbucks Coffee Marketing Plan 2010 7

_______________________________________________________________________ _ collaboration with Scientific Certification Systems (SCS), a third-party evaluation and certification firm. C.A.F.E. Practices seeks to ensure that Starbucks’ sources sustainably grown and processed coffee by evaluating the economic, social and environmental aspects of coffee production against a defined set of criteria, as detailed in the C.A.F.E. Practices Guidelines. Starbucks defines sustainability as an economically viable model that addresses the social and environmental needs of all the participants in the supply chain from farmer to consumer. Starbucks bought 367 million pounds of coffee in fiscal 2009. Eighty-one percent of that – 299 million pounds worth – from C.A.F.E. Practices approved suppliers. Starbucks paid an average of $1.47 per pound for green coffee in fiscal 2009. Fair Trade Certified coffee empowers small-scale farmers organized in cooperatives to invest in their farms and communities, protect the environment, and develop the business skills necessary to compete in the global marketplace. Starbucks began purchasing Fair Trade Certified coffee in 2000, helping grow the market for Fair Trade Certified coffee in the U.S. And in 2009, increased purchases to 40 million pounds – making Starbucks the largest purchaser of Fair Trade Certified coffee in the world. Coffee consumption in the United States has increased steadily since the 1960’s. Through the recent recession, coffee was essentially recession-proof. Daily consumption of coffee beverages among consumers remained unchanged as compared to 2009, with 56% of adults partaking. 84% of consumers have not changed their consumption habits despite the economic environment.

2.2.4 Has Starbucks saturated the Market? Today, consumers enjoy having a coffee place that's right around the corner and worth the price. Unfortunately, it is common belief that, Starbucks took the demand of the consumer a step too far, by over saturating the market with stores. One of the best examples of over saturation can be found in a strip mall in Colorado. Exactly three Starbucks locations can be found; no more than 750 ft away from one another, and two of the three stores are only 200 ft away from Starbucks Coffee Marketing Plan 2010 8

_______________________________________________________________________ _ each other. By flooding the market with spots for coffee, Starbucks has been wasting growth potential, and opting for current market optimization. Unfortunately, the optimization is becoming wasteful and hurting the brand image. In a number of press releases, Howard Schultz, Chairman and Founder of Starbucks, has mentioned the loss of original roots associated with becoming a chain store. The focus on coffee shop ambiance was the root to Starbucks' success, but somewhere along the line the company lost the entrepreneurial spirit. It is not just the fact that Starbucks is now on every block that has hurt the company; it is the loss of the entrepreneurial spirit that has affected the public opinion. At one point in their history, Starbucks was seen as a coffee shop dedicated to customer satisfaction. After rapid expansion and growth Starbucks is now seen as a corporate giant concerned with one thing; profit. This problem was quickly addressed with the return of Howard Shultz, and the effects are starting to be noticed by the change in public opinion. 2.3 Consumer Profile and Target Market Starbucks strategy has been to position itself as an upscale brand and differentiate its offerings as being not just coffee products, but rather a rich "experience". This Starbucks "experience" has been the company's selling point. The company initially targeted young college students, social classes, and neighborhoods that would be most receptive to the idea of buying $3 a cup of coffee and spending time with friends at their stores. With rapid growth and expansion, Starbucks target market expanded rapidly to include every individual of every age. The company targeted small towns, rural communities, ethnic neighborhoods, highway rest stops, and even markets already saturated with various coffee shops ("Starbucks Corp: Long-Term Growth Goal Raised To 30,000 Stores World-Wide"). What began as a niche target market eventually came to include consumers from all facets of life. Starbucks is often considered an affordable luxury, enabling the Company to broaden its demographic reach in recent years. Five years ago, the typical Starbucks customer was older, had an advanced degree and more disposable income. Today's Starbucks customer has expanded to include a younger (13 percent 18-24 years old), more diverse (37 percent multi-cultural), and slightly lower average income ($55,000 per year).

Starbucks Coffee Marketing Plan 2010 9

_______________________________________________________________________ _ "We are reaching more and more new customers by introducing innovative food and beverage products with broad appeal and by taking our stores into increasingly diverse markets," said Jim Alling, president, Starbucks Coffee U.S. "By connecting with customers, serving the highest quality coffee and striving to consistently deliver legendary service, our store partners are at the core of the Starbucks Experience." 2.3.1 Specific Consumer Profile

Starbucks target consumer: The target consumer is age 25 to 35 and is a college graduate. The consumer is single and devoted to their career, which is most likely in a corporate business setting. They work from nine to five, five days a week and spend time at home on their work. The consumer is middle class and is more concerned with image and status rather than price. The consumer seeks quality and Starbucks Coffee Marketing Plan 2010 10

_______________________________________________________________________ _ convenience. They regard relationships very important and enjoy small talk with family and friends in a relaxed social setting. 2.4 Revenue Sources Starbucks Corporation generates revenue both from its company-operated retail stores and from specialty operations. From 2004 to 2008, Starbucks grew its revenue by 14.5% CAGR, culminating in 10.4 billion in sales in 2008. Starbucks generated double-digit percentage earnings growth since it's inception. Through its company-operated retail coffee houses, Starbucks sells high-quality whole bean coffee, freshly brewed coffee, premium teas, a variety of cold blended beverages, various food/pastry items, and coffee/beverage related equipment and accessories, as well as a line of CDs. In 2008, Starbucks operated 7,238 retail stores in North America and 1,979 stores internationally. Its retail-operated stores generated 84% of its total revenue. Third Place Experience Starbucks’ success is due in large part to the trendsetting triumph of its coffeehouses as an informal and convenient "third place" outside of home and work, ideal both for informal meetings and a quiet moment away from the hubbub of daily life. Wi-fi Internet access in all stores also makes it a place where customers can work. Book and music events also take place at Starbucks, in accordance with the company's goal of making each location a community center of sorts to garner the loyalty of local customers. Specialty Operations Starbucks’ specialty operations segment tries to develop the company's brand through third parties outside the traditional coffeehouse. Specialty retail operations accounted for 16% of Starbucks’ total revenue in 2008. • Licensed Stores: Located in places like airports and supermarkets, licensed stores generate licensing fees and royalties as well as revenue from Starbucks’ coffee, tea, and CDs resold in the licensed locations. In 2008, Starbucks had 4,329 licensed stores in North America and 3,134 abroad, accounting for 48% of Specialty Ops revenue and 8% of total revenue. ▪ Packaged Tea and Coffee: Starbucks sells its packaged coffee and tea as a retail product at various food stores. This accounted for 21% of Starbucks Coffee Marketing Plan 2010 11

_______________________________________________________________________ _ company's specialty revenue and 3% of total revenue. ▪ Branded Products: Starbucks has partnerships with Pepsi and Dreyer's to develop and distribute ready-to-drink beverages and ice creams. This accounted for 4% of company's specialty revenue and 1% of total revenue. ▪ Foodservices Operations: Starbucks sells its coffee to foodservice operators like restaurants, offices, hotels, and cafes (including the Barnes and Noble Cafes) that operate under different licensing contracts. This segment accounts for 25% of company's specialty revenue and 4% of total revenue. Other: Starbucks also has entertainment business relationships with Hear Music, Satellite XM Radio (24-hour Starbucks Hear Music digital music channel), and provides wireless broadband Internet service in company-operated retail stores in U.S and Canada. Starbucks also has a credit card agreement with Chase. This division accounts for 2% of specialty revenue and less than 1% of total revenue.

