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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.
) !mbrace diversity as an essential component in the way we do
business.
") #pply the highest standards of e$cellence to the purchasing% roasting
and fresh delivery of our coffee.
&) 'evelop enthusiastically satisfied customers all of the time
() Contribute positively to our communities and our environment
)) *ecognize that profitability is essential to our future success.
Vision: To inspire and nurture the human spirit one person, one cup and one
neighborhood at a time.
Obectives:
Our Coffee- t has always been, and will always be, about !uality. "e#re
passionate about ethically sourcing the finest coffee beans, roasting them
with great care, and improving the lives of people who grow them. "e
care deeply about all of this$ our work is never done.
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Our Partners+ ,e-re called partners% because it-s not .ust a .ob% it-s our
passion. Together% we embrace diversity to create a place where each of
us can be ourselves. ,e always treat each other with respect and dignity.
#nd we hold each other to that standard.
Our Customers+ ,hen we are fully engaged% we connect with% laugh
with% and uplift the lives of our customers / even if .ust for a few moments.
Sure% it starts with the promise of a perfectly made beverage% but our work
goes far beyond that. 0t-s really about human connection.
Our Stores+ ,hen 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. 0t-s about en.oyment at the speed of life / sometimes
slow and savored% sometimes faster. #lways full of humanity.
Our Neighborhood+ !very store is part of a community% and we take our
responsibility to be good neighbors seriously. ,e want to be invited in
wherever we do business. ,e can be a force for positive action / bringing
together our partners% customers% and the community to contribute every
day. 1ow 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. ,e will lead.
Our Shareholders+ ,e know that as we deliver in each of these areas%
we en.oy the kind of success that rewards our shareholders. ,e are fully
accountable to get each of these elements right so that Starbucks / and
everyone it touches / can endure and thrive.
2.1.1 !evie" o# Mission Statement and Vision
!ntry+level baristas at Starbucks get a full & 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 23uality assurance4 agents% who visit at least three times a
3uarter. 0n a 556 Study by 7usiness ,eekly 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 8.'.
Power9s 55: database. To supplement the brands in 8.'. Power9s database%
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"%555 %usiness"eek readers were surveyed and asked to nominate three
companies they felt were best and three they felt were worst at providing
customer service. ;ore than 1%555 readers responded with %&" <votes< and
1%:(5 <complaints.< =inally% 7oth sets of date were combined% the people and
process scores to establish the <Service Score.4 Starbucks received a 7> in both
the peoples grade and the process grade and )? of respondents said they
would definitely recommend the brand to a friend. 8udging by this information%
Starbucks is meeting its customer service goals set forth in the mission
statement and the company vision.
# 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 16@1% its overriding philosophy has been thisA <Beave no one
behind.< ,ith that in mind% new employees get & hours of in+store training%
steeping them in information about coffee and how to meet% greet and serve
customers. =ull health+care benefits Cmedical% dental% vision and alternative
services) are offered to all employees% including part+timers who work at least
&5 hours per calendar 3uarter. #s a result of such measures% Starbucks
employees have an : percent .ob+satisfaction rate% according to a Dewitt
#ssociates Starbucks Partner Eiew Survey. This compares to a (5 percent
satisfaction rate for all employers and @& percent for Dewitt-s <7est Place to
,ork< employers.
The company also encourages community involvement by donating F15
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 3uilting and book clubs. !mployees
can donate an amount of their choice to a voluntary <CGP CCaring Gnites
Partners) fund%< which is used to provide grants to fellow employees who fall on
hard times. #nd every year% as part of its &arthwatch 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. Bast year two were selectedH this year five are going.
0n review% Starbucks is meeting all goals set forth in both the vision and
mission statement% however% this brings forth the 3uestion of whether or not that
translates into successIprofit.
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2.2 Maor c$an%es to t$e external environment o# t$e co##ee industry
Potential changes in the market include% new market entrants% changes in
the price of coffee% changes in buying habits of both the company and
consumers% and whether or not the market has become saturated through
continuous e$pansion.
2.2.1 &e" Market Entrants and Market S$are Analysis
0t is clear that the coffee market is rapidly growing and changing
due to new market entrants and continuous changes in consumer habits. =ierce
competition and e$ponential 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.
Juick+service operators are taking advantage of the growing popularity of
coffee+based beverages by launching new products. Traditionally% Starbucks and
'unkin- 'onuts have vied for market supremacy in the category% however% with
the launch of ;c'onald-s ;cCafe specialty coffee line% as well as surprising
entries into the category from Coldstone Creamery% !merald City Smoothies and
@+!leven% the race for market share is heating up.
<,e stayed away from the coffee thing for years% trying to stay on brand%<
stated #l Schriber% a partner at !merald City Smoothies% which added a line of
hot nutrient+enriched coffees called <8ava=it< in =ebruary. 0n testing the coffees%
the company found that consumers were interested in a hot coffee that fit with
the brand9s emphasis on healthful living% reported 1ation9s *estaurant 1ews
C8une 1). ,hether a broader line of specialty coffee is in the company9s future
remains to be seen.
Cold Stone9s recently launched line of Sweet Cream Battes is part of a
plan designed to grow the chain9s average unit volume sales from F")5%555 to
F(55%555. <,e 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 'an 7eem. ;r. 7eem also stated that the
coffee drinks are e$pected to increase the chain9s overall traffic.
Since 55% the number of coffee transactions in foodservice outlets
increased &?% according to the 1P' K*LGP. The 3uick+service segment is the
driving force being that trend. ;ore recent 1P' surveys% however% indicate that
foodservice operators traditionally known for hamburger and donut offerings may
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be gaining market share from gourmet coffeehouse chains. Booking at data from
the period 8anuary through ;arch 556% compared with the same period last
year% the total number of coffee servings within the 3uick+service segment was
estimated to total 1.& billion. Lf that% )(" million servings were reported as
specialty coffees. The number of specialty coffee transactions from hamburger
restaurants was up )1?% accounting for 15.6? of specialty coffee servings within
3uick service. =or the comparable period% specialty coffee transactions at
doughnut outlets were up )?% accounting for 1:.@? of servings. ;eanwhile% the
number of specialty coffee servings at coffeehouse concepts declined 15? for
the same period to &6.? of servings.
*ecent customer satisfaction surveys indicate that the perception of
3uality and value for specialty coffees from hamburger restaurants is improving
as more chains have launched specialty coffee lines. Bast year% 7urger Ming
launched its ;ocha 7M 8oe% a cold coffee drink% while ,endy-s announced in
;ay that it plans to launch coffee+flavored smoothies. Lther 3uick+serve
restaurants such as Subway and Sonic have launched coffee+based drinks% as
well.
0n hopes of gaining additional market share% convenience store operators
such as @+!leven are continuing to roll out ice+coffee and other specialty coffee
drinks. 0ced+coffee has gotten so popular over the last yearH it has passed iced
tea in sales as a breakfast drink% according to the 1P' Kroup. The number of
morning meals that included iced coffee more than doubled over the past five
years from ? in 55&to &.)? through =ebruary 556% reported GS# Today
C8une 1(). ,omen and teenage girls are the most likely consumers to purchase
iced coffee drinks. Teen girls are :&? more likely to purchase iced coffee than
the average #merican% while women age 1: to "& are ):? more likely. <This is
clearly a female drink%< according to Darry 7alzer of 1P'.
Bast year% coffee passed soft drinks to become #merica-s number+two
beverage after water% according to the annual 1ational Coffee 'rinking Trends
study conducted for the 1ational Coffee #ssociation. !$perts say there-s still
room for growth. 2;c'onald-s getting into it is the writing on the wall%4 0nman
says. 2This trend hasn-t even started yet. 0t-s where fast food was in the 16)5s.4
The rise of specialty coffee to widespread popularity mimics that of the
upgrading of many other #merican consumables% including wine% bread% cheese
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or chocolate. 0n each case% once consumers tasted better 3uality% for many there
was no turning back.
