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Starbucks Channel Strategy

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Presentation on theme: "Starbucks Channel Strategy"— Presentation transcript:

1 Starbucks Channel Strategy
From Bean to Cup Starbucks Channel Strategy Jennifer Brinkman Donnych Diaz Rian Miller Yelena Tupitsyna Greg Welch

2 Bean Arabica Beans C.A.F.E. certified growers

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

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

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

6 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

7 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

8 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

9 Channel Strategy Factors
Customer/Market Served Focus 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

10 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

11 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

12 Channel Strategy Factors
Competition 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

13 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

14 Channel Strategy Factors
Human Resource Considerations 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

15 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

16 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.

17 Distribution Strategy
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

18 Distribution Strategy Channel Strategy Assessment
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? 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.

19 Distribution Strategy
Is marketing strategy supported by the channel strategy? 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.

20 Distribution Strategy
RECOMMENDATIONS Specialty Coffee Segment Expand and re-strategize how it markets and brands specialty coffees. Expand Multi-channel Relationships 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.


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