2.5 New Product Release In March 2009, Starbucks introduced its new-technology instant coffee packets called VIA "Ready Brew", unveiling it in New York City with subsequent testing of the product also in Seattle, Chicago and London. The VIA flavors Italian Roast and Colombia were then rolled out in October 2009, across the U.S. and Canada with Starbucks stores promoting the product with a blind 'taste Starbucks Coffee Marketing Plan 2010 12

_______________________________________________________________________ _ challenge' of the instant versus fresh roast. The consumer test showed that many people could not tell the difference, often preferring the instant over the fresh brewed. Some analysts worry that by introducing instant coffee Starbucks will devalue its own brand. The successful launch was soon followed by a Decaf Italian Roast, and later with a sweetened version called "iced" (even though all VIA varieties can be made directly as an iced drink). In October 2010, Starbucks expanded the VIA selection by introducing four new presweetened flavored versions: Vanilla, Caramel, Cinnamon Spice and Mocha.

3.0 Competitive Analysis
“The coffee bean provides a livelihood for over 20 million people worldwide with an estimated worldwide retail sales expected to grow by a compounded rate of 6.9% from 2005-2010, reaching $48.2 billion by 2010, according to the U.S. Market for Coffee and Ready-To-Drink Coffee.” Starbucks' marketing strategy involved positioning its Starbucks outlets as a place where consumers can spend time other than their home or work. This was done by making each of its stores as comfortable and relaxing as possible. They want to be known as the “third place”, home, work, and then you have Starbucks. The coffee giant achieved these using creature comforts, such as comfortable furniture and relaxing music. Over the past several years, Starbucks also included offerings such as wireless internet, handicapped access, complimentary books, and common areas for collaboration. While Starbucks stores are positioned as locations where customers can spend time in a comfortable setting, their product lines are positioned at the higher end in regards to prices and quality. 3.1 Starbucks Competitors Starbucks competitors in the coffee beverage sales include 7-Eleven, Dunkin Donuts, BIGGBY Coffee, Caribou Coffee, McDonald's, Panera Bread, and Einstein Bagels. Competitors such as McDonald's and Dunkin Donuts not only have extensive menus, but also the financial resources and position to leverage their strengths to threaten Starbucks profitability. 3.1.1 Dunkin’ Donuts Dunkin' Donuts is an international donut and coffee retailer founded in 1950 in Quincy, Massachusetts by William Rosenberg. It is now headquartered Starbucks Coffee Marketing Plan 2010 13

_______________________________________________________________________ _ in Canton, Massachusetts. Despite originally focusing on donuts and other baked goods, over half of Dunkin' Donuts business today is in coffee, making it more of a competitor to Starbucks as opposed to traditional competitors Krispy Kreme and Tim Hortons. 3.1.2 Caribou Coffee Caribou Coffee is a specialty coffee and espresso retailer, the second largest in the United States after Starbucks. Caribou sells gourmet coffees, teas, and bakery goods in 415 company-owned coffeehouses in 16 states and the District of Columbia, as well as 80 franchise locations worldwide. Caribou Coffee’s revenue for year 2009 was 282.6 million. 3.1.3 McDonalds McDonald’s executives came out swinging when they announced their assault on the comfy world of coffee shops. After the success of its upgraded drip coffee — which even managed to snag a thumbs-up from testers at Consumer Reports earlier this year — the fast food chain known for super-size meals is gearing up for a massive expansion into the world of lattes. “We want to move from beverages as an accompaniment to being a beverage destination,” Don Thompson, president of McDonald’s USA, said in a meeting with analysts Tuesday. “Our speed, our convenience, the value that we can afford to customers without quality comprise will make us a formidable player.” Restaurants will offer lattes, mochas, cappuccinos and espressos with a choice of different flavorings and milk. Industry watchers say the drinks cost about 50 cents less than at Starbucks. McDonalds is a semi-recent competitor for Starbucks that has evolved over the past few years. A 12-ounce cup of brew starts at $1.40 at Starbucks, a penny more than the average McDonald's brew price. A small McDonald's latte costs $1.99 compared with $2.45 to $3.15 at Starbucks. 3.1.4 Others In terms of perception, 7-Eleven and Dunkin Donuts provide coffee in a "no-nonsense fashion", which attracts customers who are extremely price sensitive. Caribou Coffee's environment is similar to that of Starbucks because of furniture, free Internet, and cozy surroundings, but their lack of market expansion has prohibited them from gaining the notoriety Starbucks has achieved. Finally, BIGGBY Coffee is in the middle ground where the likes of Dunkin Donuts and Starbucks Coffee Marketing Plan 2010 14

_______________________________________________________________________ _ Caribou Coffee separate themselves. Small independently owned coffee shops also compete with individual locations of Starbucks, however, they do not own enough of the market share to have a major effect on the Starbucks Brand. 3.2 Competitive Advertising “We get a lot of questions on the competition and that everyone seems to be picking on Starbucks through their advertising as they try to reposition Starbucks as expensive or snobby, and, boy, when is Starbucks going to start advertising and join in that coffee conversation?" Starbucks Chief Marketing Officer Terry Davenport told investors in New York. "We're not going to get into that conversation. We're not going to get sucked into the, 'My coffee is better than your coffee,' price point type of coffee conversation. We're going to play at a much higher level." Starbucks is relatively new to the advertising game after two decades of building its brand on word of mouth. However, armed with newly hired advertising agency BBDO New York, Starbucks placed two commercials recently. One, which ran during the "Saturday Night Live" show before Election Day, advertised that Starbucks would give out free coffee Nov. 4. The second ran on the heavily traveled Wednesday before Thanksgiving, on the Weather Channel and CNN, to let customers know that Starbucks would be donating portions of coffee sales to help African AIDS victims. The coffee giant also is turning to cheaper modes of advertising via YouTube, Facebook and Twitter. 3.3 Features, Advantages and Benefits of Starbucks Starbucks has several features that help them continue to succeed in their coffee segment. They have many specialty coffee selections, flavors, and variety. For example, ice coffees, frappuccinos, smoothies, tea, and holiday specialty drinks in different seasons. Advantages of Starbucks include the atmosphere that going into a Starbucks portrays. Many people go to Starbucks for the surroundings and to “hang out”, not just to enjoy their coffee. The employees or “baristas” have been trained not only about the Starbucks Corporation, but about the coffee market as a whole. Starbucks continues to higher people that enjoy there type of surroundings and love what they do. It is an advantage to see a happy employee who enjoys their job; it makes the consumer’s experience that more enjoyable. Benefits of Starbucks are the free Wi-Fi service so the business professionals can come in and work on a lunch break or in the evenings. This is Starbucks Coffee Marketing Plan 2010 15

