3Roasting Roasts beans in 3 domestic roasting plants and 1 in Amsterdam
4TastersStarbucks’ professional coffee tasters may taste up to 800 cups of coffee a day.
5Distribution Packaged Coffee is then stored in Distribution Centers Then picked up by Partners filling store orders
6StoresStarbucks Partner or Barista is the company’s contact with the customerThe process ends at the store where customers enjoy freshly prepared coffee drinks
7Intermediate Functions INTERMEDIARIESStarbucks depends upon both outside brokers and its direct contact with exporters for the supply of green coffeeChannel Members are part of a “Dependent channel arrangement”Starbucks operates its own distribution systemCoffee is traded on a negotiated basis, usually quite a bit higher in priceReduce risk of unpredictability of coffee price and supply, Starbucks enters into long-term fixed price contracts with its suppliers
8Intermediate Functions INTERMEDIARIESStarbucks sells a wide variety of whole and ground bean coffees in grocery and warehouse club stores as well as Frappucinos and coffee-flavored ice creamsOther channel of delivering coffee is through direct distribution, the selling and distributing product to account members in airports, hotels, schools, restaurants and hospitals
9Channel Strategy Factors Customer/Market ServedFocus Market Region: United StatesIn the United States, some 78% of consumers drink coffee7Of that percentage, females are more likely to be the consumers rather than malesThe higher frequency of consumption tends to be older peopleFocus Market Region: ChinaCoffee consumption in China is highly concentrated in large citiesCoffee appeals to adventurous, open-minded, young, affluent, urban consumersMany of these returnees have lived in Western countries for a decade and they have become accustomed to the coffee culture
10Channel Strategy Factors Product Service CharacteristicsStarbucks’ whole business is driven by their strong brand imageThey strive to have a knowledgeable staff and unique, recognizable packagingStarbucks also has the image of being known for $5 cups of coffee but you’re also getting some image for your $5, tooStarbucks also uses an intensive distribution strategy to make their logo and coffee ubiquitous around the world
11Channel Strategy Factors Product Life CycleMost 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 storesStarbucks strives to keep its coffee drinks fresh by changing menuMany drinks are cash cows, while others are seasonal with limited life
12Channel Strategy Factors CompetitionBiggest threat MacDonalds threat to market shareDunkin DonutsCompetes with both direct channel and retailer channel through website, their stores and grocery storesMultiple distribution gives competitive advantage over smaller coffee chains and at-home coffee companies
13Channel Strategy Factors Environmental FactorsEliminates competition via Cluster bombing tactics, buyouts and cannibalizationOpen several stores next to competitionAggressive advances increased revenue by 24% in one year alone
14Channel Strategy Factors Human Resource ConsiderationsEmployees offered stockHealth Benefit (including part time)1 LB free coffee per weekSpecial/Continuous TrainingTurnover Rate50% Starbucks vs 400% Coffee Industry401k
15Distribution Strategy Starbucks’ level of distribution is intensive via retail storesStarbucks has Direct Retail System through operation of its own Retail outletsAccomplishes direct marketing of product while maintaining marketing strategy and mission statementMaintains high level of customer service via product offerings and vast number of locations
16Distribution Strategy S.B. has control/power over channels of distributionS.B. imports high quality coffee beansS.B. developed socially responsible coffee buying guidelines called C.A.F.E.Exclusive contracts from growers usually 5 years outHigh level of cooperation amongst growers/suppliers leads to rapid inventory replenishmentReduces total costs of marketing channel and improves customer serviceRoasts beans in its roasting plantsStores beans in warehouse for distribution to retail outlets.
17Distribution Strategy S.B. has Corporate Dependent Channel ArrangementOperates its own distribution system in a manor that produces an integrated channelS.B. imports and processes coffee then sells it under their own brand name in their own storesHas other ways to distribute products via groceries stores and mail order using a multi-channel structure to market productsChannel relationships are increasingly important in creating market value; maintain brand image and a sustainable competitive advantage
18Distribution 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.
19Distribution 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 imageS.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.
20Distribution Strategy RECOMMENDATIONSSpecialty Coffee SegmentExpand and re-strategize how it markets and brands specialty coffees.Expand Multi-channel RelationshipsExpand and develop new domestic channels focus on Specialty soft drinks, energy drinks, and ready-to-drink productsNutritional 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.