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Starbucks - Starbucks - Beyond The CupBeyond The CupINFSCI 2810 – M.I.S.INFSCI 2810 – M.I.S.Ken SochatsKen Sochats

Presented by:Presented by:Sangeeta Bokil * Arindam DuttaSangeeta Bokil * Arindam DuttaJessica Fondy * Shawn LewisJessica Fondy * Shawn Lewis

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Strengths / WeaknessesStrengths / Weaknesses

StrengthsStrengths Name RecognitionName Recognition Market PenetrationMarket Penetration Perception of QualityPerception of Quality Consumer Respect for BrandConsumer Respect for Brand

WeaknessesWeaknesses Social / Environmental Criticism (Fair Trade)Social / Environmental Criticism (Fair Trade) ““Anti-Starbucks” SentimentAnti-Starbucks” Sentiment People who simply don’t like the coffeePeople who simply don’t like the coffee

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Opportunities / ThreatsOpportunities / Threats

OpportunitiesOpportunities Branch out into new US MarketsBranch out into new US Markets Acquire socially / environmentally conscious Acquire socially / environmentally conscious

customerscustomers Increase public goodwill for companyIncrease public goodwill for company Make a positive impact in the worldMake a positive impact in the world

ThreatsThreats ““Anti-Starbucks” SentimentAnti-Starbucks” Sentiment Competition from other coffee shopsCompetition from other coffee shops

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What Makes a What Makes a Good New Product?Good New Product?

Seven basic decision criteriaSeven basic decision criteria Revenue boostingRevenue boosting Cost viabilityCost viability Image boostingImage boosting Social outreachSocial outreach Market appropriatenessMarket appropriateness Capitalize on brand strength Capitalize on brand strength Market effectsMarket effects

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Our ProposalOur Proposal

Starbucks T-shirts and Starbucks T-shirts and sweatshirtssweatshirts

““Beyond the Cup” Beyond the Cup” Corporate Social Corporate Social Responsibility Responsibility campaignscampaigns

Environment, LiteracyEnvironment, Literacy Targets Starbucks Targets Starbucks

customers and the customers and the socially responsiblesocially responsible

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Revenue / Cost ViabilityRevenue / Cost Viability

Start with only T-shirts in limited marketsStart with only T-shirts in limited markets Avoid sweatshop labor!Avoid sweatshop labor! ““Beyond the Cup” allows tie-in to existing Beyond the Cup” allows tie-in to existing

corporate strategies through a new corporate strategies through a new consumer avenueconsumer avenue

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Socially Responsible Supplier –Socially Responsible Supplier –The Icon GuildThe Icon Guild

Bundles shirt and printing costsBundles shirt and printing costs

Shirt Shirt CostCost

1 Color1 Color Add’l Add’l ColorColor

11stst ScreenScreen

Add’l Add’l ScreensScreens

< $6< $6 $0.50$0.50 $0.25$0.25 freefree $10/$25$10/$25

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Separate Shirt / Printing CostsSeparate Shirt / Printing Costs ShirtsShirts

American Apparel, UnionwearAmerican Apparel, Unionwear Between $4.45 - $7.50 depending on size and quantityBetween $4.45 - $7.50 depending on size and quantity

PrintingPrinting The Icon Guild, Comtempl8 T-shirtsThe Icon Guild, Comtempl8 T-shirts $0.50 - $0.60 per shirt plus set up costs$0.50 - $0.60 per shirt plus set up costs

Artwork billed separately at $40/hour; superseded by Artwork billed separately at $40/hour; superseded by Starbucks’ existing Art DeptStarbucks’ existing Art Dept

Transportation between $0.28 - $0.70 per shirt; Transportation between $0.28 - $0.70 per shirt; superseded by Starbucks’ existing logistical capabilitiessuperseded by Starbucks’ existing logistical capabilities

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Cost SummaryCost Summary $10 - $12 per shirt, $15 worst case$10 - $12 per shirt, $15 worst case

Expected price pointExpected price point $20 - $30$20 - $30

Leaves comfortable profit marginLeaves comfortable profit margin

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Image Boosting – Image Boosting – Social OutreachSocial Outreach

Already does a lot of work for social Already does a lot of work for social causescauses LiteracyLiteracy EnvironmentEnvironment

Need to better inform public of their Need to better inform public of their positive contributions to the environment positive contributions to the environment and communityand community

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Starbucks donations to charitable Starbucks donations to charitable organizations: $30.3 million in 2005organizations: $30.3 million in 2005

Starbucks also contributes to literacy, Starbucks also contributes to literacy, environmental, and coffee origin communitiesenvironmental, and coffee origin communities

Our products help publicize this knowledgeOur products help publicize this knowledge Re-educate coffee consumers about StarbucksRe-educate coffee consumers about Starbucks

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Caveat – Supporting Coffee Farmers and Caveat – Supporting Coffee Farmers and Fair Trade, but where?Fair Trade, but where?