#nother factor boosting coffee-s popularity is that it-s an affordable lu$ury.
The best gourmet coffee sold in the G.S. today costs perhaps " cents a home+
brewed cup% says *ic *hinehart% e$ecutive director of the Specialty Coffee
#ssociation of #merica% or SC##. 0n hard times% consumers may buy cheaper
wine% but coffee is relatively recession+proof. 2Nou can drink specialty coffee
anytime and not feel bad about it%4 *hinehart says. Chicago+based market
research firm Technomic reports that consumption of hot specialty coffee has
grown 1& percent in each of the past three years. Some : percent of #merican
adults are coffee drinkers% up from @6 percent in 55&. The SC## reports the
specialty market topped F1 billion at the end of 55:. #dditionally% the number
of coffee shops in the Gnited States has grown from 1%)&5 in 1661 to nearly
&%555 at the end of 55:. The bulk of those% about 11%555% belong to the
Seattle+based company that coffee+watchers agree almost single+handedly
brought specialty coffee to the masses.
2Starbucks capitalized on the trend to better coffee by offering a uni3ue
new presentation of that coffee%4 *hinehart says. 2#mericans weren-t used to
espresso+type drinks. ,e were starting to take more meals and beverages out of
the home. Starbucks was in that perfect spot of having a uni3ue product% they
offered great value% there was a new consumer patternOand they were
cognizant of their place in the social fabric% as a third place for people to gather.4
2.2.2 ' o##ee (roduction and )ricin% *rends
#s opposed to futures prices% now of GS 1. C8an 56)% average retail
prices during the mid+555 decade C55() averaged about GS F".5 per pound.
The Gnited States consumes one+fifth of global coffee production + it is the
world-s largest consumer of coffee.
The G.S. 'epartment of #griculture9s 'ecember 55) estimate for 55)+
5@ was that world coffee production had increased to 1:.) million bags% up &.6
million bags from its 8une 55) estimate. Production in 55:+56 was estimated at
1"? above the 55)+5@ period. Coffee production in 55: is now estimated at
appro$imately 15 million bags.
a
,orld coffee e$ports totaled @.@( million bags in 8uly 55:% an increase of
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1? compared with the volume of @.)@ million bags recorded in 8uly last year.
Total e$ports in the first 15 months of coffee year 55:+56 CLct+5) to 8ul+5@)
were up by 1"."? from the same period last year% totaling :1.( million bags
compared to @1.6& million bags in the prior year.
Total annual production of coffee was estimated at appro$imately ).:
million tons in 55@ and was e$pected to grow to about @.( million tons during
515. Coffee is normally shipped in bags weighing )5 kilos or about 1"5 pounds.
The top ( global producing countries of coffee in 556 are as followsA
Country !stimated Production
Cmillions of bags )
7razil "(
Eietnam 1:
Columbia 1
0ndonesia )
!thiopia (
2.2.+ '$an%es in buyin% $abits o# bot$ Starucks and 'onsumers
Starbucks initiated C.#.=.!. CCoffee and =armer !3uity) Practices to
evaluate% recognize% and reward producers of high+3uality sustainably grown
coffee. C.#.=.!. Practices is a green coffee sourcing guideline developed in
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collaboration with Scientific Certification Systems CSCS)% a third+party evaluation
and certification firm. C.#.=.!. 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.#.=.!. Practices Kuidelines. 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 ")@ million pounds of coffee in fiscal 556. !ighty+one
percent of that / 66 million pounds worth / from C.#.=.!. Practices approved
suppliers. Starbucks paid an average of F1.&@ per pound for green coffee in
fiscal 556.
'air Trade (ertified 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 'air Trade (ertified coffee in 555% helping
grow the market for =air Trade Certified coffee in the G.S. #nd in 556% increased
purchases to &5 million pounds / making Starbucks the largest purchaser of =air
Trade Certified coffee in the world.
Coffee consumption in the Gnited States has increased steadily since the
16)5-s. Through the recent recession% coffee was essentially recession+proof.
'aily consumption of coffee beverages among consumers remained unchanged
as compared to 556% with ()? of adults partaking. :&? of consumers have not
changed their consumption habits despite the economic environment.
2.2., -as Starbucks saturated t$e Market.
Today% consumers en.oy having a coffee place that9s right around the
corner and worth the price. Gnfortunately% it is common belief that% Starbucks
took the demand of the consumer a step too far% by over saturating the market
with stores.
Lne of the best e$amples of over saturation can be found in a strip mall in
Colorado. !$actly three Starbucks locations can be foundH no more than @(5 ft
away from one another% and two of the three stores are only 55 ft away from
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each other. 7y flooding the market with spots for coffee% Starbucks has been
wasting growth potential% and opting for current market optimization.
Gnfortunately% the optimization is becoming wasteful and hurting the brand
image.
0n a number of press releases% Doward Schultz% Chairman and =ounder of
Starbucks% has mentioned the loss of original roots associated with becoming a
chain store. The focus on coffee shop ambiance was the root to Starbucks9
success% but somewhere along the line the company lost the entrepreneurial
spirit. 0t is not .ust the fact that Starbucks is now on every block that has hurt the
companyH it is the loss of the entrepreneurial spirit that has affected the public
opinion. #t one point in their history% Starbucks was seen as a coffee shop
dedicated to customer satisfaction. #fter rapid e$pansion and growth Starbucks
is now seen as a corporate giant concerned with one thingH profit. This problem
was 3uickly addressed with the return of Doward Shultz% and the effects are
starting to be noticed by the change in public opinion.
2.+ 'onsumer )ro#ile and *ar%et Market
Starbucks strategy has been to position itself as an upscale brand and
differentiate its offerings as being not .ust coffee products% but rather a rich
<e$perience<. This Starbucks <e$perience< has been the company9s selling point.
The company initially targeted young college students% social classes% and
neighborhoods that would be most receptive to the idea of buying F" a cup of
coffee and spending time with friends at their stores. ,ith rapid growth and
e$pansion% Starbucks target market e$panded 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 C<Starbucks CorpA Bong+Term Krowth Koal *aised To
"5%555 Stores ,orld+,ide<). ,hat began as a niche target market eventually
came to include consumers from all facets of life.
Starbucks is often considered an affordable lu$ury% enabling the Company
to broaden its demographic reach in recent years. =ive years ago% the typical
Starbucks customer was older% had an advanced degree and more disposable
income. Today9s Starbucks customer has e$panded to include a younger C1"
percent 1:+& years old)% more diverse C"@ percent multi+cultural)% and slightly
lower average income CF((%555 per year).
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<,e 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 8im #lling% president% Starbucks Coffee G.S.
<7y connecting with customers% serving the highest 3uality coffee and striving to
consistently deliver legendary service% our store partners are at the core of the
Starbucks !$perience.<
2.+.1 S(eci#ic 'onsumer )ro#ile
Starbucks target consumerA
The target consumer is age ( to "( and is a college graduate. The
consumer is single and devoted to their career% which is most likely in a corporate
business setting. They work from nine to five% five days a week and spend time at
home on their work. The consumer is middle class and is more concerned with
image and status rather than price. The consumer seeks 3uality and
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convenience. They regard relationships very important and en.oy small talk with
family and friends in a rela$ed social setting.
2., !evenue Sources
Starbucks Corporation generates revenue both from its company+operated
retail stores and from specialty operations. =rom 55& to 55:% Starbucks grew
its revenue by 1&.(? ()*+% culminating in 15.& billion in sales in 55:.
Starbucks generated double+digit percentage earnings growth since it9s inception.
Through its company+operated retail coffee houses% Starbucks sells high+3uality
whole bean coffee% freshly brewed coffee% premium teas% a variety of cold
blended beverages% various foodIpastry items% and coffeeIbeverage related
e3uipment and accessories% as well as a line of C's. 0n 55:% Starbucks
operated @%": retail stores in 1orth #merica and 1%6@6 stores internationally. 0ts
retail+operated stores generated :&? of its total revenue.