_______________________________________________________________________ _ also beneficial for college students to study during finals week. Starbucks is all about the experience and being able to provide their consumers a high quality coffee. I believe that is also a benefit; they only provide the best coffee, which is why they charge a higher price. 3.4 Perceptual Map of Starbucks and its Competitors (Coffee Shop Market) The graph below illustrates customer perceptions regarding various brands:

3.5 Marketing Mix In order to maximize their brand awareness and establish themselves as the most recognized and respected brand in the world and within their target market, Starbucks implemented a well-integrated marketing program that would utilize a marketing mix (product, price, place, and promotion) that would satisfy the needs and wants of its target market. The four elements of marketing mix that Starbucks utilized are as follows. 3.5.1 Product Starbucks product-mix expanded from 30 varieties of whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbuck paraphernalia. Its product offerings have also expanded beyond pastries and coffee to oatmeal, smoothies, and wraps to keep up with the competition and satisfy more customer needs. Starbucks Coffee Marketing Plan 2010 16

_______________________________________________________________________ _ The company has also been constantly introducing new products, such as "Instant via Ready" and "Full Leaf Tazo Tea Lattes" and "Tazo Tea Infusions". The Instant via Ready is an instant coffee that the company claims is indistinguishable from its regular brewed coffee (Jargon). Full Leaf Tazo Tea Lattes and Tazo Tea Infusions are the company's new tea offerings through which it hopes to attract tea drinkers. The company also offers Starbucks coffee and cappuccino makers for consumers who wish to replace their existing home coffee makers. 3.5.2 Price Starbucks products are priced higher due to perceived upscale image attached to its brand. The company also began to offer $1 bottomless 8 oz. cup of coffee, with unlimited refills that cost approximately 50 cents less than any other Starbucks products. The company is also implementing "value strategies" that would emphasize more on inexpensive coffee products rather being perceived as unaffordable to price-skittish consumers. For example, the company introduced $3.95 "breakfast pairings," including popular breakfast items paired with a coffee, and highlights $2 brewed coffees instead of the more expensive specialty drinks. 3.5.3 Place Starbucks can be found in any neighborhood where there is a perceived high traffic for its stores. Starbucks outlets can also be found in-store of various large chains including Barnes & Noble and Target. Their locations are extremely conducive for individuals that are on the go and for those who enjoy reading or listening to music. Starbucks has also been recently testing "stealth outlets", where the store is named after the street it is located on. The new stores attempt to "localize" Starbucks stores with no Starbucks logo on any of the products being offered there, and instead have the specific street address as the brand name. 3.5.4 Promotion Starbucks has implemented numerous promotions to reach its target markets. Promotions are listed as follows: • One of the promotions that Starbucks has used is the Starbucks Card. Starbucks Card is an initiative that offers customers the opportunity to promote Starbucks Coffee Marketing Plan 2010 17

_______________________________________________________________________ _ company's products through a referral system. When a customer purchases a gift card, it not only shows brand loyalty, but it also provides the company with free advertising, and brings in new customers. Starbucks also provides a card for corporate sales, which are used for extrinsic rewards to show employee appreciation for a job well done, or a gift to client or a vendor. • Coffee services delivered to offices without coffee size restrictions. • Appealing to a diverse customer base by offering international teas and coffees to accommodate those customers that want a taste from home or for locals that enjoy tea. • Using philanthropy as a means for promotion - Starbucks contributes to several non-profit organizations as a way to improve brand image and awareness in local communities. 3.6 Establishing Competitive Advantage This section will explain in detail what differentiates Starbucks from its competitors. The evaluation will consist of analyzing the marketing concepts, principles, and strategic tools that Starbucks utilizes in differentiating themselves. Starbucks is a company that has differentiated itself by convincing consumers that it is selling more than a cup of coffee. Further, their brand image is associated with a sense of community activism. Starbucks feels that if they can identify with customer's societal endeavors, they would be differentiating themselves on these principles. A company's ability to adapt to changing markets wants and needs is a key to its survival. Starbucks is a great example of a company that has done a tremendous job in this area. The company managed to maintain the wants and needs of the customers at the top of its list, and through a differentiated strategy earned incredible revenues from a readily available commodity, coffee. Starbucks is selling an easily accessible tangible product, but has evolved into a company that is doing much more than that. There is also a philosophy and an image Starbucks is attempting to promote through its products. The company is heavily involved in public relations, promoting an image of a responsible company that has the resources to make good on its promises. Starbucks promotes ethical sourcing, environmental stewardship, and community involvement and goes as far grading itself on the company's website ("FY 2008 Global Responsibility Report"). The company boasts of being ethically committed Starbucks Coffee Marketing Plan 2010 18

_______________________________________________________________________ _ to all stakeholders in the business - from the coffee bean farmers to the issues of climate change. Starbucks maintains that being ethical is a top priority of the organization. Starbucks is also very much involved in community activities. The company sent 2,000 volunteers to Louisiana to help locals get their lives back on track after Hurricane Katrina, and in several communities laid sod, and planted over 1000 trees ("FY 2008 Global Responsibility Report"). As one volunteer said, "Starbucks is all about the human connection" - this statement is a powerful representation of what the company represents. The focus on the greater good of the customers is what Starbucks wants to be known for. Starbucks wants its customers, and potential customers to perceive them as a company that has a positive impact on the world. This is one of the ways Starbucks is using marketing concepts to strengthen its marketing strategy of a differentiator.

