University of Worcester

Starbucks Branding Strategy

BUSM3411 Brand Development and Corporate Identity]

By Alexandra Sanchez-Havard

12/14/2011

Table of Contents

1 Introduction 3

2 Brand Positioning 4

2.1 Target Market............................................................................................................4

2.2 Product...................................................................................................................... 5

2.3 Packaging...................................................................................................................6

2.4 Distribution................................................................................................................7

2.5 Pricing........................................................................................................................7

3 Brand Architecture 8

3.1 Brand-Product Matrix................................................................................................8

3.2 Brand Extension.......................................................................................................10

References 13

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1 Introduction

The Starbucks Corporation has been the most successful coffee chain in the world over the

last three decades. According to Interbrand’s Global Brand Value survey 2011, Starbucks

Brand Value was 3,663 ($m) and is ranked at Number 4 of the best global brands in the

Restaurant Sector worldwide. The Starbucks Brand has gained a strong acceptance and

value in consumer’s perception over 11 years. Starbucks knows that to ensure continued

growth and popularity in the future they must leverage its brand value across all sales

channels. As Brand value is based in part on consumer’s perceptions on a variety of

subjective qualities, the company believes that it is of highest importance to consider every

incident that could damage the company’s reputation when going public and reduce brand

value, even if those are single, detached incidents - for example, contaminated food scare.

Consumer demand could reduce significantly if the company fails to preserve their

reputation for quality products, or if they are perceived to act in an unethical or socially

irresponsible manner. A failure to deliver a consistent, positive consumer experience in each

market segment could be very damaging for the Starbucks brand (Starbucks Annual Report

2011).

Moreover, the company is facing a strong increase in competition and consequently the

challenge is to maintain a sustainable market advantage, to stay on the top! This requires

constantly improvements in the company’s branding strategy and focusing on innovation.

Only recently the company has introduced a new branding strategy, by changing their Logo

and reinforcing its place as a neighbourhood institution, which I am going to explain deeper,

further on in this assignment.

To enable a company to meet its agreed objectives it must have a forward thinking Brand

Strategy, an ongoing, flexible plan for the systematic development of the brand. The

strategy should be rooted in the brand's vision and driven by the principles of differentiation

and sustained consumer appeal. The brand strategy should influence the total operation of

a business to ensure consistent brand behaviours and brand experiences

(Brandchannel.com). The goal of branding strategies is to maximize brand equity across all

the different brands and products. A company’s branding strategy specifies which brand

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elements it can source from to apply across its range of products. Branding strategy is

crucial, it’s the driving force by which the company can help consumers understand its

products and services and organize them in their mind (Keller, p.433).

To examine a company’s branding strategy we need to understand how its brand is

structured within its portfolio by looking at their Brand Architecture. To begin with, we are

going to look at Starbucks current brand positioning, the place in a consumers mind. In

other words, what consumers think when they hear or see the Starbucks brand?

Subsequently I will be able to identify the company’s current Brand Architecture and

possible issues that might arise by implementing a poor branding strategy. Lastly I am going

to look at some of the marketing Strategies Starbuck’s has used to enhance the Value of it’s

brand.

2 Brand Positioning

Brand Positioning is the place in consumers mind that a company wants its brand to be – the

benefit it wants a person to associate with it’s brand. A strong brand position means the

brand has a unique, credible, sustainable and valued place in customers’ mind (Shimp).

Starbucks does not only stands for premium coffee, but also for the place, where people

want to hang out besides their first place (home) and their second place (work). That’s why

Starbucks focus so much on offering its customers a range of entertainment products, like

music, books and wireless internet. All this is part of creating an air of comfort, relaxation,

exclusivity and familiarity which attracts customers to stay longer in their coffee shops.

Starbucks deals with brand positioning by continuously aligning itself to its customers. They

position themselves by appealing to their target markets needs.

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2.1 Target Market

Starbucks’ primary target market is men and women between 25 and 40. They account for

almost half (49 percent) of its total business. Those customers tend to be people with

relatively high income, professional careers and a focus on social welfare. Originally when

Starbucks began they targeted the young college students, with slightly higher than average

income levels. Now that the company has matured and expanded they have realized, that

they are able to target specific neighbourhoods and social classes. Starbucks is among the

highest priced coffee drinks and now considered a "luxury" coffee maker. Different

customers are more willing to pay for luxury good now than ever. Through Starbucks

aggressive expansion techniques they have now begun targeting almost every demographic.

Starbucks specialty coffee drinks make around 75 percent of their sales, but an increasing

amount of its business is centred on selling whole bean coffees and merchandise. This

provides consumers with the opportunity to take the “Starbucks’ experience” home.

