By: Gillian Vogel, Samantha Lisowski, Marie Weinum, and Kayla Young

STARBUCKS GLOBAL

EXPANSION CASE 9-1

How many of you have been to Starbucks this past week?

How many of you have been to Starbucks today already?

How many of you have more than one Starbucks drink a

day?

Background Information•Starbucks began in Seattle’s Pike Street Market•Starbucks founder and chairman is Howard Schultz•Starbucks is the world’s leading specialty coffee retailer.oAn empire of 12,000 coffee cafes in 35 countries

•The brand has been licensed to non-coffee products like ice cream. They have also dabbled in recorded music and movies.

Introducing Starbucks to France• In January 2004 Starbucks opened its first outlet in Paris.•This was risky because:oThe French were not pleased with the Bush Administration nor were they pleased with the administration’s decision to stay in Iraq.oThey did not believe the American coffee was genuine- they called it too light and watered-down, too different from their usual dark espresso.oOne critic called the drink “Sock Juice.”

Introducing Starbucks to China•Starbucks faced multiple issues coming into China:oGovernment regulations – forced Starbucks to pair with local firmsoProduct- the Chinese were used to instant coffee, and they preferred teaoCulture- the Chinese wanted to sit with friends in the cafes, not rush out of them like their American counterpartsoCompetition- Starbucks faced competition from “Real Brewed Tea” which was often called the “Starbucks of Tea.”

Starbucks Takes an Online Hit•Starbucksgossip.com was created by angry customers and employees to circulate complaints about the company•Starbucks’ response:

oCreated MyStarbucksIdea.com which was launched in 2008, within months it had 75,000 new ideas for the company

o This was a great step towards public communications

o Forrester Research recognized Starbucks with a Grandswell award in the “embracing” category

Starbucks Launches a New Campaign

“It’s not Just Coffee. It’s Starbucks.”•Working with the BBDO advertising agency, Starbucks launched a corporate branding campaign that was timed to coincide with a major revamping of its food offerings.

Speaking of Changes…• Starbucks evening concept…café or bar? • Serving a variety of beer and wine oStrategy: Attract evening customers when business hours end

• Began in Seattle, Washingtono26 locations, 40 locations by end of 2014oIncluding: Portland, South California, Atlanta, Washington D.C., and Los Angeles

• Beverages may only be purchased with a food meal, and it must be brought to table by serveroMonday-Saturday 2PM-12AMoSunday 12PM-11PM

• CEO noted that typical Starbucks customer spends $5 per visit, an alcoholic beverage could easily double that figure

“We are in the early stages of our growth and development. If we’re a 20-chapter, we are only in chapter four or five.”

-Howard Schultz

Trying it All…• Latte’s that taste like beer, non-alcoholicoTesting this idea because of craft beer popularity in the USA

•Dark Barrel Latte topped with whipped cream and dark caramel sauceoSimilar in taste to a Guinness beeroAlcohol free

• Positive and negative reactions…

More (Non-alcoholic) Drinks!• Starbucks introduced very recently “Fizzio” handcrafted sodas• Contain no caffeine, no artificial flavors, no high-fructose corn syrup, and no preservatives• A Grande Soda is 100 calories or less• Came with the demand for more summery, light, refreshing drinks• Created with a machine that allows for more “fizz” to be applied depending on customer preference (50 cents more)• The carbonation happens after the drink has been prepared, so that all the flavors are thoroughly mixed together

Three New Flavors•Come in three hand-crafted flavors:•Golden Ginger Ale- contains real ginger, citrus and brown sugar and is meant to look like the original ginger ale in the 20th century.•Lemon Ale- has real lemon juice, with hints of apricot and ginger.•Spiced Root Beer- contains classic root beer with cinnamon nutmeg, clove, and star anise.

An Impending Threat•McDonald’s jumped onboard after realizing the success that came with Starbucks•McCafes offers lower prices featuring the cappuccino•A cappuccino in Paris at Starbucks is 4.00 Euros while a similar McDonalds drink in the same location is 2.00-2.50 Euros.• It is a war between Starbucks and McCafe to get the most cafes spread across Europe. In 2009:oStarbucks had around 1,300 locationsoMcDonalds had around 1,200 locations

Discussion Questions•Who do you think will (or is) winning the global expansion “coffee war” between McDonalds and Starbucks? Why?• In what countries do you think it would be difficult to introduce Starbucks and the drinks/themes that come with it? Why?•Within the United States, Starbucks has about 1/3 licensees and about 2/3 company owned cafes. Outside of the US however, they have the opposite- 1/3 company owned and 2/3 licensed.oWhat is the explanation for the two different market expansion strategies?

So, Who Gets a Free Starbucks coffee?