Third ,lace &-perience
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 3uiet moment away from the hubbub
of daily life. ,i+fi 0nternet access in all stores also makes it a place where
customers can work. 7ook and music events also take place at Starbucks% in
accordance with the company9s goal of making each location a community center
of sorts to garner the loyalty of local customers.
Specialty .perations
Starbucks- specialty operations segment tries to develop the company9s
brand through third parties outside the traditional coffeehouse. Specialty retail
operations accounted for 1)? of Starbucks- total revenue in 55:.
/icensed StoresA Bocated in places like airports and supermarkets%
licensed stores generate licensing fees and royalties as well as revenue
from Starbucks- coffee% tea% and C's resold in the licensed locations. 0n
55:% Starbucks had &%"6 licensed stores in 1orth #merica and "%1"&
abroad% accounting for &:? of Specialty Lps revenue and :? of total
revenue.
! )acka%ed *ea and 'o##eeA Starbucks sells its packaged coffee and tea
as a retail product at various food stores. This accounted for 1? of
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company9s specialty revenue and "? of total revenue.
! 0randed )roductsA Starbucks has partnerships with Pepsi and 'reyer9s
to develop and distribute ready+to+drink beverages and ice creams. This
accounted for &? of company9s specialty revenue and 1? of total
revenue.
! 1oodservices O(erationsA Starbucks sells its coffee to foodservice
operators like restaurants% offices% hotels% and cafes Cincluding the 7arnes
and 1oble Cafes) that operate under different licensing contracts. This
segment accounts for (? of company9s specialty revenue and &? of total
revenue.
Ot$erA Starbucks also has entertainment business relationships with Dear ;usic%
Satellite P; *adio C&+hour Starbucks Dear ;usic digital music channel)% and
provides wireless broadband 0nternet service in company+operated retail stores
in G.S and Canada. Starbucks also has a credit card agreement with Chase. This
division accounts for ? of specialty revenue and less than 1? of total revenue.
2.2 &e" )roduct !elease
0n ;arch 556% Starbucks introduced its new+technology instant coffee
packets called E0# <*eady 7rew<% unveiling it in 1ew Nork City with subse3uent
testing of the product also in Seattle% Chicago and Bondon. The E0# flavors
0talian *oast and Colombia were then rolled out in Lctober 556% across the G.S.
and Canada with Starbucks stores promoting the product with a blind 9taste
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challenge9 of the instant versus fresh roast. The consumer test showed that many
people could not tell the difference% often preferring the instant over the fresh
brewed. Some analysts worry that by introducing instant coffee Starbucks will
devalue its own brand. The successful launch was soon followed by a 'ecaf
0talian *oast% and later with a sweetened version called <iced< Ceven though all
E0# varieties can be made directly as an iced drink). 0n Lctober 515% Starbucks
e$panded the E0# selection by introducing four new presweetened flavored
versionsA Eanilla% Caramel% Cinnamon Spice and ;ocha.
+.0 'om(etitive Analysis
2The coffee bean provides a livelihood for over 5 million people
worldwide with an estimated worldwide retail sales e$pected to grow by a
compounded rate of ).6? from 55(+515% reaching F&:. billion by 515%
according to the G.S. ;arket for Coffee and *eady+To+'rink Coffee.4 Starbucks9
marketing strategy involved positioning its Starbucks outlets as a place where
consumers can spend time other than their home or work. This was done by
making each of its stores as comfortable and rela$ing as possible. They want to
be known as the 2third place4% home% work% and then you have Starbucks. The
coffee giant achieved these using creature comforts% such as comfortable
furniture and rela$ing music. Lver the past several years% Starbucks also
included offerings such as wireless internet% handicapped access% complimentary
books% and common areas for collaboration. ,hile Starbucks stores are
positioned as locations where customers can spend time in a comfortable setting%
their product lines are positioned at the higher end in regards to prices and
3uality.
+.1 Starbucks 'om(etitors
Starbucks competitors in the coffee beverage sales include @+!leven%
'unkin 'onuts% 70KK7N Coffee% Caribou Coffee% ;c'onald9s% Panera 7read%
and !instein 7agels. Competitors such as ;c'onald9s and 'unkin 'onuts not
only have e$tensive menus% but also the financial resources and position to
leverage their strengths to threaten Starbucks profitability.
+.1.1 3unkin 3onuts
'unkin9 'onuts is an international donut and coffee retailer founded
in 16(5 in Juincy% ;assachusetts by ,illiam *osenberg. 0t is now head3uartered
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in Canton% ;assachusetts. 'espite originally focusing on donuts and other baked
goods% over half of 'unkin9 'onuts business today is in coffee% making it more of
a competitor to Starbucks as opposed to traditional competitors Mrispy
Mreme and Tim Dortons.
+.1.2 'aribou 'o##ee
Caribou Coffee is a specialty coffee and espresso retailer% the second
largest in the Gnited States after Starbucks. Caribou sells gourmet coffees% teas%
and bakery goods in &1( company+owned coffeehouses in 1) states and the
'istrict of Columbia% as well as :5 franchise locations worldwide. Caribou
Coffee-s revenue for year 556 was :.) million.
+.1.+ Mc3onalds
;c'onald-s e$ecutives came out swinging when they announced their
assault on the comfy world of coffee shops. #fter the success of its upgraded drip
coffee Q which even managed to snag a thumbs+up from testers at Consumer
*eports earlier this year Q the fast food chain known for super+size meals is
gearing up for a massive e$pansion into the world of lattes.
2,e want to move from beverages as an accompaniment to being a
beverage destination%4 'on Thompson% president of ;c'onald-s GS#% said in a
meeting with analysts Tuesday. 2Lur speed% our convenience% the value that we
can afford to customers without 3uality comprise will make us a formidable
player.4 *estaurants will offer lattes% mochas% cappuccinos and espressos with a
choice of different flavorings and milk. 0ndustry watchers say the drinks cost
about (5 cents less than at Starbucks. ;c'onalds is a semi+recent competitor for
Starbucks that has evolved over the past few years. # 1+ounce cup of brew
starts at F1.&5 at Starbucks% a penny more than the average ;c'onald9s brew
price. # small ;c'onald9s latte costs F1.66 compared with F.&( to F".1( at
Starbucks.
+.1., Ot$ers
0n terms of perception% @+!leven and 'unkin 'onuts provide coffee in a
<no+nonsense fashion<% which attracts customers who are e$tremely price
sensitive. Caribou Coffee9s environment is similar to that of Starbucks because of
furniture% free 0nternet% and cozy surroundings% but their lack of market e$pansion
has prohibited them from gaining the notoriety Starbucks has achieved. =inally%
70KK7N Coffee is in the middle ground where the likes of 'unkin 'onuts and
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Caribou Coffee separate themselves. Small independently owned coffee shops
also compete with individual locations of Starbucks% however% they do not own
enough of the market share to have a ma.or effect on the Starbucks 7rand.
+.2 'om(etitive Advertisin%
2,e get a lot of 3uestions on the competition and that everyone seems to
be picking on Starbucks through their advertising as they try to reposition
Starbucks as e$pensive or snobby% and% boy% when is Starbucks going to start
advertising and .oin in that coffee conversationR< Starbucks Chief ;arketing
Lfficer Terry 'avenport told investors in 1ew Nork. <,e9re not going to get into
that conversation. ,e9re not going to get sucked into the% 9;y coffee is better
than your coffee%9 price point type of coffee conversation. ,e9re 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. Dowever% armed with newly
hired advertising agency 77'L 1ew Nork% Starbucks placed two commercials
recently. Lne% which ran during the <Saturday 1ight Bive< show before !lection
'ay% advertised that Starbucks would give out free coffee 1ov. &. The second ran
on the heavily traveled ,ednesday before Thanksgiving% on the ,eather
Channel and C11% to let customers know that Starbucks would be donating
portions of coffee sales to help #frican #0'S victims. The coffee giant also is
turning to cheaper modes of advertising via NouTube% =acebook and Twitter.