Starbucks also offer coffee beans and merchandise via online shopping and through

supermarkets, through the Starbucks’ family of coffee, including Starbucks brand, Seattle’s

Best and Starbucks VIA (Smallbusiness).

2.2 Product

Starbucks has positioned itself as a premium product in the coffee industry. By creating a

high standard, introducing innovative products and providing excellent service they have

successfully achieved this goal. Nevertheless, the company was aware of the fact that coffee

is a perishable product and the risk associated with getting it wrong. That’s why they place a

great emphasis on quality control and monitored each and every step of coffee production.

In their company profile they promise that all of their coffee is grown under the highest

standards of quality, using ethical sourcing practices and sending their own coffee buyers

personally to travel to the coffee farms in Latin America, Africa and Asia to select the highest

quality arabica beans. Nowadays, Starbucks product-mix has expanded from 30 varieties of

whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbucks

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paraphernalia. To keep up with the competition the company has also extended its product

range beyond coffee and tea to pastries, sandwiches, salads, ice-creams, liquor, water and

more. Starbucks also offers seasonal products, such as strawberry and cream Frappuccino in

the summer and gingerbread latte at Christmas.

Starbucks has a reputation for ground breaking innovative. They are always focusing on new

product development and creativity. However, they have experienced failures in some of

their innovations. For example, several years ago, Starbucks attempted to enter the

magazine business and failed very quickly. Before Starbucks invented Frappuccino, they

introduced a carbonated drink that also failed. Howard Schultz, Starbucks CEO claims that

that innovation and an entrepreneurial spirit still lives in the fabric of the company. While

many of these attempts failed, he credits the spirit of the company to continue to push the

limits and create huge commercial successes.

With its new branding strategy it is clear that the coffeehouse is open to experiment with

new products and in new markets.

Starbucks has realized the importance of going forwards and making innovations in

technology. For example, Starbucks has identified that wireless internet would be a great

asset to its coffee shops. With thousands of locations, Starbucks owns a network that can be

leveraged. Starbucks plans to roll out new internet based products in stores ranging from

online TV to music download services.

2.3 Packaging

Since end of 2010, Starbucks has begun to construct all new company-owned stores

worldwide under the LEED® (Leadership in Energy and Environmental Design) green building

program, reducing the environmental footprint (Starbucks Shared Planet). Starbucks has

been continually making efforts to produce cups that are more eco-friendly. In 2006, they

introduced a paper cup that contained 10 percent post-consumer recycled fiber, and last

year it switched from the standard PET cold cups to polypropylene cold cups, which use

significantly less plastic and reduce greenhouse gas emissions during manufacturing by 45

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percent. Starbucks goal is to have all of its cups 100 percent recyclable by 2012. To help

achieve this goal the company is recruiting the packaging and recycling industries (Sam

Ochs, QSR Magazine).

2.4 Distribution

As part of its international strategy, Starbucks intends to seize opportunities to move

beyond retail stores. Extending its profitable global consumer products group allows them

to reach more customers in more places that will allow them to grow the business at an

accelerated pace around the world. There remains a big opportunity in the evolution of

their distribution structure and with an increasing variety of offerings in the grocery

channel.

Starbucks is adding to the product mix by offering new licensing agreements for its products

with a number of other companies. Generally, the main purpose of creating the licensing

agreements is to improve distribution and production methods of Starbucks products. The

agreement with Pepsi-Cola Company to produce and distribute bottled Starbucks products

in grocery and warehouse club stores is an excellent example of this type of licensing

agreement.

2.5 Pricing

Starbucks has succeeded in perusing its customers to buy pricey espresso drinks. As a high-

end spectrum among retail chains, they are able to offer expensive premium coffee.

However since the start of the recession, its pricing strategy has been questioned recently.

With Seattle’s Best Coffee, the company is offering a more value coffee. Nevertheless

Starbucks had to announce a price raise due to the increasing price of coffee beans, dairy

and other raw material. Coffee is sold in different sizes so that the customer can choose

according to their budget. Unlike the coffee, tea prices aren’t based on the size, instead it’s

based on the number of tea bags, since water is pretty cheap in non-bottle form.