Our product does not address this issueOur product does not address this issue ……but It highlight’s Starbucks’ but It highlight’s Starbucks’

commitment to responsible supplierscommitment to responsible suppliers Mitigates this line of criticism.Mitigates this line of criticism.

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Market AppropriatenessMarket Appropriateness

Is it time?Is it time? Disposable Personal Income (DPI)Disposable Personal Income (DPI)

1.7% DPI increase in last year and 4.5% growth projected 1.7% DPI increase in last year and 4.5% growth projected over next yearover next year

5.4% growth in the last 12 months5.4% growth in the last 12 months US Apparel sales marketUS Apparel sales market

$181 billion in 2005, 4% growth rate$181 billion in 2005, 4% growth rate Promising three-year outlookPromising three-year outlook

US Charitable DonationsUS Charitable Donations $260.3 billion in 2005, 2.7% growth rate$260.3 billion in 2005, 2.7% growth rate

Yes!Yes!

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Market AppropriatenessMarket Appropriateness

Customer ProfileCustomer Profile Men, women, and children of all agesMen, women, and children of all ages

Versatile product line – considered as:Versatile product line – considered as: FashionableFashionable SportswearSportswear Active wearActive wear Casual WearCasual Wear Work WearWork Wear Resort WearResort Wear

……all with a theme of social responsibilityall with a theme of social responsibility

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Brand StrengthBrand Strength

Customers and employees fiercely loyalCustomers and employees fiercely loyal Very strong brand presenceVery strong brand presence

Believed the brand was created from Believed the brand was created from Starbucks’ business strengthStarbucks’ business strength

Received Brandweek Customer Loyalty Gold Received Brandweek Customer Loyalty Gold Award in 2006 for Coffee and Doughnuts Award in 2006 for Coffee and Doughnuts categorycategory

Is and will be highly marketableIs and will be highly marketable

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Market EffectsMarket Effects

Relaxed lounging environment at Starbucks Relaxed lounging environment at Starbucks supports our productsupports our product

Capitalize on customer brand loyaltyCapitalize on customer brand loyalty Donate 10% of profits to charity to further Donate 10% of profits to charity to further

commitment to social responsibilitycommitment to social responsibility Customize available inventory to local Customize available inventory to local

demographic (literacy in areas with educational demographic (literacy in areas with educational deficiencies, environment in appropriate areas)deficiencies, environment in appropriate areas)

No need for large store displayNo need for large store display

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Marketing PlanMarketing Plan

Pre-DistributionPre-Distribution Short-Term: 3-month trial in California and Short-Term: 3-month trial in California and

New York (high traffic) areas)New York (high traffic) areas) Long-Term: national approachLong-Term: national approach Extend existing advertising to encompass Extend existing advertising to encompass

“Beyond the Cup” idea“Beyond the Cup” idea Wrap shirts with tags that emphasize Wrap shirts with tags that emphasize

donation to charity and social campaigndonation to charity and social campaign

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Small shipments through local delivery Small shipments through local delivery services (UPS, FedEx, DHL)services (UPS, FedEx, DHL)

Large shipments through logistical chainLarge shipments through logistical chain Stock stores with limited inventoryStock stores with limited inventory Establish reorder pointsEstablish reorder points Tag as subset of existing inventory for Tag as subset of existing inventory for

asset trackingasset tracking

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Develop promotional effortsDevelop promotional efforts CouponsCoupons Contest prizesContest prizes Gift-with-purchaseGift-with-purchase Seasonal salesSeasonal sales Press releasesPress releases

Analyze customer reactions in NY and Analyze customer reactions in NY and CACA

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Gauging SuccessGauging Success

Small initial run of 5000 shirtsSmall initial run of 5000 shirts Break Even Point Break Even Point

worst case, 4,167 shirts @ $15 / $20 worst case, 4,167 shirts @ $15 / $20 cost/price ratiocost/price ratio

best case, 1,852 shirts @ $10 / $30 best case, 1,852 shirts @ $10 / $30 cost/price ratiocost/price ratio

Profits become even steeper as per-shirt Profits become even steeper as per-shirt costs decrease with increased quantitiescosts decrease with increased quantities

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Gauging SuccessGauging Success

One-Year goalOne-Year goal $10 million in revenue$10 million in revenue

Five-Year goalFive-Year goal $40 million in revenue$40 million in revenue

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ExpansionExpansion

Move from T-Shirts to sweatshirts and Move from T-Shirts to sweatshirts and other apparel itemsother apparel items

Capitalize on existing celebrity “authentic Capitalize on existing celebrity “authentic personal endorsements” (i.e. not personal endorsements” (i.e. not compensated) for public exposurecompensated) for public exposure

Further the cause through existing Further the cause through existing partnershipspartnerships