+.+ 1eatures4 Advanta%es and 0ene#its o# Starbucks
Starbucks has several features that help them continue to succeed in their
coffee segment. They have many specialty coffee selections% flavors% and variety.
=or e$ample% ice coffees% frappuccinos% smoothies% tea% and holiday specialty
drinks in different seasons.
#dvantages of Starbucks include the atmosphere that going into a
Starbucks portrays. ;any people go to Starbucks for the surroundings and to
2hang out4% not .ust to en.oy their coffee. The employees or 2baristas4 have been
trained not only about the Starbucks Corporation% but about the coffee market as
a whole. Starbucks continues to higher people that en.oy there type of
surroundings and love what they do. 0t is an advantage to see a happy employee
who en.oys their .obH it makes the consumer-s e$perience that more en.oyable.
7enefits of Starbucks are the free ,i+=i service so the business
professionals can come in and work on a lunch break or in the evenings. This is
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also beneficial for college students to study during finals week. Starbucks is all
about the e$perience and being able to provide their consumers a high 3uality
coffee. 0 believe that is also a benefitH they only provide the best coffee% which is
why they charge a higher price.
+., )erce(tual Ma( o# Starbucks a nd its 'om(etitors 5'o##ee S$o( Market6
The graph below illustrates customer perceptions regarding various brandsA
+.2 Marketin% Mix
0n order to ma$imize their brand awareness and establish themselves as
the most recognized and respected brand in the world and within their target
market% Starbucks implemented a well+integrated marketing program that would
utilize a marketing mi$ Cproduct% price% place% and promotion) that would satisfy
the needs and wants of its target market. The four elements of marketing mi$ that
Starbucks utilized are as follows.
+.2.1 )roduct
Starbucks product+mi$ e$panded from "5 varieties of whole bean coffees
to eco+friendly cappuccino% coffee makers% and other Starbuck paraphernalia. 0ts
product offerings have also e$panded beyond pastries and coffee to oatmeal%
smoothies% and wraps to keep up with the competition and satisfy more customer
needs.
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The company has also been constantly introducing new products% such as
<0nstant via *eady< and <=ull Beaf Tazo Tea Battes< and <Tazo Tea 0nfusions<.
The 0nstant via *eady is an instant coffee that the company claims is
indistinguishable from its regular brewed coffee C8argon). =ull Beaf Tazo Tea
Battes and Tazo Tea 0nfusions are the company9s 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 e$isting home
coffee makers.
+.2.2 )rice
Starbucks products are priced higher due to perceived upscale image
attached to its brand. The company also began to offer F1 bottomless : oz. cup
of coffee% with unlimited refills that cost appro$imately (5 cents less than any
other Starbucks products. The company is also implementing <value strategies<
that would emphasize more on ine$pensive coffee products rather being
perceived as unaffordable to price+skittish consumers. =or e$ample% the
company introduced F".6( <breakfast pairings%< including popular breakfast items
paired with a coffee% and highlights F brewed coffees instead of the more
e$pensive specialty drinks.
+.2.+ )lace
Starbucks can be found in any neighborhood where there is a perceived
high traffic for its stores. Starbucks outlets can also be found in+store of various
large chains including 7arnes S 1oble and Target. Their locations are e$tremely
conducive for individuals that are on the go and for those who en.oy 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.
+.2., )romotion
Starbucks has implemented numerous promotions to reach its target
markets. Promotions are listed as followsA
T Lne of the promotions that Starbucks has used is the Starbucks Card.
Starbucks Card is an initiative that offers customers the opportunity to promote
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company9s products through a referral system. ,hen 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 e$trinsic rewards to show employee
appreciation for a .ob well done% or a gift to client or a vendor.
T Coffee services delivered to offices without coffee size restrictions.
T #ppealing to a diverse customer base by offering international teas and coffees
to accommodate those customers that want a taste from home or for locals that
en.oy tea.
T Gsing philanthropy as a means for promotion + Starbucks contributes to several
non+profit organizations as a way to improve brand image and awareness in local
communities.
+.7 Establis$in% 'om(etitive Advanta%e
This section will e$plain in detail what differentiates Starbucks from its
competitors. The evaluation will consist of analyzing the marketing concepts%
principles% and strategic tools that Starbucks utilizes in differentiating themselves.
Starbucks is a company that has differentiated itself by convincing
consumers that it is selling more than a cup of coffee. =urther% their brand image
is associated with a sense of community activism. Starbucks feels that if they can
identify with customer9s societal endeavors% they would be differentiating
themselves on these principles. # company9s ability to adapt to changing markets
wants and needs is a key to its survival. Starbucks is a great e$ample of a
company that has done a tremendous .ob 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 company9s website C<=N 55:
Klobal *esponsibility *eport<). The company boasts of being ethically committed
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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 %555 volunteers to Bouisiana to help locals get their lives back on
track after Durricane Matrina% and in several communities laid sod% and planted
over 1555 trees C<=N 55: Klobal *esponsibility *eport<). #s 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.
,.0 S8O* Analysis
,.1 Stren%t$s
" ,ide range of coffee+products sold through the company-s retail
operations
" *esearch and development capabilities leveraged to strengthen product
portfolio
" Lperations in more than (5 countries and relationships with established
players such
" as Mraft% PepsiCo% 'reyersKrand ice cream
" 0t is a global coffee brand built upon a reputation for fine products and
services
" The organization has strong ethical values% commitment to the
environment% and community activists.
Starbucks stores offer a wide choice of regular and decaffeinated coffee
beverages% a broad selection of 0talian+style espresso beverages% cold blended
beverages% iced shaken refreshment beverages% a selection of premium teas%
and distinctively packaged roasted whole bean coffees in both GS and
international markets. =urthermore% it also offers variety of fresh food items%
including healthier choice selections focusing on high+3uality ingredients%
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nutritional value and great flavor. =ood items include pastries% prepared breakfast
and lunch sandwiches% oatmeal% and salads as well as sodas% .uices and bottled
water. #dditionally% Starbucks is a retailer of specialty coffee in the world.
Starbucks also sells coffee and tea products and licenses its trademark through
other channels such as licensed retail stores. Starbucks operated :%:"
company operated stores and @%:5" licensed retail stores worldwide as of
September 556. Such an e$tensive 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 Starbucks9s brand is the 3uality 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
e3uipment. Starbucks9s strong research and development capabilities enable it to
focus on relevant product innovation% e$pansion and leveraging of its e$isting
products and sales channels. =or instance% in =N556% the company launched
Starbucks E0# ready brew coffee to capture a significant share of both the F1
billion global instant coffee category and the single+serve market and further
e$panding its coffee e$pertise and leadership in local and international markets.
Starbucks E0# is made with a proprietary% GS patent+pending microgrind
technology to preserve the coffee-s taste% 3uality and freshness. #dditionally in
September 556% the company-s brand Seattle-s best coffee introduced 28ust
Pure =lavor4% 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 (5 calories to a 1 fl. oz. C( calories) beverage.
Starbucks invests substantial amount of resources on technical research
and development activities including customary product testing and product and
process improvements. =or instance% Starbucks spent appro$imately F).( million%
F@. million and F@.5 million during =N556% 55: and 55@% respectively on its
research and development activities. Starbucks9s focus on 3uality and product
innovation help sustain the brand value of the company and introduction of new
products at regular intervals helps them to stay competitive.
Starbucks is well positioned to increase its revenues% customer-s base%
and profit margins through its e$panded presence in international markets.
Starbucks currently operates in more than (5 countries.The company-s
international markets include #rgentina% #ustralia% #ustria% 7razil% 7ulgaria%
Canada% China% Czech *epublic% =rance Kermany% Kreece% Dong Mong%
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0ndonesia% 0reland% 8apan% ;alaysia% ;e$ico% ;iddle !ast 1ew Uealand% Peru%
Poland% Portugal% *omania% *ussia% Singapore% South Morea% Spain Switzerland%
Taiwan% Thailand% Turkey and the GM.
