StarbucksSingleCupCampaign

NickConteEmilyFitzpatrick

LizaHoodCarolynLenahanJanelleScudder

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Table of Contents   

ExecutiveSummary 3

BackgroundInformation 4

SituationalAnalysis 6

Goals&Objectives 8

SWOTAnalysis 9

MarketSegments 10

Strategies 12

MediaTactics 13

Budget 16

Evaluation 17

Summary 19

Appendices 20

 

3

Executive Summary 

Considering the single‐cup coffeemarket is the fastest growing segment in

the coffee industry, Starbucks Coffee Company sees an opportunity to expand

beyondtheirtraditionalretailstoresandintothesingle‐cupcoffeemarket.Tojump

startprogresswithinthemarket,Starbuckshaspartneredwiththedominantleader

in the U.S. single‐cup market, Green Mountain Coffee Roasters, Inc. Green

Mountain’s Keurig single‐cup brewing system controls 80% of the market share.

This relationship gives Starbucks an incredible opportunity to enter and have

immediate success within the growing market. Last year the single‐cup segment

approached$2billionandthatfigureisexpectedtoalmostdoublebytheendofnext

year.Starbucksbelievesthatovertimetheycangeneratesalesinexcessof$1billion

acrossallchannels.

Starbuckstargetmarketofpremiumcoffeedrinkershasbeenthe fastest to

adopt single‐cup coffee into their routines. In order to reach these markets,

Starbucks plans to promote their new single‐cup coffee product through print

advertisements in magazines and major metropolitan newspapers, social media

pagesonTwitterandFacebook,theStarbuckswebsite,andin‐storepromotions.

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Background Information 

Starbucks StarbucksCoffeeCompanyisoneofthemostsuccessfulandadmiredcompanies

today.TheygrewfromasmallcoffeeshopinSeattle,Washington33yearsagointoa

$4.1billioninternationalcompany.Starbuckspromisescustomersongenuine

service,aninvitingatmosphere,andanexcellentcupofcoffee.Starbucks'mission

statementis“toinspireandnurturethehumanspirit–oneperson,onecupandone

neighborhoodatatime”.Bydoingso,theybelieveinservingthebestcoffee

possible.StarbucksCoffeeCompanyhasbecomeanoutstandingsuccessstory,

operatinginmorethan50countrieswith17,009stores(asofJanuary2,2011).

Withmorethan30blendsofcoffeeroasts,itisawonderwhyStarbuckshasnot

collaboratedwithKeurig/GreenMountainCoffee“K‐Cups”sooner.IfStarbuckswere

tosellK‐Cups,consumerscouldmakeanddrinksinglecupsofStarbucks'coffeein

theirhomeoratwork.

Single Cup Coffee 

Themarketofsinglecupcoffeehasbeenincreasingoverrecentyears.Singlecup

coffeemachineshavebeenintroducedtotheworkplaceandtoconsumers’homes.

Majorityofpeople’slivesinthe21stcenturyarefastpacedbecausetheyare

constantlyonthego,thereforethesemachinesareperfectforaquickanddelicious

hotbeverage.Starbuckshopestoenterintothismarketthroughthecompany

Keurig.Keurigmachinesaresinglecupcoffeemakersforthehomeandoffice.

Keurig“K‐Cup”machinesaredesignedtoquicklybrewacupofcoffee.Aconsumer

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buyssingleunitscontaininggroundsandplacesthemintotheseKeurigmachines,

pushesabuttonandwithin20‐60secondsthecoffeeisreadyandspoutsoutintoa

mug.Theyareespeciallyefficientincorporateoffices,orathome,wheninarush.

KeurigisawhollyownedsubsidiaryofGreenMountainCoffeeRoasters,Inc.,and

theK‐Cupscomeinmanyteas,flavoredcoffee,androast/blendoptions,mainlyof

GreenMountainCoffee.ButothercompanieshavebeguntocreateK‐Cupversionsof

theirproducts,andStarbucksCoffeeCompanywouldabsolutelybenefitbycreating

K‐Cupsoftheirroasts.BypartneringupwithKeurig,Starbuckswillbeabletosell

theirK‐CupsandencouragetheconsumertobuyaKeurigmachineatthesametime.

