4The Heritage Behind the Brand 1971, Single Store in Pikes Place MarketHoward Shultz steps into store for the first time in 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.
5Original Inspiration European Coffee House Culture “coffee as art” In 1983, a year after becoming a chairman at Starbucks, Howard traveled to Italy and became captivated with Italian coffee bars and the romance of the coffee experience. He had a vision to bring the Italian coffeehouse tradition back to the United States. A place for conversation and a sense of community. A third place between work and home. He left Starbucks for a short period of time to start his own Il Giornale coffeehouses and returned in August 1987 to purchase Starbucks with the help of local investors.Café Florian in Venice, Italy
7Facts Type Public Industry Restaurants (Genre- Coffeehouse) Founded Pike Place Market in Seattle, Washington (March 30, 1971)Founder(s) Jerry Baldwin, Gordon Bowker, Zev SieglHeadquarters Seattle, Washington, U.S.Area served WorldwideKey people Howard Schultz (Chairperson, President and CEO)
8Facts 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.
9Locations Number 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.
10Partnerships Apple in 2006 Apple adds Starbucks Entertainment to iTunes StoreMSNBC in June 2009 Morning Joe program“brewed by Starbucks”Kraft Foods in Starbucks products to be sold in Mondelez Grocery StoresBreaking!! 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.(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.
11The Starbucks Story Year by Year. 3.The Starbucks Story Year by Year.
121970’s-1980’s 1971-1976 Only sold roasted whole bean coffee Green coffee beans during this time were purchased from Peet’s1982 Schultz, joins Starbucks in marketing & operations1983 Schultz travels to Italy- coffeehouse culture1984 Convinces Starbucks to test coffeehouse concept1984 Original owners became partners at Peet’s because of the increase consumption of specialty coffee1985 Founds Il Giornale offering coffee and espresso beverages1986 Six stores in Seattle1987 Il Giornale acquires Starbucks. Schultz assumes command over Starbucks brand.Begins connecting to their customersEnter into a 5 year non compete agreement with Peet’s1988 Astounding $10 million dollars inrevenue, or 45% increase.1989 Starbucks was roasting over 2 millionpounds in coffeeWow!!
131990’s1991 First privately held company to offer a stock option programOpens first airport store at Seattle International Airport1992 Starbucks goes public being traded on NASDAQ as SBUXOver 140 store fronts in the US1994 Starbucks starts selling CDs in store1995 Introduces Frappuccino®1996 established first store out of North America in Tokyo, Japan & partnership with Pepsi1997 1,142 Store locations1998 $1.3 billion in revenue stores and purchase of “Hear Music” and Tazo Tea
142000 Schultz steps down from CEO to chairman and Orin Smith steps in as CEO2001 Introduction of Starbucks Card4,709 Stores2003 Acquires Seattle Coffee CompanyPer store annual sales was an average of $900,000 and new offerings of food, books, movies and music2004 Light or “skinny” versions became available8,569 Store!Opened alliances within airports and other facilities such as Target2005 Jim Donald CEOAcquires Ethos Water2006 Opened stores in Brazil and EgyptStarted selling their line of licensed products in grocery stores12,4402007 $9.4 billion in worldwide revenue
152008 Starbucks now viewed as a “stuff-seller” First reported decline in same store sales2008 Closed 100 of least profitable stores to re-establish their missionSchultz 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)
162009-Present2009 Starbucks focuses efforts in the community and starts gaining a “conscience” among humanitarian and conservationist efforts2012 Expansions. New plan to open over 1,000 new locations and largest Starbucks opens on University of Alabama campus2013 Starbucks opens first location in Colombia & announces many more Colombian locations to ariseToday more than 20,000 locations worldwide in 62 countriesSchultz, Howard. "How Starbucks Got Its Mojo Back." Newsweek (2011): Academic Search Elite. Web. 2 Nov. 2013
19Strengths Brand equity ( we even calculate our seasons by Starbucks!) Strong customer connectExpanding operating marginFocus on employee relationshipsCompany with a conscience
20Corporate Conscience C.A.F.E. (Coffee and Farmer Equity) Promote high quality and socially responsible collective coffee
21Weaknesses Overdependence on the U.S. market Aggressive expansion Pressure from Wall StreetBrand viewed as pretentious
22Opportunities Entry into health and food markets Growing international presenceIndia, Asia and other growing markets
23Threats Growing competition Rising commodity costs Sustaining growth Fading impact of word-of-mouth advertisingLegal proceedingsMarketLine Revenue AnalysisGlobalData Financial and Strategic Analysis Review"Starbucks Coffee Company in the 21st Century" case study by Nancy F. Koehn, Marya Besharov and Katherine Miller
25Coffee WarsStarbucks 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.
26Coffee WarsMarch 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"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.
27Coffee WarsMcD 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 serviceFocus on EDUCATIONAL
29(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 sizesGrande 16 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"
30Marketing Controversy Starbucks has been accused of:Driving out small independent competitorsIntentionally operating at a lossSaturating 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.