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3 Brand Architecture

The Architecture of a brand shows how an organization structures and names the brands

within its portfolio. It helps minimize customer confusion by laying out the product structure

in a way that makes it easy for customers to find what they are looking for and to

understand what the company has to offer (Prophet). As with the recession, consumers

spending behaviour has changed and customers have become more opinionated, savvy and

connected. In particular, the internet has made it possible for customers to access

information about any products they are interested in. Therefore, it is of great importance

to develop an accurate brand architecture and portfolio management system. A well

managed portfolio represents the interrelation of the brands within an organisation. Getting

it right or wrong affects the financial value of customer relationships. A company will

benefit, on a number of levels, by fully understanding brand architecture, identifying the

best and most valuable arrangement for products and services, and making demonstrable

progress towards it (Interbrand 2011). Those brands that demonstrate transparency,

integrity and authenticity are most likely to build successful long-term relationships with

their customers.

The following strategic tool brand-product matrix (brand portfolio) will help to characterize

and formulate branding strategies by defining the relationship among brands and products.

3.1 Brand-Product Matrix

The brand-product matrix is a graphical representation of all the brands and products sold

by a firm (Keller). The rows of the matrix demonstrate the relationships between the

company’s brands and products (brand-product relationship), and thus the extension

strategy of the firm. The columns represent the relationships between the products and the

brands (product-brand relationships) of the company, and form the brand portfolio (the set

of all Brands and Brand Lines that an organisation offers for sale to buyers in a particular

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category) strategy of the firm (Keller). The aim is to maximize market coverage and minimize

brand overlap through the effective creation, implementation, and management of multiple

brands within a company. It serves as an inward-facing tool for the organization to ensure

that their brands are effectively targeting all key segments within the marketplace, working

together to maximize sales rather than competing against one another for their customers’

attention (Prophet). Starbucks is using a portfolio of brands to reach a more diverse set of

consumer without sacrificing the integrity of their core brand (Ben Wise). In addition to its

flagship Starbucks brand, its current Brand Portfolio consists of Tazo® Tea, Seattle’s Best

Coffee®, and Starbucks VIA® Ready Brew (Starbucks Annual Report).

Brand Product Matrix (Starbucks)

Starbucks Coffee Whole Bean CoffeeBoldExtra BoldMedium

Espresso BeveragesCafé LatteCappuccinoAmericano

Frappuccino BeveragesCaramel FrappuccinoCafé Vanilla FrappucinoCinnamon Dolce Creme

Tazo® Tea Tea LattesChai Tea LatteAwake Tea LatteEarl Grey Tea Latte

Brewed TeasEarl Grey Brewed TeaPassion Brewed TeaRefresh Brewed Tea

Iced TeasIced Awake Tea Latte Iced Chai Tea LatteIced Green Tea Latte

Starbucks VIA® Ready Brew

Ready Brewed CoffeeBreakfast Blend (mild)House Blend (medium)Italian Roast (extra Bold)

Flavoured CoffeeIced CaramelVanilla Mocha

Seattles’s Best Coffee

Espresso BeveragesClassic LatteClassic MochaCaramel Mocha

Iced Lattes (in a can)Iced LatteIced Vanilla LatteIced Mocha

Tea BeveragesIced TeaChai Tea

With Seattle’s Best Coffee brand, the company wants to target a different segment of the

market place. This action is designed to protect the position of Starbuck’s brand ‘home away

from home’, the coffee giant is selling Seattle’s Best coffee through fast food chains like

Burger King and others. Seattle's Best Coffee is generally cheaper than that of its parent

brand, and is marketed as more of a working class coffee compared to the premium

Starbucks coffee. Starbucks hopes to grow Seattle’s Best into a billion-dollar business by

expanding it to fast-food channels, convenience stores, drive-through restaurants and even

vending machines (Adweek). “Our endgame is to bring our great coffee everywhere," says

Michelle Gass, president of Seattle’s Best Coffee in the TIME Business Magazine.

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Nevertheless, there is the risk of cannibalization. The risk that Seattle’s Best Brand could

take over and Starbucks would lose its main position to be seen as a premium Coffee retailer

that offers its customers a third place away from home. Further on, associating Starbucks

with a product sold from vending machines could also damage the brand's upscale image.

Coffee sold from Vending-machines are most found in factories and cantinas, they have

been regarded as a last resort. Starbucks has to be extremely careful with the brand

extension of Seattle’s Best Coffee.

3.2 Brand Extension

Since the nineties the Starbucks has been constantly extending its product and brand lines.

Recently the company has made some significant changes to its Brand identity. They have

changed their Logo by removing the word Starbucks and simplifying the Logo. This obviously

will have an impact on its brand portfolio which we can already see with Starbucks decision

in experimenting with Alcohol products. The company wants to “think beyond coffee” says

Howard Schultz in its Starbucks Website. He also explains that the new brand identity is

supposed to give Starbucks the freedom and flexibility to explore innovations and new

channels of distribution that will keep them in step with their current customers and build

strong connections with new customers (Starbucks). Starbucks is planning to manage its

expansion into new product categories and business models. They want to diversify and

therefore they need a mark that doesn’t tie it to just coffee shops. The company has already

tried its hand at the music distribution, ice creams, and sandwiches and now it wants to try

entering into a new market by selling beer and wine. I think it’s pretty clear that it wants to

explore other business models. Removing the coffee anchor from the mark allows them to

do that.

