What has made the Starbucks brand successful?

What challenges did/does this brand face?

How will it survive as a brand in the future?

1.The Beginnings.

The Heritage Behind the Brand

• 1971, Single Store in Pikes Place Market

– Howard Shultz steps into store for the first time in 1981. Joins a year later.

The name, inspired by Moby Dick, evoked the romance of the high seas and the seafaring tradition of early coffee traders.

Original Inspiration

EuropeanCoffeeHouseCulture

“coffee as art”

Café Florian in Venice, Italy

2. Fact Sheet.

Facts

Type Public

Industry Restaurants (Genre- Coffeehouse)

Founded Pike Place Market in Seattle, Washington (March 30, 1971)

Founder(s) Jerry Baldwin, Gordon Bowker, Zev Siegl

Headquarters Seattle, Washington, U.S.

Area served Worldwide

Key people Howard Schultz (Chairperson, President and CEO)

Facts

Revenue Increase $ 13.29 billion (2012)

Operating Income Increase $ 1.50 billion (2012)

Net income Increase $ 1.38 billion (2012)

Total assets Increase $ 8.21 billion (2012)

Total equity Increase $ 5.10 billion (2012)

Employees 149,000 (2011)

Brands: Starbucks Coffee Company, Ethos water, Evolution Fresh, Hear Music,La Boulange Bakery, Seattle's Best Coffee, Tazo , Teavana,

Torrefazione ItaliaStarbucks Corporation 2011 Annual Report, Form 10-K, Filing Date Nov 18, 2011". secdatabase.com.

LocationsNumber of locations 20,891 in 62 countries (March 22, 2013)

Newest Location: Store set to open in Bogota, Columbia in 2014

"Loxcel Starbucks Map". Starbucks. March 22, 2013.

(13 November 2013). "Starbucks Fined $2.8B in Grocery Dispute, and More" (Video upload). The Wall Street Journal. Retrieved 16 November 2013.Tamara Rutter (15 November 2013). "2 Reasons Mondelez Doesn't Need Starbucks". Daily Finance. AOL Inc. Retrieved 16 November 2013.Jargon, Julie (November 13, 2013). "Starbucks Defeated, Fined $2.8 Billion". The Wall Street Journal. pp. B1–B2.

Partnerships

Apple in 2006 Apple adds Starbucks Entertainment to iTunes Store

MSNBC in June 2009 Morning Joe program “brewed by Starbucks”

Kraft Foods in 1998 Starbucks products to be sold in Mondelez Grocery Stores

Breaking!! November 2013: Starbucks to pay $2.8 billion fine to Kraft spin-off Mondelez International for its premature unilateral termination of the agreement.

Starbucks claimed that Kraft did not sufficiently promote its products and offered Kraft $750 million to terminate the agreement. Kraft declined, but Starbucks proceeded anyway.

3.The Starbucks Story Year by Year.

1970’s-1980’s• 1971-1976 Only sold roasted whole bean coffee• Green coffee beans during this time were purchased from Peet’s • 1982 Schultz, joins Starbucks in marketing & operations• 1983 Schultz travels to Italy- coffeehouse culture• 1984 Convinces Starbucks to test coffeehouse concept• 1984 Original owners became partners at Peet’s because of the increase

consumption of specialty coffee• 1985 Founds Il Giornale offering coffee and espresso beverages• 1986 Six stores in Seattle • 1987 Il Giornale acquires Starbucks. Schultz assumes command over Starbucks

brand.– Begins connecting to their customers– Enter into a 5 year non compete agreement with Peet’s

• 1988 Astounding $10 million dollars in revenue, or 45% increase.

• 1989 Starbucks was roasting over 2 million pounds in coffee

Wow!!

