Memo report – task A

To: Marketing manager Caffé Nero

From: Marketing assistant Caffé Nero
Date: 07-04-2010
Report on how Starbucks reacts to changing market conditions, and how Caffè Nero may learn from
Starbucks’ initiatives.

In the following report I will give you an insight into how Starbucks react to the changing market conditions
and how we, Caffé Nero, may learn from that.
I’m writing this so that we, by learning from Starbucks, can improve our own situation and keep our share
of the market or even gain more of the market share.

I base my information in the report on an interview with the Chief Executive Officer of Starbucks, Howard
Schultz, an interview about Howard Schultz and the founding of Starbucks, a news coverage of the
introducing of the Instant coffee Via and a document about the instant coffee and its development.

Starbucks

The development of Starbucks

The first store was actually not opened by Howard Schultz, but by a number of friends in the
1970’s. But as soon as Schultz walked into the store, he knew he wanted to be a part of it.
In January 2008 he again took over as CEO.
Starbucks has always been an innovative company, and that has also always been there hallmark.

Latest initiatives

Starbucks´ latest initiatives have been several. Starbucks has announced a whole range of
initiatives from introducing the clover coffee machines which is making very individual coffee to
selling instant coffee.
The clover coffee machine is an advanced hand-made coffee machine for individually brewed cups of
coffee, which takes all customers needs into account. This is one of the new initiatives which Starbucks has
announced recently.

Another initiative Starbucks has come up with is the instant coffee. Starbucks has launched the instant
coffee under the name Via. This is a respond to the downturns in the economy, the before mentioned
changing in the market conditions. The instant coffee is not seen as good coffee, but as a temporary
solution when not being able to make you a cup of coffee or go to a store and buy one. Schultz is willing to
try changing this attitude, and make the instant coffee a good thing. If he is able to do that, there is a huge
market share to be won.
The initiative comes at the exact right time. The downturns in the economy have made people think about
how they are spending their money, which has lead to people not wanting to spend 4 or 5 $ for a cup of
coffee. It is like Starbucks saw this one coming, since they have been developing the instant coffee for
several years. So introducing a cheap, but almost as good tasting coffee at this time is nothing but brilliant.
But if it is the right thing for Starbucks to do is another question.

Keep the value of the brand

Starbucks is a great brand, and it may be dangerous for Starbucks to introduce a discount coffee. Although
it might taste just as good as the brew, it is dangerous for Starbucks to introduce such a coffee with the
Starbucks brand, because there is a chance of losing some of the value of their brand, by doing that.
Howard Schultz also said in the interview, that they had to keep the value of the company and stay within
guard rail of being appropriate.
Therefore it is too dangerous for Starbucks to announce such a product with the Starbucks brand on.
Starbucks has therefore announced it under the brand Via, although it is a Starbucks product.
This is a really clever thing to do, because although the economy is down now, it will go again at some
point. It is therefore important to hold your brand.
He also says that he want to do everything to enhance the experience that they provide their customers
and that he want to make the customers proud of holding a cup of Starbucks coffee in their hand.
This is also very important values to remember in these times.

Conclusion

After reading and watching the information I base my report on, I think we can conclude that there is a lot
to be won be being initiative, but it can also hurt you back in other ways. You have to be able to start up a
new brand if you want to start selling instant coffee, because it might hurt your brand. But if you are able to
make some cheap coffee, which is not instant coffee, you should sell it instead.

Recommendations

In light of the above-mentioned I recommend that we either develop our own instant coffee and announce
it under another brand, or we start providing our customers with some more affordable offers. We could
start selling more affordable coffee in our shops to follow the down-turns in the economy. But we also have
to consider the great opportunities of the instant coffee marked, which has a 70 billion $ sale a year.
Although there are great opportunities in the instant coffee market, I recommend that we start selling
some more affordable coffee in our shops. We might expose our brand of a lesser danger, but not enough
to do any damage.

Plan of action

We shall therefore start selling some sorts of cheap coffee in our shops and perhaps some cheap snacks as
well.
This has to be done as soon as possible, if we want to gain more of the market share.