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Situational Analysis 

SingleservecoffeeisthefastestgrowingmarketintheindustrywithU.S.

retailsaleslikelytoapproach4billiondollarsin2011.Starbuckshasastatedgoal

to,“extendthebrandbeyondourretailstores.”Starbuckswaseagertograbmore

businessinthesingleservemarketfollowingitslaunchofVIAinstantcoffeein

October2009,whichaccountedfor194milliondollarsinsales.However,Green

MountainRoastCoffee’sKeurigbrandsingleservesaleswere$1.19billionin2010

(salesincludeKeurigmachinesandK‐Cupcoffeepods).Keurigrelatedrevenue

accountedfor88%ofGreenMountain’soverallsalesandGreenMountaincontrols

80%oftheNorthAmericasinglecupmarket.Furthermore,StarbucksVIAcoffeeis

instantcoffeeandnotwholebeancoffeethatisroasted,groundandbrewedlikethe

coffeeofferedforKeurigsingle‐servebrewers.

KeurigsystemsaregainingpopularitybecausetheycatertoU.S.consumers'

demandforconvenienceandcustomization.Unliketraditionaldripcoffeebrewers,

themachinesmakeonecupatatimeanddifferentuserscanhavedifferentbrews.

OtherthanStarbucksVIAcoffee,Starbuckswasinvolvedinthesinglecupmarket

throughadealwithKraftFoodstodevelopproductsforitsTassimosingle‐cup

system.Kraft’sTassimoproductaccountsforonly3%ofthesingle‐cupmarket.

StarbucksterminatedthisdealonMarch1stofthisyear.ConsideringStarbucks

statedintentionstobethedefiniteleaderinthesingle‐cupmarket,Starbucksmade

adealtobeKeurig’sonly“super‐premium”K‐Cupbrandjustninedaysafterthe

Kraftdealwasterminated.SharesofGreenMountainsoaredto41%tocloseat

$61.71whileStarbucks’stockrose10%followingtheannouncementofthedeal.

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OppenheimeranalystMatthewDiFriscocalledthedeal"incrementally

positive"forStarbucksandjoinedsomeotheranalystsinraisingearningsestimates

fornextyear:"Itisanimmediatelowriskandlowinvestmentsolutiontoaddress

thefastgrowingat‐homesingle‐servemarket,inturnfurtheringthegrowthof

(Starbucks)highermarginconsumerproductsdivision".StarbucksandGreen

MountainRoastCoffeeplantomakeStarbucksK‐CupsavailablethroughStarbucks

café’saswellasfood,drug,mass,club,specialtyanddepartmentstoreretailers

throughoutU.S.andCanadabeginninginthefallof2011.

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Goals and Objectives 

Goal 

ToextendtheStarbucksbrandbeyondtheretailstores.

Objectives 

•Awareness:Tohave75%ofregularStarbuckscustomersawareof

StarbucksK‐Cupsbeforetheirreleaseinthefallof2011.

•Conviction:Tohaveatleast80%ofcustomersconsiderStarbucksK‐Cup

coffeetobejustasgoodasinstorecoffeebytheendofthe“SingleCupChallenge”.

•Action:Ofthe80%ofStarbuckscustomerswhodonotownaKeurig

machine,have50%ofthesecustomerspurchaseaKeurigwithinthefirstyearofthe

releaseofStarbucksK‐Cups.

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SWOT Analysis 

Strengths/Opportunities  

Withlessthan20%ofStarbucks’customersnotowningasingle‐cupbrewing

systemandGreenMountaincontrollingabout80%percentoftheU.S.single‐cup

coffeemarket,thereisaclearopportunitytoenterabigmarket.Also,premium

coffeecustomershavebeenfastesttoswitchovertosingle‐cupbrewers.Thisagain

providesaclearopportunityforStarbuckstointroducethesingle‐cupsystemto

theircustomersandexpandthecustomerbase.Inabout18months,manyof

Keurig’spatentswillrunout,leavingthedooropenforStarbuckstocreateitsown

machinecoffeepods.By2012Starbucksplanstosellsingle‐cupbrewerwith

manufacturercourtesytoexpandreachinthemarket,withbrewersexpectedtobe

soldinU.S.supermarketchainsandwarehouseclubstores.