1990’s

• 1991 First privately held company to offer a stock option program– Opens first airport store at Seattle International Airport

• 1992 Starbucks goes public being traded on NASDAQ as SBUX– Over 140 store fronts in the US

• 1994 Starbucks starts selling CDs in store• 1995 Introduces Frappuccino®• 1996 established first store out of North America in Tokyo, Japan &

partnership with Pepsi • 1997 1,142 Store locations• 1998 $1.3 billion in revenue 1999 1200 stores and purchase of “Hear

Music” and Tazo Tea

2000-2007

• 2000 Schultz steps down from CEO to chairman and Orin Smith steps in as CEO

• 2001 Introduction of Starbucks Card– 4,709 Stores

• 2003 Acquires Seattle Coffee Company – Per store annual sales was an average of $900,000 and new offerings

of food, books, movies and music• 2004 Light or “skinny” versions became available

– 8,569 Store!– Opened alliances within airports and other facilities such as Target

• 2005 Jim Donald CEO – Acquires Ethos Water

• 2006 Opened stores in Brazil and Egypt– Started selling their line of licensed products in grocery stores– 12,440

• 2007 $9.4 billion in worldwide revenue

2008

• Starbucks now viewed as a “stuff-seller”• First reported decline in same store sales• 2008 Closed 100 of least profitable stores to re-

establish their mission• Schultz re-emerges as CEO, to help revitalize “the

watering down of the Starbucks experience and the commoditization of the Starbucks brand” (memo from Howard Shultz to senior Management, February 14, 2007)

http://globalassets.starbucks.com/assets/e56b2a6b08244aaab0632dc6ac25ad0d.pdf

2009-Present

• 2009 Starbucks focuses efforts in the community and starts gaining a “conscience” among humanitarian and conservationist efforts

• 2012 Expansions. New plan to open over 1,000 new locations and largest Starbucks opens on University of Alabama campus

• 2013 Starbucks opens first location in Colombia & announces many more Colombian locations to arise

• Today more than 20,000 locations worldwide in 62 countries

http://www.starbucks.com/about-us/our-heritageSchultz, Howard. "How Starbucks Got Its Mojo Back." Newsweek157.12 (2011): 50-55. Academic Search Elite. Web. 2 Nov. 2013

4.SWOT Analysis.

Strengths

• Brand equity ( we even calculate our seasons by Starbucks!)

• Strong customer connect• Expanding operating margin• Focus on employee

relationships• Company with a conscience

Corporate Conscience

• C.A.F.E. (Coffee and Farmer Equity)– Promote high quality and socially responsible

collective coffee

http://globalassets.starbucks.com/

Weaknesses

• Overdependence on the U.S. market• Aggressive expansion• Pressure from Wall Street• Brand viewed as pretentious

Opportunities

• Entry into health and food markets• Growing international presence

– India, Asia and other growing markets

Threats

• Growing competition• Rising commodity costs• Sustaining growth• Fading impact of word-of-mouth advertising• Legal proceedings

1. MarketLine Revenue Analysis2. GlobalData Financial and Strategic Analysis Review3. "Starbucks Coffee Company in the 21st Century" case study by Nancy F. Koehn, Marya

Besharov and Katherine Miller

5.The Coffee Wars.

Coffee Wars

• Starbucks declines in the 2000s, leading heavier competition with Dunkin' Donuts (DD) and McDonald's (McD) despite Schultz's "pain" in his company being compared with fast-food restaurants.

• Economic recession + rising prices for food commodities (which were at an all-time high in 2008) caused Starbucks to increase their prices, which pushed consumers to DD or McD.

Coffee Wars

• Starbucks tests drive-through windows and introduces breakfast sandwiches to their menu.

• McD added espresso and flavored coffee to its menu, which it marketed as "specialty coffee," and sold for 60 cents cheaper than Starbucks.

• Starbucks began using television commercials in November of 2007.

March 2007 Consumer Reports ranked Starbucks behind McDonald's Premium Roast. The magazine called Starbucks coffee "strong, but burnt and bitter enough to make your eyes water instead of open"

Coffee Wars

• McD created "UnsnobbyCoffee.com" and billboard advertisements in Seattle that said "Four bucks [for espresso] is dumb.”

• Schultz was reinstated as CEO of Starbucks, and re-focuses on educational and artful coffee experience and customer service

http://www.youtube.com/watch?v=r2y_GwKzxck

(PS. Here’s how the size chart works)

Demi 3 US fl oz (89 ml) Smallest size. Espresso shots.Short 8 US fl oz (240 ml) Smaller of the two original sizesTall 12 US fl oz (350 ml) Larger of the two original sizesGrande16 US fl oz (470 ml) Italian for "large"Venti 20 US fl oz (590 ml), Italian for "twenty”

26 US fl oz (770 mL)Trenta 30 US fl oz (890 ml) Italian for "thirty"

Marketing Controversy

Starbucks has been accused of:1. Driving out small independent competitors2. Intentionally operating at a loss3. Saturating the market (clustering several

locations in small geographic area)

Klein, N. (2001). No Logo New York: Flamingo, pp. 135–140"Store Wars: Cappuccino Kings". BBC News. June 9, 2004. Wander, Jonathan (March 2010). "Ken Zeff". Pittsburgh Magazine.