#dditionally% Starbucks also has established relationships with Mraft
=oods% the largest confectionery% food and beverage corporation in the GS. =or
instance% Starbucks sells its branded packaged coffees and teas in grocery and
warehouse club stores throughout the GS through its licensing relationship with
Mraft =oods. Mraft =oods manages all distribution% marketing% advertising and
promotion of Starbucks products. #dditionally% Starbucks also sells packaged
coffee and tea internationally both to warehouse club stores% such as Costco
,holesale% and to grocery stores through a licensing relationship with Mraft in
Canada% the GM and other !uropean countries.
,.2 8eaknesses
" Product recalls by Starbucks affect margins and brand image
" The organization has a strong presence in the Gnited States of #merica
with more than three 3uarters of its cafes located in the domestic market
" Starbucks has a reputation for new product development and creativity.
Dowever% they remain vulnerable to the possibility that their innovation
may falter over time% and product acceptance will come to a halt
eventually slowing growth.
" Digher coffee prices compared to competitors
" 'ownward turn in economy% people being more conscious of their
spending habits and grabbing the less e$pensive option% Starbucks not
being the one.
Starbucks has recalled few of its products in the recent times. =or instance in
=N556% the Consumer Product Safety Commission ordered recall of thousands
of Starbucks and Seattle9s best coffee blade grinders. The recall was prompted
as the company-s grinders can fail to turn off or can turn on une$pectedly% posing
a laceration hazard to consumers. The total recalls of company products included
("5%555 grinders. #dditionally% the company announced a voluntary recall of
more than 1%555 glass water bottles due to the possibility of lacerations. The GS
Consumer Product Safety Commission and Dealth Canada claimed that while
removing or reapplying the bottle-s stopper% the bottle can shatter and cut the
consumer which strained Starbucks to recall its glass water bottles in =N556.
=urthermore% Starbucks also recalled few of its products containing peanut butter
from its stores following an outbreak of salmonella in the GS. Product recalls
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such as these hurt the value of the Starbucks brand and lead to a decline in the
demand for its products.
,.+ O((ortunities
" Cost reduction initiatives such as rationalizing of global retail network to
improve margins
" !ntry into !urope-s ready+to+drink coffee sector and a tie+up with #rla
=oods
" 0ntroduction of Starbucks E0# coffee essence in 8apan
" Stable credit ratings strengthen stakeholder confidence
The company in =N556 initiated a cost reduction program to improve its
margins through rationalizing its global store portfolio. =or instance% during the
year% Starbucks completed the closure of nearly 1%555 company+operated stores
globally. #t the end of =N556% appro$imately :55 GS company+operated stores%
)1 stores in #ustralia and &1 company+operated stores in other international
markets had been closed. The remaining international store closures are
e$pected to be completed by the end of =N515. 0nitiatives such as these helped
the company to improve its operational efficiencies through reduced cost
e$penditures. =or instance% through closure of company-s stores globally has led
to cost savings of F(:5 million in =N556 for Starbucks% and few more closures
e$pected in =N515 is likely to reduce further cost of the company which
positively impact the margins. Cost reduction initiatives and related operational
efficiency efforts such as these will significantly contribute to the margin
improvement of the Starbucks.
Starbucks announced to enter the ready+to+drink C*T') coffee products in
!urope in 8anuary 515. The ready+to+drink coffee category market in !urope is
valued to be F((5 million. =urthermore% during the same year% the company also
signed an agreement with #rla =oods% a leading producer and distributor of
3uality milk products in !urope. Gnder the agreement% #rla =oods will
manufacture% distribute and market Starbucks+branded premium *T' coffee
beverages in !urope. The new relationship with #rla =oods complements
Starbucks coffee e$pertise and e$perience in the ready+to+drink coffee category.
=urthermore% e$tending 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 !urope. The success of Starbucks premium *T'
products in the GS and #sia demonstrates strong business opportunity for the
company in !uropean markets. The company-s decision to enter !uropean
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markets through introduction of its strong *T' coffee category products will
boost its top line and also e$pand its geographical reach.
#fter the company-s successful introduction of Starbucks E0# ready brew in
the GS% GM and Canadian markets in =N556% it launched Starbucks E0# coffee
essence in =N515% its first premium coffee stick product in 8apan% where )"? of
total coffee sold is instant. The company will sell its Starbucks E0# coffee
essence product through :@5 Starbucks stores in 8apan and eventually e$pand
distribution to include grocery shops and other retail channel. 8apan is one of the
biggest market at+home coffee markets valued at F( billion. ,ith the body% flavor
and rich aroma e$pected from Starbucks coffee%
Starbucks E0# coffee essence will create a new category for coffee drinkers
looking to en.oy Starbucks 3uality coffee in 8apan. #dditionally% 8apan is a key
market for Starbucks as it eyes the F" billion instant and single serve coffee
market. The launch of Starbucks E0# coffee essence in 8apan is likely to e$pand
Starbucks customer base besides enhancing revenues.
Starbucks has been rated well by credit rating agencies on account of
recording strong financials for =N556. =or instance% the rating agency Standard
and Poor-s *atings Services in #ugust 556% revised its outlook on the Starbucks
credit ratings to stable from negative based on improved credit metrics and
stabilizing performance. 0t also affirmed the 777 corporate credit rating on the
company and raised the short+term rating to #+ from #+". 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
e$pansion plans in the future.
,., *$reats
" 0ncreased minimum wages affect operating margins
" 'iscretionary spending negatively impact margins
" 0ncreasing health consciousness among #mericans could reduce demand
" Continued threat in the coffee competition
0n recent times% tight labor markets% increased overtime% government+
mandated 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 company9s operating margins. The federal minimum wage rate in the
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GS% which remained at F(.1( per hour since 166@ reached F).(( per hour in 8uly
55:. 0t is e$pected to further rise to F@.( an hour from 8uly 556. Starbucks
employed about 1&%555 people in the GS% as on September =N556. 0ncreased
labor costs could increase overall costs and affect the company9s operating
margins.
#s a retailer dependent upon consumer discretionary spending% Starbucks will
face an e$tremely challenging =N511. #ll ma.or western counties including the
GS% GM% Kermany% =rance% 0taly% Spain% 8apan and #ustralia are in the grip of
recession and are forecast to remain so through 515. !ven the key emerging
market economies are currently e$periencing downturns% including China% ;iddle
!ast and 7razil. The global economic downturn has led to a severe decline in
consumer confidence. Consumers also have less money for discretionary
purchases as a result of .ob losses% foreclosures% bankruptcies and reduced
access to credit. # decrease in consumer confidence and the resultant curbed
consumer spending would result in decreases in customer traffic and average
value per transaction. Starbucks9s business is highly sensitive to changes in
customer traffic% and the current economic downturn would put downward
pressure on the company9s margins.
Starbucks9s products contain caffeine% dairy products% sugar and other active
compounds% the health effects of which are the sub.ect of increasing public
scrutiny. 0t is suggested that e$cessive consumption of caffeine% dairy products%
sugar and other active compounds can lead to a variety of adverse health
effects. Particularly in the GS% 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. 0ncreasing
health awareness among #merican consumers could significantly reduce the
demand for the company9s beverages and food products.
2.0 Market !esearc$ 1indin%s
2.1 Starbucks 90oard o# 'ustomers:
0n September 515% we designed a revolutionary market research plan
called the 2Starbucks %oard of (ustomers4. ,e decided to conduct a coffee
convention that completely analyzed every part of our operation. 0n order to gain
an unbiased and honest opinion% Polaris 1ational ;arketing *esearch =irm
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conducted the convention. The convention took place in% Bos #ngeles% Seattle%
Phoeni$% 'allas% ;iami% 1ew Nork% Charlotte% #tlanta% and on the 0nternet. The
convention provided consumers with the opportunity to taste new potential
brewing flavors% while they shared their opinion on what Starbucks needed to
change.
