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Starbucks – Memo report

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.

Introduction
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.

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.

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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 dollars for a cup of coffee.

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 guardrail of being appropriate.
Therefore it is too dangerous for Starbucks to announce such a product with the Starbucks
brand on. Which is why Starbucks has 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 value 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 hit you back in other ways. You have
to be able to start up a new brand if you want to start selling instant coffee. 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 both develop our own instant

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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
downturns in the economy. But we also have to consider the great opportunities of the instant
coffee marked, which has a 70 billion dollar 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.

Number of words: 857

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