Starbucks: is it still the third place?“You and Starbucks. It's bigger than coffee”

Gianpaolo | Lucas | Thomas

Agenda“Every beginning has an end“

Morpheus (Matrix)

A) Who is drinking Starbucks: premium segmentB) The value proposition: the promise & what is being delivered

A) Customer service: is going down?B) Starbucks’ Growth-strategy: until 2008, crisis and current

Starbucks’ positioning (what, who & how)

Assumptions: analysis

Recommendations & Further questions

A

B

Who is drinking Starbucks: the premium segment“To be sure of hitting the target, shoot first, and

call whatever you hit the target”  Ashleigh Brilliant 

The Premium Segment: Income > $ 28,000 PPP Fast growing segment Segment grows 72% in 2005-2015 By 2010, more potential premium consumers in China than Europe

Urbanization

The rise of the middle class

Ageing Population

Female spending power

Individualism & Single household

Lifestyle changes

Growth in educationSource: Nestlé Investor Seminar 2008 (Premiumization)

Who is drinking Starbucks: the premium segment“To be sure of hitting the target, shoot first, and

call whatever you hit the target”  Ashleigh Brilliant 

Source: Nestlé Investor Seminar 2008 (Premiumization)

The value proposition: the promise…"For Starbucks, it's not just selling the coffee,

but selling the experience“ Eileen Wall

The Starbucks experience

Distinctive product: Coffee Fresh, dark-roasted, full- flavored coffee "We will not pollute our high-quality beans with chemicals" "to build a company with soul" that will pursue the perfect cup of coffee

Source: www.mhhe.com

The value proposition: what is being delivered…It is what the company does, not what it

says, that reinforces the brand

Howard Schultz CEO & Chairman Starbucks

“Sterile, cookie-cutter" store environments, they have lost the coffee aroma

Quality of service and personal touch have declined

“Commoditized“ Starbucks that has sacrificed a warm, neighborhood feel for streamlined store designs

Consumers have toppled Starbucks from its No. 1 spot in favor of Dunkin‘ Donuts (2007)

Source: www.customerthink.com

Customer service: is going down?“A driving ambition is of little use if

you're on the wrong road”  Frank Tyger

Starbucks In-Store Experience (U.S.)

Concept Evaluated Customer Brand

Pleasant Atmosphere 1 8

Relaxed environment 2 9

Coffee taste 3 3

Cleanliness of store 4 11

See and be seen 5 10

Packing of coffee 11 1

Appropiateness of prices 22 219July 2010 (P. la Castellana, Madrid)

Source: www.customerthink.com

What do you like the least about the Starbucks in-store experience?

When you are growing, your focus is on growing rapidly and you tend to be opportunistic about growth

Marketing research showing that markets are far from saturatedStarbucks is taking over Madrid. There should be a law or something that states that you can't have the same business within xx meters of each other! Fred, Spain, 2008

7 New Stores a day - Goal of 30,000 stores worldwide Resulted in decreased profit – Brand dilution – 900 stores closing in 2008

The Growth Strategy: until 2008“It was so focused on growth by opening new stores

that it lost touch with its core customers”Rohit Deshpandé, HBS

Rohit Deshpandé Profesor Marketing Harvard BS

The Growth Strategy: the global crisisStarbucks rumoured to cut more jobs

What about the global crisis?There might be an amplifying effect - No causality

Source: es.finance.yahoo.com

The Current Growth Strategy“There’s tremendous opportunity to go much

deeper in our existing markets”John Culver, VP Operations

Starbucks foreign stores are less profitable as those in US

New strategy:- Expanding the number of foreign stores with business partners to share risk & costs- Expand in areas where historically succesful- Expansion with less upfront investment – efficient way of boosting sales- Exception China & India

FOCUS FOCUS FOCUS New Strategy working? Share price goes up, future will tell

Recommendations

Deal with increasing local competition – Communicate what makes Starbucks different

Monitor and evaluate service

Consistently deliver on what is promised

Monitor what the customer wants in order to avoid gaps between what is delivered and what is perceived

Centralize Marketing and closely tie it to the strategy (CEO involvement)

“The great thing in the world is not so much where we stand, as in what direction we are moving”

Oliver Wendell H.

Further questions

Global strategy with local characteristics? Is the American coffee-way-of-living working in all countries? Is the customer worlwide educated in the same way? Does the customer values the same thing in different countries?

Is Starbuck opening new stores in strategic locations? What drives Starbucks to open new stores?

How are the sales in other channels related to the performance of the Starbucks retail?

Analyze whether there is a different perception of Starbuck in divers local markets

When is a market saturated?

“O traveler, there is no path. Paths are made by walking.” Antonio Machado

Thank you for your time

Gianpaolo | Lucas | Thomas