 

Weaknesses/Threats 

AlthoughweaknessesandthreatsarelowforStarbucksinthissituation,

therearethreatsintheformofcompetition.KeurigsellsK‐CupsforStarbucks’main

competitorsDunkinDonuts,Foldgers,andCaribouCoffee.DespiteStarbucks’strong

presenceinthepremiumcoffeeindustry,threecompetitorsalreadyhavea

dominantpresenceinthesingle‐cupmarket,thereforepossessingtheabilityto

detercurrentsingle‐cupcoffeedrinkersfromswitchingtoStarbucks’K‐Cups.

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Market Segments 

TheStarbuckscustomerisaverywelldefinedindividualandthecompany

hasdoneanexcellentjobonnarrowinginonaveryspecificmarket.Theaverage

Starbuckscustomerisintheirearly40swithacollegeeducationandearnsa$90k

income.ResearchhasalsoshownthatStarbuckstendstoskewtowardsthefemale

consumersaswell.Starbuckshasalsobeenknowntoservethe“urbancommuter

family”ademographicdescribedasadualincome,collegeeducatedhousehold.

Starbucks’mostvividconsumergroupisknownasthe“yuppies”,shortfor

YoungUrbanProfessionals.Theseindividualsareintheirmid20’sto30’s,college

educatedandareinwellpaidprofessionalpositions.Theyaredescribedashavinga

“workhardtoplayhard”mentalityalongwiththeideathatthey“focusonmaking

moneytofuelalifestylefilledwithexpensivetoys”.Ithasalsobeenshownthat

yuppiesgenerallydateormarryotheryuppies,thereforedoublingtheiralready

highincomes.

YuppiesarealreadydevotedStarbuckscustomers,soitmakessensethat

theywouldbeinterestedinbringingtheStarbucksexperienceintotheirownhome

withtheKeurigmachineandStarbucksK‐Cups.Yuppiesalsohavethediscretionary

incomethatallowsthemtobuysomewhathighpriceddevicesasaKeurigmachine.

Thesehardworkingprofessionalswouldbenefitfromhavingthecomfortand

qualityofthecafébrewedStarbucksintheirownhome,butwiththeeaseand

convenienceofbrewingitintheirownhomewithaKeurig.

AnotherdemographicStarbucksshouldconsidermarketingtoowouldbethe

babyboomergeneration.Thisgenerationisbetweentheagesof46and64,

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representingthelargestgeneration.Whilethisgenerationwasknownasthe“liveto

work”type,themajorityofthemarenoweitherenteringoralreadyinretirement.

Thisgenerationisalsoknowntobeexperiencinga“well‐off”orwealthypost‐work

lifestyleandwhilemanyarefrugalwiththeirmoney,thereisalargeportionthat

spendstheirhardearnedmoneyonindulgences.Thisgenerationisalsoseenasa

generationwho“embracesnewtechnology”andithasbeenreportedthat,

“…boomerwomanarethefastestgrowinggrouponFacebook”.Itisclearthatthis

generationshouldnotbepassedoverandcouldprovetobeabeneficialmovefor

Starbucks.

ThisopensaninterestingmarketsegmentforStarbucksastheyfindsuccess

insellingKeurigmachinestobabyboomers.Thisgroupisanon‐the‐gogroup,and

couldbenefitfromhavingtheirKeurigandStarbucksK‐Cups.Eveniftheyare

travelingorrushingsomewheretheycanstillenjoytheirStarbuckscoffee.This

generationalsoembracesnewtechnologyandfeelscomfortablespendingmoneyon

varioustoys,suchastheKeurigmachine.

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Strategies 

Afterdeterminingthegoalsandobjectivesforthecampaign,Starbucks

neededtofindthebestavailableapproachtoreachtheirtargetmarkets.The

majorityofthetargetmarketismadeupofworkingprofessionalswhorelyon

professionaltrademagazinesandnewspapersfortheirdailysourceofinformation.

ByadvertisinginthesepublicationsStarbuckscansecurealargeamountof

publicitydirectlytomembersoftheStarbuckscommunitywhowouldbemost

interestedinStarbucksK‐Cups.Alsosincethetargetmarketsareprofessionals,

advertisinginmetropolitanareasonsubwaysandtrainswillprovebeneficial.

Socialmediaisthebestpossiblewaytoreachboththeyuppiemarketaswell

asthebabyboomers.Bothmarketsegmentsareheavyusersofsocialmediaasa

waytostayconnectedwithfriendsandfamily,shareideas,andpromotefavorite

products.ByannouncingStarbucksK‐CupsonitsFacebookandTwittersiteswecan

gainmasspublicityfromthesetwogroups.