4.0 SWOT Analysis
4.1 Strengths – Wide range of coffee-products sold through the company’s retail operations – Research and development capabilities leveraged to strengthen product portfolio – Operations in more than 50 countries and relationships with established players such – – as Kraft, PepsiCo, DreyersGrand ice cream It is a global coffee brand built upon a reputation for fine products and services – The organization has strong ethical values, commitment to the environment, and community activists. Starbucks stores offer a wide choice of regular and decaffeinated coffee beverages, a broad selection of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, a selection of premium teas, and distinctively packaged roasted whole bean coffees in both US and international markets. Furthermore, it also offers variety of fresh food items, including healthier choice selections focusing on high-quality ingredients, Starbucks Coffee Marketing Plan 2010 19

_______________________________________________________________________ _ nutritional value and great flavor. Food items include pastries, prepared breakfast and lunch sandwiches, oatmeal, and salads as well as sodas, juices and bottled water. Additionally, Starbucks is a retailer of specialty coffee in the world. Starbucks also sells coffee and tea products and licenses its trademark through other channels such as licensed retail stores. Starbucks operated 8,832 company operated stores and 7,803 licensed retail stores worldwide as of September 2009. Such an extensive product offering enabled the company to enhance its reach, cater to a wider customer base and meet their diverse needs efficiently. The core strength behind Starbucks's brand is the quality of its products. The company has a strong research and development team which is responsible for the technical development of food and beverage products and new equipment. Starbucks's strong research and development capabilities enable it to focus on relevant product innovation, expansion and leveraging of its existing products and sales channels. For instance, in FY2009, the company launched Starbucks VIA ready brew coffee to capture a significant share of both the $21 billion global instant coffee category and the single-serve market and further expanding its coffee expertise and leadership in local and international markets. Starbucks VIA is made with a proprietary, US patent-pending microgrind technology to preserve the coffee’s taste, quality and freshness. Additionally in September 2009, the company’s brand Seattle’s best coffee introduced “Just Pure Flavor”, an innovation for fresh brewed coffee that offers customizable flavor by the cup. The new flavors use no dairy, sugar or artificial sweeteners, and add less than 50 calories to a 12 fl. oz. (5 calories) beverage. Starbucks invests substantial amount of resources on technical research and development activities including customary product testing and product and process improvements. For instance, Starbucks spent approximately $6.5 million, $7.2 million and $7.0 million during FY2009, 2008 and 2007, respectively on its research and development activities. Starbucks's focus on quality and product innovation help sustain the brand value of the company and introduction of new products at regular intervals helps them to stay competitive. Starbucks is well positioned to increase its revenues, customer’s base, and profit margins through its expanded presence in international markets. Starbucks currently operates in more than 50 countries.The company’s international markets include Argentina, Australia, Austria, Brazil, Bulgaria, Canada, China, Czech Republic, France Germany, Greece, Hong Kong, Starbucks Coffee Marketing Plan 2010 20

_______________________________________________________________________ _ Indonesia, Ireland, Japan, Malaysia, Mexico, Middle East New Zealand, Peru, Poland, Portugal, Romania, Russia, Singapore, South Korea, Spain Switzerland, Taiwan, Thailand, Turkey and the UK. Additionally, Starbucks also has established relationships with Kraft Foods, the largest confectionery, food and beverage corporation in the US. For instance, Starbucks sells its branded packaged coffees and teas in grocery and warehouse club stores throughout the US through its licensing relationship with Kraft Foods. Kraft Foods manages all distribution, marketing, advertising and promotion of Starbucks products. Additionally, Starbucks also sells packaged coffee and tea internationally both to warehouse club stores, such as Costco Wholesale, and to grocery stores through a licensing relationship with Kraft in Canada, the UK and other European countries. 4.2 Weaknesses – – – Product recalls by Starbucks affect margins and brand image The organization has a strong presence in the United States of America with more than three quarters of its cafes located in the domestic market Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time, and product acceptance will come to a halt eventually slowing growth. – – Higher coffee prices compared to competitors Downward turn in economy, people being more conscious of their spending habits and grabbing the less expensive option, Starbucks not being the one. Starbucks has recalled few of its products in the recent times. For instance in FY2009, the Consumer Product Safety Commission ordered recall of thousands of Starbucks and Seattle's best coffee blade grinders. The recall was prompted as the company’s grinders can fail to turn off or can turn on unexpectedly, posing a laceration hazard to consumers. The total recalls of company products included 530,000 grinders. Additionally, the company announced a voluntary recall of more than 12,000 glass water bottles due to the possibility of lacerations. The US Consumer Product Safety Commission and Health Canada claimed that while removing or reapplying the bottle’s stopper, the bottle can shatter and cut the consumer which strained Starbucks to recall its glass water bottles in FY2009. Furthermore, Starbucks also recalled few of its products containing peanut butter from its stores following an outbreak of salmonella in the US. Product recalls Starbucks Coffee Marketing Plan 2010 21

_______________________________________________________________________ _ such as these hurt the value of the Starbucks brand and lead to a decline in the demand for its products. 4.3 Opportunities – – – – Cost reduction initiatives such as rationalizing of global retail network to improve margins Entry into Europe’s ready-to-drink coffee sector and a tie-up with Arla Foods Introduction of Starbucks VIA coffee essence in Japan Stable credit ratings strengthen stakeholder confidence

The company in FY2009 initiated a cost reduction program to improve its margins through rationalizing its global store portfolio. For instance, during the year, Starbucks completed the closure of nearly 1,000 company-operated stores globally. At the end of FY2009, approximately 800 US company-operated stores, 61 stores in Australia and 41 company-operated stores in other international markets had been closed. The remaining international store closures are expected to be completed by the end of FY2010. Initiatives such as these helped the company to improve its operational efficiencies through reduced cost expenditures. For instance, through closure of company’s stores globally has led to cost savings of $580 million in FY2009 for Starbucks, and few more closures expected in FY2010 is likely to reduce further cost of the company which positively impact the margins. Cost reduction initiatives and related operational efficiency efforts such as these will significantly contribute to the margin improvement of the Starbucks. Starbucks announced to enter the ready-to-drink (RTD) coffee products in Europe in January 2010. The ready-to-drink coffee category market in Europe is valued to be $550 million. Furthermore, during the same year, the company also signed an agreement with Arla Foods, a leading producer and distributor of quality milk products in Europe. Under the agreement, Arla Foods will manufacture, distribute and market Starbucks-branded premium RTD coffee beverages in Europe. The new relationship with Arla Foods complements Starbucks coffee expertise and experience in the ready-to-drink coffee category. Furthermore, extending the Starbucks brand into new distribution channels globally is a part of the company’s long-term plans to target international growth in key regions such as Europe. The success of Starbucks premium RTD products in the US and Asia demonstrates strong business opportunity for the company in European markets. The company’s decision to enter European Starbucks Coffee Marketing Plan 2010 22

