From Bean to CupStarbucks Channel Strategy

Jennifer Brinkman

Donnych Diaz

Rian Miller

Yelena Tupitsyna

Greg Welch

Bean

http://www.starbucks.com/whatmakescoffeegood/good_coffee.html

• Arabica Beans • C.A.F.E. certified growers

Roasting

http://www.starbucks.com/whatmakescoffeegood/good_coffee.html

• Roasts beans in 3 domestic roasting plants and 1 in Amsterdam

Tasters

http://www.starbucks.com/whatmakescoffeegood/good_coffee.html

• Starbucks’ professional coffee tasters may taste up to 800 cups of coffee a day.

Distribution

http://www.starbucks.com/whatmakescoffeegood/good_coffee.html

• Packaged Coffee is then stored in Distribution Centers • Then picked up by Partners filling store orders

Stores

• Starbucks Partner or Barista is the company’s contact with the customer

• The process ends at the store where customers enjoy freshly prepared coffee drinks

Intermediate Functions

INTERMEDIARIES• Starbucks depends upon both outside brokers and its direct

contact with exporters for the supply of green coffee• Channel Members are part of a “Dependent channel

arrangement” • Starbucks operates its own distribution system• Coffee is traded on a negotiated basis, usually quite a bit

higher in price• Reduce risk of unpredictability of coffee price and supply,

Starbucks enters into long-term fixed price contracts with its suppliers

Intermediate Functions

INTERMEDIARIES• Starbucks sells a wide variety of whole and ground bean

coffees in grocery and warehouse club stores as well as Frappucinos and coffee-flavored ice creams

• Other channel of delivering coffee is through direct distribution, the selling and distributing product to account members in airports, hotels, schools, restaurants and hospitals

Channel Strategy Factors

Customer/Market ServedFocus Market Region: United States• In the United States, some 78% of consumers drink coffee7 • Of that percentage, females are more likely to be the consumers rather

than males• The higher frequency of consumption tends to be older people

Focus Market Region: China• Coffee consumption in China is highly concentrated in large cities• Coffee appeals to adventurous, open-minded, young, affluent, urban

consumers• Many of these returnees have lived in Western countries for a decade and

they have become accustomed to the coffee culture

Channel Strategy Factors

Product Service Characteristics• Starbucks’ whole business is driven by their strong brand

image• They strive to have a knowledgeable staff and unique,

recognizable packaging• Starbucks also has the image of being known for $5 cups of

coffee but you’re also getting some image for your $5, too• Starbucks also uses an intensive distribution strategy to make

their logo and coffee ubiquitous around the world

Channel Strategy Factors

Product Life Cycle

• Most items Starbucks sells are consumables, representing their core business (77%) Coffees, teas, Frappacino’s, etc.

• They also distribute at-home coffee in-store as well as through convenience and grocery stores

• Starbucks strives to keep its coffee drinks fresh by changing menu

• Many drinks are cash cows, while others are seasonal with limited life

Competition

Channel Strategy Factors

• Biggest threat MacDonalds threat to market share• Dunkin Donuts • Competes with both direct channel and retailer channel

through website, their stores and grocery stores • Multiple distribution gives competitive advantage over

smaller coffee chains and at-home coffee companies

Channel Strategy Factors

Environmental Factors• Eliminates competition via Cluster bombing tactics, buyouts

and cannibalization • Open several stores next to competition• Aggressive advances increased revenue by 24% in one year

alone

Human Resource Considerations

Channel Strategy Factors

• Employees offered stock• Health Benefit (including part time)• 1 LB free coffee per week

• Special/Continuous Training• Turnover Rate• 50% Starbucks vs 400% Coffee Industry• 401k

Distribution Strategy

• Starbucks’ level of distribution is intensive via retail stores

• Starbucks has Direct Retail System through operation of its own Retail outlets

Accomplishes direct marketing of product while maintaining marketing strategy and mission statement

Maintains high level of customer service via product offerings and vast number of locations

Distribution Strategy

• S.B. has control/power over channels of distribution• S.B. imports high quality coffee beans• S.B. developed socially responsible coffee buying

guidelines called C.A.F.E. • Exclusive contracts from growers usually 5 years out

High level of cooperation amongst growers/suppliers leads to rapid inventory replenishment

Reduces total costs of marketing channel and improves customer service

Roasts beans in its roasting plants Stores beans in warehouse for distribution to retail

outlets.

• S.B. has Corporate Dependent Channel Arrangement• Operates its own distribution system in a manor that

produces an integrated channel• S.B. imports and processes coffee then sells it under

their own brand name in their own stores• Has other ways to distribute products via groceries

stores and mail order using a multi-channel structure to market products

• Channel relationships are increasingly important in creating market value; maintain brand image and a sustainable competitive advantage

Distribution Strategy

• Are the distribution decisions in order to facilitate an effective and efficient distribution system accomplishing this and are the results in line with the marketing strategy?

Channel Strategy AssessmentDistribution Strategy

At the direct retail system level yes, the current channel strategy and decisions are facilitating the marketing at the retail level delivering a high quality product to the customers.

S.B. also accomplishes integration of marketing and distribution via mail order as well as grocery stores.

Other partner relationship dependent on a multi-channel strategy have been successful i.e. PepsiCo – Frappucino product.

The marketing strategy of offering a differentiated product is supported by the purchase of high quality coffee along with high quality controls/standards applied to growers/suppliers.

Expansion of retail outlets promotes further marketing and brand image

S.B. has seen extensive growth in the international markets. Developing retail units as well as licensed units abroad. This again strengthens the company’s position as a global purveyor of quality coffee drinks.

• Is marketing strategy supported by the channel strategy?

Distribution Strategy

• Specialty Coffee Segment

RECOMMENDATIONS

• Expand Multi-channel Relationships

Expand and re-strategize how it markets and brands specialty coffees.

Expand and develop new domestic channels focus on Specialty soft drinks, energy drinks, and ready-to-drink products

Nutritional and Health drink segment. Acquire company whose product lines offer nutritional/health drinks and ascribe to principles of sustainability and environmental stewardships re-enforcing the company’s mission statement, brand image and positioning.

Distribution Strategy

THANK YOU!