BothofthesemarketsegmentsarealreadydevotedconsumersofStarbuckscoffee,

makingweeklyanddailytripstogettheirfavoritecoffee.PromotingK‐Cupsin

Starbuckscafeswillprovidethebestpossibleopportunitytoencouragethe

committedcustomerstobuyintothenewproduct.Throughin‐storetastetests

StarbuckscanalsoprovideprooftotheirconsumersthattheStarbuckscoffeethey

lovewillnotchangebetweenstoreandK‐Cupsbutwillinsteadbecomemore

convenientandreadilyaccessibleforthem.  

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Media Tactics 

TheStarbucksidentityisbasedaroundtheconcepttheyhavecreatedofthe

“thirdplace.”The“thirdplace”isanotherlocation,otherthanhomeandwork,

wherecustomerscangotorelax,dowork,ormeetwithfriends.Duetothishomey

atmosphere,Starbucksavoidslargecorporateadvertisingcampaignsinfavorofa

wordofmouthapproach.

WiththelaunchoftheStarbucksK‐cups,thecorporationistryingtobringthe

escapeofthe“thirdplace”tobothhomeandworkwiththehelpoftheKeurig

brewer.

Print Advertising

Thistraditionaladvertisingtechniquewillbefocusedonsubwayandtrain

advertisements,aswellaswithinnews‐basedprintmedia.Thesubwayandtrain

advertisementswillbepresentinmetropolitanareasastobevisibletoyoung

businessprofessionalscommutingtowork.Theseadvertisementsarevisibleinthe

terminalswherecommutersboardandexitthetrains,aswellasbeingplacedonthe

trainsoridersareexposedtothemthroughouttheircommute.Thenews‐based

printmediawillincludedpublisherssuchastheWashington Post,New York Times,

Wall Street Journal,andNewsweekmagazine.Suchpublishersarefrequentlyreadby

babyboomersbecausetheydependonprintmediatogetupdatedoncurrent

events.Youngbusinessprofessionalsalsousethesesourcestostaycurrentand

competitivewithintheirbusinessfields.

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In­Store Promotion

Tobestreachourestablishedconsumerbase,in‐storepromotionwillbe

utilizedthroughthecreationofthe“Single‐CupChallenge”.Withthischallenge,

StarbuckswillhaveKeurigsinglecupbrewersandK‐Cupsavailableforsamplesin

theStarbuckscafes,advertisingStarbucksK‐cupsonthebeveragesleeves,aswellas

havingaraffleforaKeurigsinglecupbrewer.The“Single‐CupChallenge”willallow

customerstohaveablindtastetestofaK‐Cupversusin‐storebrewedcoffee.The

baristawillrecordthecustomer’sresponseandinformthecustomerofwhichcupof

coffeewastheK‐Cupandthein‐storebrewedcup.Thisopportunitywillproveto

customersthattheStarbucksK‐Cupwillbejustasdeliciousasanin‐storebrewed

cupofcoffee.HavingboththeKeurigsinglecupbrewersandtheStarbucksK‐Cups

in‐storeswillallowforachancefordirectpurchaseforthefrequentcafeconsumer.

ThisbuildsastrongerrelationshipbetweenStarbucksandtheStarbucksK‐cupsfor

theconsumer.

StarbuckswillbeadvertisingthearrivaloftheStarbucksK‐cupsontheir

beveragesleevesthattheyprovideforcustomerstoraiseawarenessoftheK‐cups

priortotheirreleaseinthemarket,inadditiontomakingtheirpresenceknown

whentheyareforsaleinstores.

InordertoencouragepurchaseoftheKeurigmachineandtheK‐Cups,

Starbuckswillhavearaffleinselectstoresacrossthecountry.Thecustomerwillbe

giventhechancetofilloutaformwiththeirbasicinformationandentertowina

freeKeurigmachinewithatwelve‐packofStarbucksK‐Cups.Onaspecificday,the

winnerwillbeannouncedandtheywillreceivetheirprize.Theideabehindthis

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tacticistopushtheproductsandrelyontheconsumers’promotionthroughword

ofmouth.