On the other hand, this might not have been necessary to be done because Starbucks could

have created this new logo for its corporate entity – the overarching, umbrella Starbucks

brand – and kept the name Starbucks without the logo. This would have given them the

freedom to apply the new mark to non-coffee business concepts without having to worry

about associating itself solely with coffee. This doesn’t take in to consideration the savings

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to be made from not having to redo every sign in the world, reprint every menu and every

cup, change all of the websites and collateral, etc.

Before making the decision to extend a brand into a new product or service category,

Starbuck has bear in mind what the brand stands for, what people associate it with and

what its personality is. Then it has to identify if these qualities will be beneficial or

problematic in the new product. They need to determine what the new product or service

category will do for the brands identity. The ideal picture would be to draw in wider

consumer group, enhancing its perception and broadening its appeal. However the opposite

could also happen. This decision could over broaden Starbucks appeal making them into a

brand for all but losing them their title as the leaders of coffee shop experiences.

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REFERENCES

Brandchannel.com. Brandcarriers-glossery [online]. Available from:

http://www.brandchannel.com/education_glossary.asp [Accessed 22nd November 2011]

Ben Wise on Branding (19th February 2010). Starbucks Benefits From a Portfolio of Brands. [online] Available from: http://www.benwise.ca/starbucks-benefits-from-a-portfolio-of-brands/ [Accessed 24th November]

Gregory, Sean (25th May 2010). Starbucks Hits McDonalds with Seattle’s Best [online]. Time Business.

Available from:

http://www.time.com/time/business/article/0,8599,1990813,00.html#ixzz1g8pBB7Pz

[Accessed 24th November 2011]

Interbrand. Best Global Brands 2011.[online] Available from:

http://www.interbrand.com/en/best-global- brands/BGB-Interactive-Charts.aspx [Accessed

22nd November 2011]

Nasdaq Stock Market. United States Securities and exchange commission (Form 10-K).

[online] Available from: http://secfilings.nasdaq.com/edgar_conv_html

%2f2011%2f11%2f18%2f0001193125-11-317175.html#D232803D10K_HTM_TOC [Accessed

22nd November 2011]

Ochs, Sam (2011) How Starbucks is changing packaging [Online]. Available from:

http://www2.qsrmagazine.com/articles/features/134/starbucks-1.phtml [Accessed 6th

December 2011]

O‘Farrell, Rene (2011) Who is Starbucks target audience [online]. Chrone. Available from:

http://smallbusiness.chron.com/starbucks-target-audience-10553.html [Accessed 24th

November 2011]

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Prophet (2011). Brand Portfolio and Brand Architecture in Single Brand Companies.[Online]

Available from: http://www.prophet.com/thinking/view/196-brand-portfolio-and-brand-

architecture-in-single-brand-companies [Accessed 22nd November 2011]

Starbucks Corporation. (2011c) Company Profile [Online]. Available from:

http://globalassets.starbucks.com/assets/aboutus-companyprofile-q1-2011-final-3-8-11.pdf

Starbucks Shared Planet (2008). Our Responsability [Online]. Available from:

http://www.starbucks.com/assets/fy08-gr-report.pdf [Accessed 6th December 2011]

[Accessed 6th December 2011]

Schultz, Howard. (5th January 2011). Looking forward to Starbucks next chapter [online].

Starbuck Corporation. Available from: http://www.starbucks.com/blog/looking-forward-to-

starbucks-next-chapter [Accessed 24th November 2011]

Wong, Elaine (h May 2010). Why Starbucks Rebranded Seattle’s Best Coffee [online].

Adweek. Available from: http://www.adweek.com/news/advertising-branding/why-

starbucks-rebranded-seattles-best-coffee-107377?pn=1 [Accessed 24th November 2010)

Textbooks

Keller, K.L. (2008) Strategic Brand Management: Building, Measuring, and Managing Brand

Equity. 3rd edition. Upper Saddle River, New Jersey, Pearson Education

Kotler, P. and Bliemel, F. (1999) Marketing Management. 9th edition. Schaeffer-Poeschel

Verlag Stuttgart

Shimp, A.T. (2007) Integrated Marketing Communications in Advertising and Promotion. 8th

edition. South-Western, Cengage Learning

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