32The Future of the Starbucks Brand. 6.The Future of the Starbucks Brand.
332013 Coffee Consumer Trends Reports June 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%)
347.Marketing Tactics.In class we were talking about how it is hard establish a real strategy when current markets seem to be in a state on constant flux. So these are the tactics we analyzed. We feel that these tactics are on track because, learning from their mistakes, these initiatives are coffee-centered.
35B+ Starbucks Evening (As of January 2012) Customers want more options to relax in store in the eveningSelected locations onlySpecial menu 4pm-close. Includes beer, wine, appetizers“Less hurried atmosphere perfect for winding down.”Modeled after European coffeehouses that evolve with the time of dayLive music and poetry readingLow risk because they are operate out of Normal starbucks stores. If they are unpopular, they just take the sign off the door that says “evening” and return it to normala Starbucks.B+Appeals to young urban professionals, “weeknight hang”True to original inspiration of EuropeanCan maintain educational, artful atmosphereNovember 2013 Los Angelus Airport: still serves small plates of European inspired foods.Risk: Not about just coffee, Makes the starbucks brand more more complex
36D Starbucks Drive Thru (As of September 2013) US only Goal: 60% in 1,500 new US locationsAimed at sustainability“Store in a Box”: modular designLess than 1000 sq. feetAssembled off premises and delivered.This store designed to look like “shipping containers” from local portHoward Shultz used to complain that his coffee was being compared to MCDonald. He said that his company was a far cry from the McDonald’s pitstop experience. Soooo, what now Howe?The only thing that saves this from an F is its appeal to building sustainability. The selling point of this is that we tell consumers: Look, you get the same coffee, but without the extra expenses that the weigh on our environment
37B+ Starbucks Train Car (As November 2013) Zurich, Switzerland Starbucks opened first store in Europe 11 years ago in Switzerland(As November 2013)Zurich, SwitzerlandSeats 50 PeopleSpecifically designed for the locale+Maintains the ambiance of affluence+Specifically designed for the locale, so it will feel localNot a cozy coffee house, it’s a moving, bustling, train with time limits.Is this an educational relaxed coffeehouse?
38A- C+ 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 industry2012 SB introduces a line of single serving coffee makers called Starbucks Verismo with coffee podsThis tactic is all about $$$12% of American Adults own single-serving coffee (up significantly from 2012)81% of American adults aware of single serving coffee (up significantly from 2012)Very AmericanAppeals to hospitality industryHannah: Money!!!Andrea: Does not help mission. Not an educational, artful experience.Erika: B
39A+++ (As of October 2013) Tweet a Coffee Allows Starbucks to collect User infoLess Friction in Starbucks SalesSo basically, in the process of tweeting a coffee, you can potentially tell Starbucks who you are, where you live, who your friends are, what coffee you drink, and which Starbucks locations you visit or don’t visit.As we learned this is virtually FREE PRIMARY INFORMATIONThey are reaching million of people since they have the largest twitter following.With give this an A+++Because I hardly costs anythingAnd if its way too “faddy” who cares!!! Look at at all the primary Information you’re getting!
40A- My Starbucks Rewards 2009, loyalty card program established Works in Conjunction with the App that lets you scan to pay and win rewardsIn July 2013, 10% of store sales were made using the app.2009, loyalty card program established2013, opened to reward Starbucks brand groceries and Teavana purchasesBuilds loyalty. Let’s ask Arika.We give this a A. Simply because we have learned to be cautious with all kinds of “cards.” from the mistakes and warnings of our mothers. Plus grocery store means one more step in the checking out process. We are lazy. That’s also why “levels” turns us off. Is it faddy.But 10%!!! $$$$$"Mobile Payment At U.S. Starbucks Locations Crosses 10% As More Stores Get Wireless Charging"
41Consistent Fortune Magazine Rankings Reason Cited:1. Employees of the company were offered stock rewards for working 20 hours/week2. "There is potential for anyone to move up the ladder."You can’t go wrong when you are considered a great company to work for and support.
42“The way ‘we’ see it…”Our group has come to the conclusion that the Starbucks brand will thrive in future if:Continued participation in the health and wellness markets: transparency with ingredients and processes.Strong presence in and advocate for humanitarian and conservationist efforts. Make themselves a brand with a conscience worth supporting.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.Gain prestige via corporate culture rankings.In class we were talking about how it is hard establish a real strategy when current markets seem to be in a state of constant flux. Here’s what we think…#2 Especially since it will benefit Latin Americans coffee farmers. Be PRO-Latin American 76% of Hispanic-Americans drink coffee daily (up 13%)
43Original InspirationIn this #1 New York Times bestseller, the CEO of Starbucks recounts the story and leadershiplessons behind the global coffee company’s comebackIn 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.If you want to learn more about the Starbucks journey, read this book
44If this presentation inspired some ideas, you can share it on MyStarbucksIdea.com
45“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, CEOWe want to close with the words of this CEO