Social Media

Socialmediaisanintegralaspectinreachingthetargetmarketsand

generatinggreaterwordofmouthfortheStarbucksK‐Cups.TheStarbucksfanpage

onFacebookwillallowfollowerstoincreasetheirknowledgeoftheK‐Cupsand

shareinformationontheproductwiththeirFacebookfriends.ThroughTwitter,

StarbuckswillbeabletoupdatefollowersonallnewsrelatedtotheK‐Cups.The

StarbucksblogatMyStarbucksIdea.comwillkeepallStarbucksenthusiasts

informedaboutdevelopmentsinrelationtothepartnershipwithKeurigandthe

creationoftheStarbucksK‐Cups.Theblogwillalsoallowfordirectfeedbackonthe

K‐Cups.AllofthesocialmediamethodswillkeepStarbucksinformedoftheincrease

inpublic’sknowledgeaswellastotheresponsetothereleaseoftheStarbucksK‐

Cups.

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Budget 

FortheStarbuckssingle‐cupcampaign,thebudgetisgoingtobe$75million.

BecauseStarbucksisreleasinganentirelynewproduct,thecampaignwillbe

nationallypromotedthroughprintadvertising,socialmedia,andin‐store

promotions.

$75 million campaign Print Advertising­ 50% ‐Magazines‐Instoreposters‐Newspapers—Wall Street Journal,New York Times, Chicago Tribune, L.A. Times‐Subway/TrainadvertisementsSocial media 14% ‐Advertising‐FanpagesonFacebook‐Twitteraccount‐Employeesmonitoringsites‐StarbucksblogIn­store­ 35% ‐Single‐CupChallenge‐RaffleOur salaries­ <1% 

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Evaluation 

   

Awareness: To have 75% of regular Starbucks customers aware of Starbucks 

K­Cups before their release in the fall of 2011. 

  InordertomeasuretheawarenessofStarbucksK‐Cupsbeforetheirrelease

Starbucks’socialmediawillbeused.Onewayoflookingatawarenesswillbe

throughtheStarbucks’Facebookpage.Wewillcountthenumberof“followers”and

“likes”wereceiveontheFacebookpage.Wewillalsomonitorthenumberfollowers

ofStarbucksontheirTwittersite.LastlywewilllookattheactivityontheStarbucks

blogconcerningcommentsfromourK‐Cuppostsandotherrelatedfeedback.

Conviction: To have at least 80% of customers consider Starbucks K­Cup 

coffee to be just as good as in store coffee by the end of the “Single­Cup 

Challenge.”  

  InorderthemeasureconvictionwewillmonitortheSingle‐CupChallenge

resultsofwhetherornotStarbuckscustomersbelievedthecoffeebrewedin

StarbucksisjustasgoodasthecoffeebrewedusingtheK‐Cups.Afteradministering

thechallengewewillrecordthecustomers’responses.Bytheendofthechallenge

wewilltabulateandrevealthefinalresults.

Action: Of the 80% of Starbucks customers who do not own a Keurig machine, 

have 50% of these customers purchase a Keurig within the first year of the 

release of Starbucks K­Cups.   

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OnewaytomonitortheKeurigmachinesalestoStarbuckscustomersisby

sellingtheminStarbuckscafes.Thisdirect,in‐storesalewillenableustokeepan

accuratetrackofcurrentStarbuckscustomerswhonowwanttoownaKeurigfor

thepurposeofusingStarbucksK‐Cups.WewillalsotracksalesofKeurigmachines

throughtheStarbuckswebsite.

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Summary 

  Starbucks’ventureintothesingle‐cupbrewingsystemisaboldmoveforthe

companyknownfortheirpremiumandspecialtycoffeeretailchain.However,this

moveishighlyadvantageous,withlowrisksandanarrayofavailableopportunities.

Starbucks’marketsegmentsarealsoprimeaudiencestosellthesingle‐cupsystem

too.Advertisinginprintmedia,socialmedia,andin‐storepromotionswillenable

StarbuckstoreachtheirmaindemographicsandpushtheStarbucksK‐Cups.Ifthe

strategiesaredonecorrectly,Starbuckswillseeimmenseprofitabilityinthesingle‐

cupsystemandrisetobethedominantplayerinthesingle‐cupindustry.

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Appendix A 

Subway Advertisement  

 

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Appendix B 

Newspaper/Magazine Advertisement 

 

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Appendix C 

In­Store Advertisement