_______________________________________________________________________ _ markets through introduction of its strong RTD coffee category products will boost its top line and also expand its geographical reach. After the company’s successful introduction of Starbucks VIA ready brew in the US, UK and Canadian markets in FY2009, it launched Starbucks VIA coffee essence in FY2010, its first premium coffee stick product in Japan, where 63% of total coffee sold is instant. The company will sell its Starbucks VIA coffee essence product through 870 Starbucks stores in Japan and eventually expand distribution to include grocery shops and other retail channel. Japan is one of the biggest market at-home coffee markets valued at $5 billion. With the body, flavor and rich aroma expected from Starbucks coffee, Starbucks VIA coffee essence will create a new category for coffee drinkers looking to enjoy Starbucks quality coffee in Japan. Additionally, Japan is a key market for Starbucks as it eyes the $23 billion instant and single serve coffee market. The launch of Starbucks VIA coffee essence in Japan is likely to expand Starbucks customer base besides enhancing revenues. Starbucks has been rated well by credit rating agencies on account of recording strong financials for FY2009. For instance, the rating agency Standard and Poor’s Ratings Services in August 2009, revised its outlook on the Starbucks credit ratings to stable from negative based on improved credit metrics and stabilizing performance. It also affirmed the BBB corporate credit rating on the company and raised the short-term rating to A-2 from A-3. Strong financial performance and improved cash flows were the main reason for Starbucks’s improved ratings. The stable credits of the company increase stakeholder confidence and also provide an opportunity to raise finances to meet any expansion plans in the future. 4.4 Threats – – – – Increased minimum wages affect operating margins Discretionary spending negatively impact margins Increasing health consciousness among Americans could reduce demand Continued threat in the coffee competition

In recent times, tight labor markets, increased overtime, governmentmandated increases in minimum wages and a higher proportion of full-time employees have resulted in an increase in labor costs, which could materially impact the company's operating margins. The federal minimum wage rate in the Starbucks Coffee Marketing Plan 2010 23

_______________________________________________________________________ _ US, which remained at $5.15 per hour since 1997 reached $6.55 per hour in July 2008. It is expected to further rise to $7.25 an hour from July 2009. Starbucks employed about 142,000 people in the US, as on September FY2009. Increased labor costs could increase overall costs and affect the company's operating margins. As a retailer dependent upon consumer discretionary spending, Starbucks will face an extremely challenging FY2011. All major western counties including the US, UK, Germany, France, Italy, Spain, Japan and Australia are in the grip of recession and are forecast to remain so through 2010. Even the key emerging market economies are currently experiencing downturns, including China, Middle East and Brazil. The global economic downturn has led to a severe decline in consumer confidence. Consumers also have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies and reduced access to credit. A decrease in consumer confidence and the resultant curbed consumer spending would result in decreases in customer traffic and average value per transaction. Starbucks's business is highly sensitive to changes in customer traffic, and the current economic downturn would put downward pressure on the company's margins. Starbucks's products contain caffeine, dairy products, sugar and other active compounds, the health effects of which are the subject of increasing public scrutiny. It is suggested that excessive consumption of caffeine, dairy products, sugar and other active compounds can lead to a variety of adverse health effects. Particularly in the US, there is increasing consumer awareness of health risks, including obesity, due in part to increasing publicity and attention from health organizations, as well as increased consumer litigation based on alleged adverse health impacts of consumption of various food products. Increasing health awareness among American consumers could significantly reduce the demand for the company's beverages and food products.

5.0 Market Research Findings
5.1 Starbucks “Board of Customers” In September 2010, we designed a revolutionary market research plan called the “Starbucks Board of Customers”. We decided to conduct a coffee convention that completely analyzed every part of our operation. In order to gain an unbiased and honest opinion, Polaris National Marketing Research Firm Starbucks Coffee Marketing Plan 2010 24

_______________________________________________________________________ _ conducted the convention. The convention took place in, Los Angeles, Seattle, Phoenix, Dallas, Miami, New York, Charlotte, Atlanta, and on the Internet. The convention provided consumers with the opportunity to taste new potential brewing flavors, while they shared their opinion on what Starbucks needed to change. The results were very eye opening and what we found was that Starbucks had lost their personal touch and had become another profit hungry corporate machine. The following opinions are those of real Starbucks customers. The people interviewed ranged from Starbucks fanatics, average Joes, and antiStarbucks activists. We looked at every survey and suggestions submitted, (almost 500,000 surveys in total) and picked out the ones that represented what most customers were saying. “Personalization is Key” “The coffee is still as good as ever, the flaw is in the ambiance. The interior of each Starbucks location is growing more and more placid; meaning it needs SOUL. I recall a Starbucks in Kent, Ohio where students from the nearby university would gather on all nights of the week to reminisce, relax, and enjoy coziness away from school life. The employees were students as well and they joined their classmates in discussions while still doing their job. The atmosphere at this Starbucks was warm in the winter and vibrantly cool in the summer. Being a college student who has recently moved to New York City, I have noticed a slight similarity in the Starbucks locations here—the interiors are all the SAME. It could be that the general method of Manhattan-ites is “In quick to get my coffee and go”, but I am not always in a rush and would like some identity as a consumer. I want to be able to say, “It’s MY Starbucks and they are MY Baristas.” –Kristopher Patel, St. Johns University “Just as neighborhoods are unique, stores need to be unique” I think Starbucks can grow and maintain its core values, its soul if you will, and allow for each store to create a unique ambiance. Neighborhoods are different and if you want a neighborhood store, there needs to be flexibility to adapt and customize for the consumer. Starbucks can function this way as long as the core values are at the center of the issues. To do that, they need to get back to their roots of being a coffee house with the smell of coffee and where Starbucks Coffee Marketing Plan 2010 25