The results were very eye opening and what we found was that Starbucks
had lost their personal touch and had become another profit hungry corporate
machine. The following opinions are those of real Starbucks customers. The
people interviewed ranged from Starbucks fanatics% average 8oes% and anti+
Starbucks activists. ,e looked at every survey and suggestions submitted%
Calmost (55%555 surveys in total) and picked out the ones that represented what
most customers were saying.
9)ersonali;ation is <ey:
2The coffee is still as good as ever% the flaw is in the ambiance. The interior
of each Starbucks location is growing more and more placidH meaning it needs
SLGB. 0 recall a Starbucks in Ment% Lhio where students from the nearby
university would gather on all nights of the week to reminisce% rela$% and en.oy
coziness away from school life. The employees were students as well and they
.oined their classmates in discussions while still doing their .ob. The atmosphere
at this Starbucks was warm in the winter and vibrantly cool in the summer.
7eing a college student who has recently moved to 1ew Nork City% 0 have noticed
a slight similarity in the Starbucks locations hereQthe interiors are all the S#;!.
0t could be that the general method of ;anhattan+ites is 20n 3uick to get my coffee
and go4% but 0 am not always in a rush and would like some identity as a
consumer. 0 want to be able to say% 20t-s ;N Starbucks and they are ;N
7aristas.4 //ristopher ,atel, St. 0ohns 1niversity
9 =ust as nei%$bor$oods are uni>ue4 stores need to be uni>ue :
0 think Starbucks can grow and maintain its core values% its soul if you will%
and allow for each store to create a uni3ue ambiance. 1eighborhoods are
different and if you want a neighborhood store% there needs to be fle$ibility to
adapt and customize for the consumer. Starbucks can function this way as long
as the core values are at the center of the issues. To do that% they need to get
back to their roots of being a coffee house with the smell of coffee and where
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fresh% custom+made drinks are prepared the old fashioned way. That-s what
made Starbucks. /0amey Shields, 2os )ngeles, (alifornia
9 *$ere are too many Starbucks :
0t was LM when there were some. 1ot now. 8ust today 0 noticed a new
Starbucks on my work com+ mute. Dmm% let me count the number of Starbucks
or other Starbucks+branded locations on my eight mile commute to workA there-s
one 'rive+thru location% three in #lbertson-s% one &+hour Starbucks C blocks
from #lbertson-s)% one inside target% and two more standalone Starbucks within a
& block radius of each other and the target outpost. #nd there are no large office
parks on my driveV 0n fact only a handful of people work on this routeV Clearly this
is far too many StarbucksV They are starting to be to concerned with the 3uantity
of stores than the 3uality. !very Starbucks is the same and the flooding of the
market is starting to get frustrating. /0ane-)nn &rvine, 3allas, Te-as
9 Slo" do"n?? :
!verything needs to slow down at Starbucks. 0t-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 en.oy a coffee without a lineup of "5
people and employees yelling 2triple skinny latteV4 Perhaps offering a few select
dine+in coffee servicesR 0 know this is bold and very different% but 0 feel like it
reflects the lu$ury Starbucks is trying to convey. Daving a full+service coffee
place also allows for people who go to meet up for a coffee somewhere a little
special to rela$ and chat without all the hustle and bustle. 0t-ll give a little revamp
to the image% and hopefully upgrade it a bit. /+ob Stevens, 4ew 5ork, 4ew 5ork
9 !eac$ out to t$e 'olle%e stud ent and youn% businessman cro"d:
To reach the CollegeINoung 7usinessman crowd% Starbucks must do three
thingsA
W1) Lffer free ,i+=i. This is a no+brainer. 0 was going to study at a
Starbucks today but did not since they did not have free 0nternet.
W) Create the ne$t big coffee or nonIcoffee drink trend. Starbucks
continually tries to add to its offer+ ing% but few new drinks stick. ;uch of
Keneration N began their coffee addiction thanks to the cold blended
=rappuccino drink that you can now purchase anywhere. ,hat-s the ne$t big
drinkR 0 think it-ll be something non+coffee. Lur generation loves energy drinksQ
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so how can we get a similar kick in a better tasting ,#*; drink without coffee
flavoring. Starbucks does this well in the summer% but poorly the rest of the year%
with their only real non+coffee offering being tea and the popular Chai Batte.
W") Treat each store as its own entity. 0 don-t mean with store layout design.
Create buzz around each store if you want a local feel. Stores near college
campuses should be open & hours during finals week% or at least offer free drip
coffee during those weeks for anyone with a Student 0'. ;any small business
meetings occur at Starbucks. ,hat are their needsR ,i+=i% of course. 7ut maybe
they also need to be able to reserve space to meet. Bet them call in advance to
reserve a small% comfort+ able area in the corner for a set price. 'oes the area
mostly cater to familiesR Dave toys for children to play with while the moms grab
a Chai tea% or free treats if you bring in your dog. Cater to your local crowd% and
they-ll keep coming back for more.+ &ric (assilious, (hangeThis.com
2En$ance t$e sense o# community t$at used to exist at Starbucks :
The success of Starbucks rests in its ability to create a communityQa place
where like+minded folks can come in and get a fantastic coffee e$perience. 7ut
also% a place where customers can buy into an identity% a culture% and a
community of coffee+lovers and lingerers is the key. People can argue all day
long about how the coffee is prepared% but all functional things can be copied
over time. There was a time when carrying a Starbucks coffee cup as you walked
down the street said some+ thing very distinct and very positive about you. ,ith
ubi3uity comes an unavoidable backlash from the folks who long to be special%
different% trendy and admired. The trick now% and in the future% is for Starbucks to
figure out ways to continue to give customers the ability to be included in a
community that enhances their own self+worth. there will always be functional
things they will have to do to remain relevantQsuch as offering new and different
drinks% foods% music% etc. 7ut the real way to win in the long run will be to make
the Starbucks cup cool. To carry and the Starbucks couch cool to read the
Sunday paper on. ;ake the Starbucks community the community with which
people want to be identified. The tastes% the scents% and the theatreQthese are
now all costs of entry. The 3uestion isQcan Starbucks create a Xcool- community
out of ubi3uityR /2en 6erstein, (harlotte, 4orth (arolina
7.0 Obectives
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7.1 Ex(ansion o# s(ecialty branc$ 912
t$
Avenue:
0t could certainly pass as a stand+alone Seattle neighborhood coffee
house. There is an eclectic mi$ture of old wooden tables to sit at% and pictures by
local artists adorn the walls. ,ine and beer are on sale% too% along with cheese
and meat plates. 0t feels cozy and not at all corporate. The only clue to the true
identity of 78th )venue (offee and Tea is the small print on the doorA 2inspired by
Starbucks4. =or 2inspired by4% read 2owned and operated by4. Lur goal is to
design new specialty sub+brands in order to capture more of the coffee market.
This will effectively enable us to compete with small town% individual coffee
shops% rather than being seen as a corporate entity.
The ob.ective is to have more than 55 locations in the Gnited States by
year 55.
7.2 'a(itali;e on t$e in@$ome bre"in% market
To capitalize on the growing market for single cup brewers% we are going
to channel a ma.ority of our research efforts to design a new brewer that will
allow consumers to brew a single cup of Starbucks Coffee% in their own home. 7y
the year 51(% we aim to have more than 1( million brewing systems in the
Gnited States.
7.+ /aunc$ ad cam(ai%n "it$ a #ocus on in@$omeAon@t$e@%o Via co##ee
Lver the past decade% we have not taken full advantage of the effects that
today-s advanced media can have on a company or product. 7eginning in
8anuary 51% we plan on launching an add campaign advertising the release of
our single cup brewing systems.