January 2013

6.The Future of the Starbucks Brand.

2013 Coffee Consumer Trends ReportsJune 20, 2013 HIGHLIGHTS

• 83% of Americans had one coffee/espresso drink in the past year (up 5%)

• 63% of American adults consume coffee daily (same as 2012)• 75% of American adults consume coffee weekly (up slightly)

• 76% of Hispanic-Americans drink coffee daily (up 13%)• 12% of American Adults own single-serving coffee (up significantly from

2012)• 81% of American adults aware of single serving coffee (up significantly

from 2012)• Consumer Ages:

• 18-24 at 41% (down 9%)• 60+ at 76% (up 5%)

7.Marketing Tactics.

Starbucks Evening

(As of January 2012)• Customers want more options to relax

in store in the evening• Selected locations only• Special menu 4pm-close. Includes

beer, wine, appetizers• “Less hurried atmosphere perfect for

winding down.”• Modeled after European coffeehouses

that evolve with the time of day • Live music and poetry reading

B+

Starbucks Drive Thru

(As of September 2013)• US only• Goal: 60% in 1,500 new

US locations• Aimed at sustainability• “Store in a Box”: modular

design• Less than 1000 sq. feet• Assembled off premises

and delivered. http://news.starbucks.com/news/innovative-new-drive-thrus

This store designed to look like “shipping containers” from local port

D

Starbucks Train Car

(As November 2013)• Zurich, Switzerland• Seats 50 People• Specifically designed for

the locale

http://news.starbucks.com/news/

Starbucks opened first store in Europe 11 years ago in Switzerland

B+

Single Servings

(As of February 2011)• 2010, SB serves premium single serves

which accounted for 2/3rds of growth coffee sales in US.

• Starbucks’ Via (instant coffee) generated $180 million.

• SB VIA permeates the hospitality industry• 2012 SB introduces a line of single

serving coffee makers called Starbucks Verismo with coffee pods

A- C+B

Tweet-A-Coffee

http://www.washingtonpost.com/

(As of October 2013)• Tweet a Coffee• Allows Starbucks to collect

User info• Less Friction in Starbucks

Sales

A+++

My Starbucks Rewards

• 2009, loyalty card program established

• 2013, opened to reward Starbucks brand groceries and Teavana purchases

Works in Conjunction with the App that lets you scan to pay and win rewards

In July 2013, 10% of store sales were made using the app.

"Mobile Payment At U.S. Starbucks Locations Crosses 10% As More Stores Get Wireless Charging"

A-

Consistent Fortune Magazine Rankings

Reason Cited:

1. Employees of the company were offered stock rewards for working 20 hours/week

2. "There is potential for anyone to move up the ladder."

http://money.cnn.com/magazines/fortune/best-companies/2013/snapshots/94.html?iid=bc_lp_arrow1

A+

“The way ‘we’ see it…”

Our group has come to the conclusion that the Starbucks brand will thrive in future if:

1. Continued participation in the health and wellness markets: transparency with ingredients and processes.

2. Strong presence in and advocate for humanitarian and conservationist efforts. Make themselves a brand with a conscience worth supporting.

3. Protecting the unique identity of each Starbucks store, to avoid the “big chain” feel and to preserve the “artful and educational coffee ambiance ” at home in each locale.

4. Gain prestige via corporate culture rankings.

Original Inspiration

In this #1 New York Times bestseller, the CEO of Starbucks recounts the story and leadershiplessons behind the global coffee company’s comeback In 2008, Howard Schultz decided to return as the CEO of Starbucks to help restore its financial health and bring the company back to its core values. In Onward, he shares this remarkable story, revealing how, during one of the most tumultuous economic periods in American history, Starbucks again achieved profitability and sustainability without sacrificing humanity.

“The road is paved with so many companies that have lost their way through thinking that they can be all things to all people.

The strength of Starbucks brand and the success of our company is linked to focus and discipline. We’ll continue to be a coffee company.

That’s who we are.”

-Howard Shultz, CEO