_______________________________________________________________________ _ fresh, custom-made drinks are prepared the old fashioned way. That’s what made Starbucks. –Jamey Shields, Los Angeles, California “There are too many Starbucks” It was OK when there were some. Not now. Just today I noticed a new Starbucks on my work com- mute. Hmm, let me count the number of Starbucks or other Starbucks-branded locations on my eight mile commute to work: there’s one Drive-thru location, three in Albertson’s, one 24-hour Starbucks (2 blocks from Albertson’s), one inside target, and two more standalone Starbucks within a 4 block radius of each other and the target outpost. And there are no large office parks on my drive! In fact only a handful of people work on this route! Clearly this is far too many Starbucks! They are starting to be to concerned with the quantity of stores than the quality. Every Starbucks is the same and the flooding of the market is starting to get frustrating. –Jane-Ann Ervine, Dallas, Texas “Slow down!!” Everything needs to slow down at Starbucks. It’s becoming a fast food restaurant because the employees are letting it. There needs to be more of a welcoming in-store feeling where people can enjoy a coffee without a lineup of 30 people and employees yelling “triple skinny latte!” Perhaps offering a few select dine-in coffee services? I know this is bold and very different, but I feel like it reflects the luxury Starbucks is trying to convey. Having a full-service coffee place also allows for people who go to meet up for a coffee somewhere a little special to relax and chat without all the hustle and bustle. It’ll give a little revamp to the image, and hopefully upgrade it a bit. –Rob Stevens, New York, New York “Reach out to the College student and young businessman crowd” To reach the College/Young Businessman crowd, Starbucks must do three things: #1) Offer free Wi-Fi. This is a no-brainer. I was going to study at a Starbucks today but did not since they did not have free Internet. #2) Create the next big coffee or non/coffee drink trend. Starbucks continually tries to add to its offer- ing, but few new drinks stick. Much of Generation Y began their coffee addiction thanks to the cold blended Frappuccino drink that you can now purchase anywhere. What’s the next big drink? I think it’ll be something non-coffee. Our generation loves energy drinks— Starbucks Coffee Marketing Plan 2010 26

_______________________________________________________________________ _ so how can we get a similar kick in a better tasting WARM drink without coffee flavoring. Starbucks does this well in the summer, but poorly the rest of the year, with their only real non-coffee offering being tea and the popular Chai Latte. #3) Treat each store as its own entity. I don’t mean with store layout design. Create buzz around each store if you want a local feel. Stores near college campuses should be open 24 hours during finals week, or at least offer free drip coffee during those weeks for anyone with a Student ID. Many small business meetings occur at Starbucks. What are their needs? Wi-Fi, of course. But maybe they also need to be able to reserve space to meet. Let them call in advance to reserve a small, comfort- able area in the corner for a set price. Does the area mostly cater to families? Have toys for children to play with while the moms grab a Chai tea, or free treats if you bring in your dog. Cater to your local crowd, and they’ll keep coming back for more.- Eric Cassilious, ChangeThis.com “Enhance the sense of community that used to exist at Starbucks” The success of Starbucks rests in its ability to create a community—a place where like-minded folks can come in and get a fantastic coffee experience. But also, a place where customers can buy into an identity, a culture, and a community of coffee-lovers and lingerers is the key. People can argue all day long about how the coffee is prepared, but all functional things can be copied over time. There was a time when carrying a Starbucks coffee cup as you walked down the street said some- thing very distinct and very positive about you. With ubiquity comes an unavoidable backlash from the folks who long to be special, different, trendy and admired. The trick now, and in the future, is for Starbucks to figure out ways to continue to give customers the ability to be included in a community that enhances their own self-worth. there will always be functional things they will have to do to remain relevant—such as offering new and different drinks, foods, music, etc. But the real way to win in the long run will be to make the Starbucks cup cool. To carry and the Starbucks couch cool to read the Sunday paper on. Make the Starbucks community the community with which people want to be identified. The tastes, the scents, and the theatre—these are now all costs of entry. The question is—can Starbucks create a ‘cool’ community out of ubiquity? –Len Herstein, Charlotte, North Carolina

6.0 Objectives
Starbucks Coffee Marketing Plan 2010 27

_______________________________________________________________________ _ 6.1 Expansion of specialty branch “15th Avenue” It could certainly pass as a stand-alone Seattle neighborhood coffee house. There is an eclectic mixture of old wooden tables to sit at, and pictures by local artists adorn the walls. Wine and beer are on sale, too, along with cheese and meat plates. It feels cozy and not at all corporate. The only clue to the true identity of 15th Avenue Coffee and Tea is the small print on the door: “inspired by Starbucks”. For “inspired by”, read “owned and operated by”. Our goal is to design new specialty sub-brands in order to capture more of the coffee market. This will effectively enable us to compete with small town, individual coffee shops, rather than being seen as a corporate entity. The objective is to have more than 200 locations in the United States by year 2020. 6.2 Capitalize on the in-home brewing market To capitalize on the growing market for single cup brewers, we are going to channel a majority of our research efforts to design a new brewer that will allow consumers to brew a single cup of Starbucks Coffee, in their own home. By the year 2015, we aim to have more than 15 million brewing systems in the United States. 6.3 Launch ad campaign with a focus on in-home/on-the-go Via coffee Over the past decade, we have not taken full advantage of the effects that today’s advanced media can have on a company or product. Beginning in January 2012, we plan on launching an add campaign advertising the release of our single cup brewing systems. 6.4 Changing the focus from quantity of locations to the quality Using the results from, Starbucks Board of Customers, we aim to increase the quality of our existing retail locations. We also aim to slow the expansion of our main retail locations to 100 per fiscal year. In the year, 2020, we will conduct another “Board of Customers” convention to measure the success of our efforts.

7.0 Strategies
Starbucks Coffee Marketing Plan 2010 28

_______________________________________________________________________ _ 7.1 Expansion of Specialty branches “15th Avenue” We will conduct a year of intense market research in a potential location for a “15th Avenue” coffee shop. The Starbucks strategy for these specialty shops is to shy away from the ‘corporate Starbucks atmosphere’ and the current ‘blanket approach’ that they are currently in. These specialty shops will not display the Starbucks logo and many consumers will not know the business is “inspired by Starbucks”. A significant road names each specialty coffee shop in that area, hence the only one that is now operating is named after “15th Avenue”. The name in itself will give the location that its in a sense of their own special, unique coffee shop. We will produce and design a customized experience for each location. For example, a “15th Avenue” in Texas will differ from one in New York because of the lifestyles and demographical difference between the areas. The locations of the “15th Avenues” won’t be that of Starbucks. Starbucks’ are generally located in well-populated metropolitan cities. We want “15th Avenue to be in smaller cities to portray the home town atmosphere specifically for each location. No 15th Ave is going to be the same. Starbucks is a brand with very high recognition that is compatible for any consumer; their stores should reflect the same aspect as their product. 7.2 Capitalize on the in-home brewing market We are going to research and develop an in-home, single cup coffee brewer that is similar to the new Keurig machine. It will be the Starbucks brand machine and each single cup coffee cartridges will also be Starbucks brand. We believe this will be a great success for Starbucks in the home brewing market. An example of a similar product being a success is the Margaretville brand named blender. The name of the blender has high brand recognition, which has made it a great success. Starbucks has tremendous brand recognition; that is strictly their competitive advantage over the Keurig machine, the name says it all. Starbucks plans to eventually phase out their espresso machine and replace it with the Starbucks in-home brewing system. This strategy will greatly help Starbucks compete, if not take over the in-home brewing. This will now make them a competitor of the in-home brewers, for example Folgers. 7.3 Launch ad campaign with a focus on in-home/VIA coffee The strategies in conducting a new ad campaign on the in-home coffee and the new VIA instant coffee is the motto, “You can take the luxury of Starbucks to your home.” Starbucks is known to have the best tasting coffee because they pay Starbucks Coffee Marketing Plan 2010 29