7., '$an%in% t$e #ocus #rom >uantity o# locations to t$e >uality
Gsing the results from% Starbucks %oard of (ustomers, we aim to increase
the 3uality of our e$isting retail locations. ,e also aim to slow the e$pansion of
our main retail locations to 155 per fiscal year. 0n the year% 55% we will conduct
another 2%oard of (ustomers convention to measure the success of our efforts.
B.0 Strate%ies
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B.1 Ex(ansion o# S(ecialty branc$es 912
t$
Avenue:
,e will conduct a year of intense market research in a potential location
for a 21(
th
#venue4 coffee shop. The Starbucks strategy for these specialty shops
is to shy away from the Xcorporate Starbucks atmosphere- and the current
Xblanket approach- that they are currently in. These specialty shops will not
display the Starbucks logo and many consumers will not know the business is
2inspired by Starbucks4. # significant road names each specialty coffee shop in
that area% hence the only one that is now operating is named after 21(
th
#venue4.
The name in itself will give the location that its in a sense of their own special%
uni3ue coffee shop. ,e will produce and design a customized e$perience for
each location. =or e$ample% a 21(
th
#venue4 in Te$as will differ from one in 1ew
Nork because of the lifestyles and demographical difference between the areas.
The locations of the 21(
th
#venues4 won-t be that of Starbucks. Starbucks- are
generally located in well+populated metropolitan cities. ,e want 21(
th
#venue to
be in smaller cities to portray the home town atmosphere specifically for each
location. 1o 1(
th
#ve is going to be the same. Starbucks is a brand with very high
recognition that is compatible for any consumerH their stores should reflect the
same aspect as their product.
B.2 'a(itali;e on t$e in@$ome bre"in% market
,e are going to research and develop an in+home% single cup coffee brewer
that is similar to the new Meurig machine. 0t will be the Starbucks brand machine
and each single cup coffee cartridges will also be Starbucks brand. ,e believe
this will be a great success for Starbucks in the home brewing market. #n
e$ample of a similar product being a success is the ;argaretville brand named
blender. The name of the blender has high brand recognition% which has made it
a great success. Starbucks has tremendous brand recognitionH that is strictly
their competitive advantage over the Meurig 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 e$ample =olgers.
B.+ /aunc$ a d cam(ai%n "it$ a #ocus on in@$omeAVCA co##ee
The strategies in conducting a new ad campaign on the in+home coffee and
the new E0# instant coffee is the motto% 2Nou can take the lu$ury of Starbucks to
your home.4 Starbucks is known to have the best tasting coffee because they pay
Starbucks Coffee Marketing Plan 2010
29
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a higher price for such a high 3uality. The high 3uality% lu$urious coffee will now
be available in the single cup% in+home brewing machine or the E0# instant coffee
packets that have been taste tested with great success. ,e will have one page
ads in a handful of magazines that Starbucks has always ran in the past which
areA *olling Stone% !SP1% ;a$im% Bucky% Cosmo% GS ,eekly and !ntertainment
,eekly. Starbucks has never done a large amount of advertising compared to
competitor% ;c'onalds 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% CStarbucks
single cup maker S the E0#) but also focusing on the Xbring the lu$ury coffee
home- factor. The ad campaign will be a large hit towards =olgers% who is a big
leader in the in+home brewing coffee segment. Starbucks will be in every aspect
of the coffee market. !ach Starbucks will have a drive threw% for the Xgrab a
coffee and go drinkers-% they will still keep the same environment throughout the
Starbucks stores% for the college student and business professional target
market% and they now will have the in+home brewing system along with a grab
and go from home instant coffee.
B., Starbucks c$an%e in #ocus D #rom Euantity o# locations to Euality
,e felt that the continuation of openings of Starbucks on every corner was
not in Starbucks best for future profits% the 3uantity shouldn-t be the focus. The
focus of Starbucks is in the 3uality% not .ust the coffee% which has already been
established% but also the 3uality of the businesses. This strategy is more focused
on the launch of the 21(
th
#venue4 stores. ,e will conduct an undercover
Starbucks board that continuously listens to the customer-s opinions throughout
the current Starbucks locations and the new 21(
th
#venue4 locations that will be
built. ,e want the 3uality of each 21(
th
#venue4 to be sincere. !ach 21(
th
#venue4
will be a different e$perience that adapts to that location. These coffee shops will
not have a corporate feel like Starbucks tends to have. There will be large
amounts of market research done in each particular location that a store may be
desired. ,e want to know the location% environment% demographics% culture% and
everything that has to do with the city to be able to portray the 2third place4% from
work and home% as these new 21(
th
#venue4 coffee shops.
F.0 *actics
F .1 Ex(ansion o# s(ecialty branc$ 912
t$
Avenue:
Starbucks Coffee Marketing Plan 2010
30
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0n order to create an effective% customized specialty sub+brand% we are
going to e$pand on our 1(
th
#venue Coffee and Tea locations. Dowever% we are
going to take an e$tremely different e$pansion approach than we have in the
past. ,e are going to open a new *S' department dedicated to developing si$
different e$periences customized to particular markets. =or e$ample% a 1(
th
#venue in a suburb of B.#. may operate completely differently than one in
Topeka% Mansas. The goal is to do enough market research to design si$
different customized e$periences that we can then e$pand with a more personal
approach to each location. #fter the si$ e$periences are established% potential
franchisees will have the option of applying to open a 1(
th
#venue in their town.
#fter an application for a franchise is submitted% the *S' department will analyze
the potential market and decide which e$perience 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.
#llowing private owners to own and operate a 1(
th
#venue 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 settingsH 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.
F.2 'a(itali;e on t$e in@$ome bre"in% market
0n order to compete directly with Meurig% we plan on selling the Starbucks
Single Cup 7rewers in all Starbucks retail locations% ,al+;art% Target% and
anywhere that coffee brewers are sold. 7y 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.

F .+ /aunc$ ad cam(ai%n "it$ a #ocus on in@$omeAon@t$e@%o co##ee
This ad campaign will focus on sending the message that you can take the
lu$ury and status of Starbucks coffee% wherever you go. ,e hope to create the
belief that having a Starbucks brewer in your home gives you a status and lu$ury
Starbucks Coffee Marketing Plan 2010
31
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that other brewers do not. ,e want to portray a lu$ury that no other brewer can
provide because we believe that no other company offers coffee better than ours.
=or our on the go coffee 9ia coffee% we would like to have an add that
shows potential customers that the coffee tastes the same as coffee brewed the
traditional way. Lur main marketing focus will be to prove that you can have the
great taste of Starbucks coffee% no matter where you go.
F ., '$an%in% t$e #ocus #rom >uantity o# locations to t$e >uality
0n order to accomplish this goal we are going to stop the e$pansion of our
current Starbucks retail stores and focus on changing the stores we have% back
to what made us so successful in the first place. To do so% we plan on
establishing regional teams to evaluate every one of our locations. #fter a
thorough evaluation% a report on the things we would like to emphasize and
change will be sent to the store managers. # year later a follow up evaluation will
be done and new assessments will be made as to the success of the changes
made. 0n the year 55 we plan to conduct another 27oard of Customers4
convention to benchmark our progress.
