Starbucks Tows

"We aren't in the coffee business, serving people.

We are in the people business, serving coffee"

Howard Schultz, Starbucks Chairman and Chief Global Strategist

Fortune Magazine, Vol. 149 No. 2

Title: Starbucks: "The Non-Coffee Treat"

Submit To: P.V. Sundar Balakrishnan

Completed By:

Matthew CarmeanPartner Julie AnstettPartner Julia ToochettePartner

Joel EnnisPartner Joey EatonPartner Trang P. HuynhPartner

Table of Contents

TABLE OF CONTENTS 2

EXECUTIVE SUMMARY 3

MANAGERIAL PROBLEM 4

SITUATION ANALYSIS 4

Company 4

Customer 4

Competitor 5

Complementors 5

STRATEGY (STP) 5

Segmentation 5

Target 5

PRODUCT LIFE CYCLE 6

Introductory Stage 6

Growth Stage 6

Maturity Stage 7

Decline Stage 7

IMPLEMENTATION PLAN AND RECOMMENDATION 7

Product 7

Price 7

Place (Distribution) 8

Promotion 8

APPENDIX 9

Executive Summary

Starbucks is the leading retailer and roaster for brand specialty coffee in the world. It has over 7,500 stores located worldwide. As Starbucks continues to expand, it will encounter all sorts of new product markets, with new and demanding customers for unique and appealing products. Starbucks has begun by introducing an extension of the Frappuccino line targeted to the non-coffee drinker. Entering this new market, Starbucks faces many challenges from having to compete to retain brand recognition of its primary products, yet increase awareness of its new product line. Our analysis and research of the market have resulted in keys findings as follows:

* The new Frappuccino blended beverages, also known as the Summer Drink flavors will help Starbucks reposition itself in the developing non-coffee iced-beverage market; Starbucks will also need to enhance the product perception to maintain the perceived high quality. Customers of this segment are sensitive to taste and quality of food product and nutritional data.

* With this new line extension, Starbucks will be facing many new competitors such as Jamba Juice, Orange Julius and other local non-coffee iced-beverage providers. Special care must be implemented to maintain Brand equity for it's primary product, and not become to diversified the current customers seek alternatives.

* Based on our research, we found that the married couples age 25-54 with children to be the primary potential target market.

* Additionally, we have concluded generating awareness about the product via a Web Campaign would be highly advisable. A Secondary approach would be Network TV or Print Media such as magazines, journals, and newspapers.

Managerial Problem

Starbucks strategic goal is to increase market share of the non-coffee drinker; they have begun by introducing an extension of a product line targeted to this segment. To ensure market growth, Starbucks has repositioned one of its current products, the Frappuccino line, this product has been extended to include 3 new flavors; Double Chocolate Chip Crиme, Vanilla Bean Crиme, and Strawberries & Crиme, introduced throughout the summer months. Faced with the challenge of entering a new competitive market Starbucks must compete to retain brand recognition of its primary products, yet increase awareness of its new product line.

Situation Analysis

Company

Starbucks is the leading retailer for roaster and brand specialty coffee in the world (See Figure 1). It has over 7,500 stores, which are located in the United States, Canada, Europe, Asia and the Middle East . Besides high quality coffee drinks, Starbucks sells bottled coffee drinks, such as Frappuccino® and Starbucks DoubleShot™.

Starbucks revenue is growing by 20% a year and is opening approximately three stores every day. Starbucks is capable of managing its successful operations by having steady market growth. It achieved this by financing through their cash flow instead of franchising, selling stock or increasing their financial leverage . Its strategy to success is "blanket an area completely." This approach is to "cuts down on delivery and management costs, shortens customer lines at individual stores, and increases foot traffic for all the stores in an area," that gives Starbucks a competitive advantage.3

Customer

At first only yuppies went to Starbucks, but now it attracts a much wider demographic of customers including people of different ethnic backgrounds and ages. Today, Starbucks has the striking number of 25 million people visitors in its stores each week . This success is due to the combination of high quality drinks and friendly environment with good music, comfortable chairs, and good services. This creates the "Starbucks experience" which customers can relate to that lead to brand loyalty. In addition, Starbucks needs to deal with customers' cultural preferences in all its worldwide locations to maintain customers' loyalty. (See Figure 2) Also see Figure 3 for influences on