_______________________________________________________________________ _ a higher price for such a high quality. The high quality, luxurious coffee will now be available in the single cup, in-home brewing machine or the VIA instant coffee packets that have been taste tested with great success. We will have one page ads in a handful of magazines that Starbucks has always ran in the past which are: Rolling Stone, ESPN, Maxim, Lucky, Cosmo, US Weekly and Entertainment Weekly. Starbucks has never done a large amount of advertising compared to competitor, McDonalds who saturates the advertising market. There will be a select few commercials that will be launched in the ad campaign. The commercials will be informative of the new in-home brewing systems, (Starbucks single cup maker & the VIA) but also focusing on the ‘bring the luxury coffee home’ factor. The ad campaign will be a large hit towards Folgers, who is a big leader in the in-home brewing coffee segment. Starbucks will be in every aspect of the coffee market. Each Starbucks will have a drive threw, for the ‘grab a coffee and go drinkers’, they will still keep the same environment throughout the Starbucks stores, for the college student and business professional target market, and they now will have the in-home brewing system along with a grab and go from home instant coffee. 7.4 Starbucks change in focus – from Quantity of locations to Quality We felt that the continuation of openings of Starbucks on every corner was not in Starbucks best for future profits, the quantity shouldn’t be the focus. The focus of Starbucks is in the quality, not just the coffee, which has already been established, but also the quality of the businesses. This strategy is more focused on the launch of the “15th Avenue” stores. We will conduct an undercover Starbucks board that continuously listens to the customer’s opinions throughout the current Starbucks locations and the new “15th Avenue” locations that will be built. We want the quality of each “15th Avenue” to be sincere. Each “15th Avenue” will be a different experience that adapts to that location. These coffee shops will not have a corporate feel like Starbucks tends to have. There will be large amounts of market research done in each particular location that a store may be desired. We want to know the location, environment, demographics, culture, and everything that has to do with the city to be able to portray the “third place”, from work and home, as these new “15th Avenue” coffee shops.

8.0 Tactics
8.1 Expansion of specialty branch “15th Avenue” Starbucks Coffee Marketing Plan 2010 30

_______________________________________________________________________ _ In order to create an effective, customized specialty sub-brand, we are going to expand on our 15th Avenue Coffee and Tea locations. However, we are going to take an extremely different expansion approach than we have in the past. We are going to open a new R&D department dedicated to developing six different experiences customized to particular markets. For example, a 15th Avenue in a suburb of L.A. may operate completely differently than one in Topeka, Kansas. The goal is to do enough market research to design six different customized experiences that we can then expand with a more personal approach to each location. After the six experiences are established, potential franchisees will have the option of applying to open a 15th Avenue in their town. After an application for a franchise is submitted, the R&D department will analyze the potential market and decide which experience would be best for that particular location. This will enable Starbucks to start penetrating the local markets with a personal touch rather than the blanket approach of the past. Allowing private owners to own and operate a 15th Avenue will allow the stores to maintain their local, hometown, and personal environment while offering the same great tasting coffee already produced at current Starbucks locations. The thinking behind this approach is that the current Starbucks stores are best in the metropolitan settings; however, lack the environment to compete in smaller, less populated settings. This will allow Starbucks to directly compete with small town coffee shops and create a wider platform for Starbucks to penetrate the smaller markets. 8.2 Capitalize on the in-home brewing market In order to compete directly with Keurig, we plan on selling the Starbucks Single Cup Brewers in all Starbucks retail locations, Wal-Mart, Target, and anywhere that coffee brewers are sold. By creating our own brewers and cartridges, we believe that we can gain a significant amount of control in the single cup market because of the consumers desire to brew our coffee, one cup at a time. 8.3 Launch ad campaign with a focus on in-home/on-the-go coffee This ad campaign will focus on sending the message that you can take the luxury and status of Starbucks coffee, wherever you go. We hope to create the belief that having a Starbucks brewer in your home gives you a status and luxury Starbucks Coffee Marketing Plan 2010 31

_______________________________________________________________________ _ that other brewers do not. We want to portray a luxury that no other brewer can provide because we believe that no other company offers coffee better than ours. For our on the go coffee Via coffee, we would like to have an add that shows potential customers that the coffee tastes the same as coffee brewed the traditional way. Our main marketing focus will be to prove that you can have the great taste of Starbucks coffee, no matter where you go. 8.4 Changing the focus from quantity of locations to the quality In order to accomplish this goal we are going to stop the expansion of our current Starbucks retail stores and focus on changing the stores we have, back to what made us so successful in the first place. To do so, we plan on establishing regional teams to evaluate every one of our locations. After a thorough evaluation, a report on the things we would like to emphasize and change will be sent to the store managers. A year later a follow up evaluation will be done and new assessments will be made as to the success of the changes made. In the year 2020 we plan to conduct another “Board of Customers” convention to benchmark our progress.

9.0 Financial Impact of the Marketing Plan
9.1 Income Statement (Numbers in Millions except per share items)

Starbucks Coffee Marketing Plan 2010 32

_______________________________________________________________________ _
Period End Date Period Length Stmt Source Stmt Source Date Stmt Update Type Revenue Total Revenue Cost of Revenue, Total Gross Profit Selling/General/Administrative Expenses, Total Research & Development Depreciation/Amortization Interest Expense (Income), Net Operating Unusual Expense (Income) Other Operating Expenses, Total Operating Income Interest Income (Expense), Net Non-Operating Gain (Loss) on Sale of Assets Other, Net Income Before Tax Income Tax - Total Income After Tax Minority Interest Equity In Affiliates U.S. GAAP Adjustment Net Income Before Extra. Items 10/03/2010 53 Weeks 10-K 11/22/2010 Updated 10,707.4 10,707.4 8,010.0 2,697.4 569.5 0.0 510.4 0.0 53.0 293.2 1,419.4 50.3 0.0 0.0 1,437.0 488.7 948.3 -2.7 0.0 0.0 945.6 0.0 Total Extraordinary Items Net Income 945.6 390.8 315.5 672.64 564.26