G.0 1inancial Cm(act o# t$e Marketin% )lan
G.1 Cncome Statement 5 &umbers in Millions exce(t (er s$are items6
Starbucks Coffee Marketing Plan 2010
32
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Starbucks Coffee Marketing Plan 2010
33
515 556 55: 55@ 55)
Period !nd 'ate 15I5"I515 56I@I556 56I:I55: 56I"5I55@ 15I51I55)
Period Bength (" ,eeks ( ,eeks ( ,eeks ( ,eeks ( ,eeks
Stmt Source 15+M 15+M 15+M 15+M 15+M
Stmt Source 'ate 11II515 11II515 11II515 11I6I55@ 11I6I55@
Stmt Gpdate Type Gpdated *eclassified *eclassified Gpdated *eclassified

*evenue 15%@5@.& 6%@@&.) 15%":".5 6%&11.( @%@:).6&
*otal !evenue 104B0B., G4BB,.7 104+F+.0 G4,11.2 B4BF7.G,

Cost of *evenue% Total :%515.5 @%@(5.5 :%"65.& @%1(.51 (%:)).)1
Hross )ro#it 247GB., 2402,.7 14GG2.7 241G7.,F 14G20.+,

SellingIKeneralI#dministrative
!$penses% Total
()6.( &(".5 &().5 &:6.( &@6."6
*esearch S 'evelopment 5.5 5.5 5.5 5.5 5.5
'epreciationI#mortization (15.& ("&.@ (&6." &)@.1) ":@.1
0nterest !$pense C0ncome)% 1et
Lperating
5.5 5.5 5.5 5.5 5.5
Gnusual !$pense C0ncome) (".5 "".& )).6 5.5 5.5
Lther Lperating !$penses% Total 6". )&.& ""5.1 6&.1& (".@
O(eratin% Cncome 14,1G., 272.0 20+.G 1402+.G2 FG+.G2

0nterest 0ncome C!$pense)% 1et
1on+Lperating
(5." "@.5 (. .& 1.6
Kain CBoss) on Sale of #ssets 5.5 5.5 5.5 5.5 5.5
Lther% 1et 5.5 5.5 5.5 5.5 5.5
Cncome 0e#ore *ax 14,+B.0 22G.G ,22.B 14027.+7 G07.2,

0ncome Ta$ + Total &::.@ 1):.& 1&&.5 ":".@" "&.@@
Cncome A#ter *ax G,F.+ +G1.2 +11.B 7B2.7, 2F1.,B

;inority 0nterest +.@ +5.@ ".: 5.5 5.5
!3uity 0n #ffiliates 5.5 5.5 5.5 5.5 5.5
G.S. K##P #d.ustment 5.5 5.5 5.5 5.5 5.5
&et Cncome 0e#ore Extra. Ctems G,2.7 +G0.F +12.2 7B2.7, 2F1.,B

Total !$traordinary 0tems
5.5 5.5 5.5 5.5 +1@.1
&et Cncome G,2.7 +G0.F +12.2 7B2.7, 27,.27


Total #d.ustments to 1et 0ncome
5.5 5.5 5.5 5.5 5.5

7asic ,eighted #verage Shares @&&.& @":.@ @"1.( @&6.: @)).11
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Cncome Statement: 10@Iear Summary
5in Millions6
Sales !70T 'epreciation Total 1et 0ncome !PS Ta$ *ate C?)
15I15 15%@5@.& 1%&"@.5 (15.& 6&(.) 1.& "&.51
56I56 6%@@&.) ((6.6 ("&.@ "65.: 5.( "5.5:
56I5: 15%":".5 &((.@ (&6." "1(.( 5.&" "1.)
56I5@ 6%&11.( 1%5().") &)@.1) )@.)& 5.:@ ").""
15I5) @%@:).6& 65).& ":@.1 (:1.&@ 5.@" "(.:&
15I5( )%")6." @6)."( "&5.6@ &6&."@ 5.)1 "@.6
15I5& (%6&.( )5.)" :6.): "::.:: 5.&@ "@."&
56I5" &%5@(.( &".&@ &(.5@ )(.") 5."" ":.)&
56I5 "%::.61 "").:6 5(.() 11."6 5.@ "@.(
56I51 %)&:.6: ::.5( 1@@.56 1:5."& 5." "@."6
G.2 *$e #inancial im(act o# ex(andin% 912
t$
Avenue:
=or one brick and mortar% 1(
th
#venue location% at appro$imately 1%555
s3uare feet% the start up cost will range from F55%555 to F"@(%555 depending on
the price of land. #fter a significant amount of market research and a review of
the first 1(
th
#venue in Seattle% which had 1.1 million in profit for fiscal 556% we
believe that the average 21(
th
#venue4 location will bring in F@(5%555 to
F1%555%555 in profit per year.
G.+ *$e #inancial im(act o# (roducin% in $ome bre"in% division
The head3uarters for our e$pansion will be located in Seattle%
,ashington. 0n order to simplify the process and minimize costs we will
outsource the production of our products overseas at a cost of appro$imately
F&&." per unit Cincludes transportation). #n estimated start+up cost of the entire
in home brewing division is 1( million. ,e believe that in the ne$t ten years% our
market share will increase enough to position us as one of the top providers of
coffee brewers in the Gnited States. This division has the potential to bring in an
estimated "55 million dollars a year.
G., 'ost o# Advertisin%
,e would like to launch a 1( million dollar ad campaign. This includes%
hiring a marketing firm% market research% TE advertising% magazine ads% online
ads% and billboard ads.
10.0 Metrics
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34
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11.0 'ontin%ency )lan
11.1 Ex(ansion o# S(ecialty branc$es 912
t$
Avenue:
,e have read a few articles regarding the new 1(
th
avenue coffee store
and they have raised the X,hat 0f these people are right- 3uestions% 91(th #ve
Coffee S Tea is an e$periment doomed to failure% because there9s no way a
corporate coffee chain can create an authentic neighborhood coffeehouse
e$perience. Nour favorite local coffeehouse is the product of someone9s passion%
dedication% and probable borderline craziness. 1(th #ve is the product of
corporate product design and development.4 0f this were to come true we would
need to continue our focus on the current Starbucks branches and the in+home
brewing market. 0f the 21(
th
#venue4 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 e$isting Starbucks stores. ,e believe that this will be a great
addition under the Starbucks name.
11.2 'a(itali;e on t$e in@$ome bre"in% market
2,hat if the Meurig coffee machine has already controlled the ma.ority of
market share for the in+home coffee machineR4 ,e believe that our brand
recognition will not let this occur when we enter the in+home brewing market with
our Starbucks name. 0f Meurig has already gained ma.ority of the market share
we will need to discuss alternatives ways to enter the market and conduct more
in+depth research% focus groups% on what the consumers would like to see in the
in+home brewing market. ,e believe market research would need to be done on
our product itself to determine what the reasoning would be for not being able to
take over the in+home brewing marketH it could be the price point% advertising% or
that is may not be something the consumer really feels the need to purchase.
These are all aspects that would be considered in the Xwhat if- analysis.
11.+ /aunc$ ad cam(ai%n "it$ a #ocus on in@$omeAVCA co##ee
2,hat if our ad campaign does not clearly portray the messageR ,hat if
we did not use enough advertisingR ,hat if the money spent on advertising is not
workingR4 0f your ad campaign does not portray the message we will know this by
the number of sales after the ad launch. 0f sales do not increase at all within &+)
months of the advertising launch we will need to reconnect and take a different
approach. The approach may be to focus on either .ust E0# or the in+home coffee
maker. ;aybe the amount of information trying to portray both of the items is too
Starbucks Coffee Marketing Plan 2010
35
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much for consumers to remember or engage in. 0f not enough advertising is the
case we will know this by consumers still not being aware of our product when
we conduct market research ) months down the road after the advertising as
been launched. ,e would then decide to use more money into advertising% much
like competitor ;c'onalds does. ,e do not feel that a large amount of
advertising is the key to a successful coffee business% but if the lack of
knowledge is significant after months of advertising that may be our ne$t focus.
11., Starbucks c$an%e in #ocus D #rom Euantity o# locations to Euality
2,hat if the 3ualities of the 21(th #venue4 stores are not accepted in the
selected areasR4 2,hat if adding additional stores is the answer in creating more
revenueR4 ,e believe that our e$tensive 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. 7ut% 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. 0f we are not creating
profit throughout the 21(
th
#venue4 coffee shops within ) months to a year we will
need to reconvene and determine whether opening up more Starbucks stores is
the answer. ,e think the 21(
th
#venue4 stores are going to be a great success.
Starbucks Coffee Marketing Plan 2010
36