09/27/2009 52 Weeks 10-K 11/22/2010 Reclassified 9,774.6 9,774.6 7,750.0 2,024.6 453.0 0.0 534.7 0.0 332.4 264.4 562.0 37.0 0.0 0.0 559.9 168.4 391.5 -0.7 0.0 0.0 390.8 0.0

09/28/2008 52 Weeks 10-K 11/22/2010 Reclassified 10,383.0 10,383.0 8,390.4 1,992.6 456.0 0.0 549.3 0.0 266.9 330.1 503.9 5.2 0.0 0.0 455.7 144.0 311.7 3.8 0.0 0.0 315.5 0.0

09/30/2007 52 Weeks 10-K 11/29/2007 Updated 9,411.5 9,411.5 7,215.01 2,196.48 489.25 0.0 467.16 0.0 0.0 294.14 1,053.95 2.42 0.0 0.0 1,056.36 383.73 672.64 0.0 0.0 0.0 672.64 0.0

10/01/2006 52 Weeks 10-K 11/29/2007 Reclassified 7,786.94 7,786.94 5,866.61 1,920.34 479.39 0.0 387.21 0.0 0.0 253.72 893.95 12.29 0.0 0.0 906.24 324.77 581.47 0.0 0.0 0.0 581.47 -17.21

0.0 Total Adjustments to Net Income





Basic Weighted Average Shares

744.4 Starbucks Coffee Marketing738.7 2010 731.5 Plan 33



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Income Statement: 10-Year Summary (in Millions)
10/10 09/09 09/08 09/07 10/06 10/05 10/04 09/03 09/02 09/01 Sales 10,707.4 9,774.6 10,383.0 9,411.5 7,786.94 6,369.3 5,294.25 4,075.52 3,288.91 2,648.98 EBIT 1,437.0 559.9 455.7 1,056.36 906.24 796.35 620.63 432.47 336.89 288.05 Depreciation 510.4 534.7 549.3 467.16 387.21 340.97 289.68 245.07 205.56 177.09 Total Net Income 945.6 390.8 315.5 672.64 581.47 494.37 388.88 265.36 211.39 180.34 EPS 1.24 0.52 0.43 0.87 0.73 0.61 0.47 0.33 0.27 0.23 Tax Rate (%) 34.01 30.08 31.6 36.33 35.84 37.92 37.34 38.64 37.25 37.39

9.2 The financial impact of expanding “15th Avenue” For one brick and mortar, 15th Avenue location, at approximately 12,000 square feet, the start up cost will range from $200,000 to $375,000 depending on the price of land. After a significant amount of market research and a review of the first 15th Avenue in Seattle, which had 1.1 million in profit for fiscal 2009, we believe that the average “15th Avenue” location will bring in $750,000 to $1,000,000 in profit per year. 9.3 The financial impact of producing in home brewing division The headquarters for our expansion will be located in Seattle, Washington. In order to simplify the process and minimize costs we will outsource the production of our products overseas at a cost of approximately $44.23 per unit (includes transportation). An estimated start-up cost of the entire in home brewing division is 125 million. We believe that in the next ten years, our market share will increase enough to position us as one of the top providers of coffee brewers in the United States. This division has the potential to bring in an estimated 300 million dollars a year.

9.4 Cost of Advertising We would like to launch a 15 million dollar ad campaign. This includes, hiring a marketing firm, market research, TV advertising, magazine ads, online ads, and billboard ads.

10.0 Metrics
Starbucks Coffee Marketing Plan 2010 34

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11.0 Contingency Plan
11.1 Expansion of Specialty branches “15th Avenue” We have read a few articles regarding the new 15th avenue coffee store and they have raised the ‘What If these people are right’ questions, “15th Ave Coffee & Tea is an experiment doomed to failure, because there's no way a corporate coffee chain can create an authentic neighborhood coffeehouse experience. Your favorite local coffeehouse is the product of someone's passion, dedication, and probable borderline craziness. 15th Ave is the product of corporate product design and development.” If this were to come true we would need to continue our focus on the current Starbucks branches and the in-home brewing market. If the “15th Avenue” ends up being unsuccessful a large amount of money would be lost, but we would be able to recover through the continued business in the existing Starbucks stores. We believe that this will be a great addition under the Starbucks name. 11.2 Capitalize on the in-home brewing market “What if the Keurig coffee machine has already controlled the majority of market share for the in-home coffee machine?” We believe that our brand recognition will not let this occur when we enter the in-home brewing market with our Starbucks name. If Keurig has already gained majority of the market share we will need to discuss alternatives ways to enter the market and conduct more in-depth research, focus groups, on what the consumers would like to see in the in-home brewing market. We believe market research would need to be done on our product itself to determine what the reasoning would be for not being able to take over the in-home brewing market; it could be the price point, advertising, or that is may not be something the consumer really feels the need to purchase. These are all aspects that would be considered in the ‘what if’ analysis. 11.3 Launch ad campaign with a focus on in-home/VIA coffee “What if our ad campaign does not clearly portray the message? What if we did not use enough advertising? What if the money spent on advertising is not working?” If your ad campaign does not portray the message we will know this by the number of sales after the ad launch. If sales do not increase at all within 4-6 months of the advertising launch we will need to reconnect and take a different approach. The approach may be to focus on either just VIA or the in-home coffee maker. Maybe the amount of information trying to portray both of the items is too Starbucks Coffee Marketing Plan 2010 35

_______________________________________________________________________ _ much for consumers to remember or engage in. If not enough advertising is the case we will know this by consumers still not being aware of our product when we conduct market research 6 months down the road after the advertising as been launched. We would then decide to use more money into advertising, much like competitor McDonalds does. We do not feel that a large amount of advertising is the key to a successful coffee business, but if the lack of knowledge is significant after months of advertising that may be our next focus. 11.4 Starbucks change in focus – from Quantity of locations to Quality “What if the qualities of the “15th Avenue” stores are not accepted in the selected areas?” “What if adding additional stores is the answer in creating more revenue?” We believe that our extensive market research throughout the locations of the stores will be sufficient enough that the coffee shops will be openly accepted as a new aspect of their town. But, if they are not wanted or welcomed in the community we would conduct more market research that included several intensive focus groups to determine what would make it a better coffee shop for the consumers to approve of in their area. If we are not creating profit throughout the “15th Avenue” coffee shops within 6 months to a year we will need to reconvene and determine whether opening up more Starbucks stores is the answer. We think the “15th Avenue” stores are going to be a great success.

Starbucks Coffee Marketing Plan 2010 36

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