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)

Starbucks positioning

(what, who & how)

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

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

A B
Recommendations & Further questions

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
Source: Nestl Investor Seminar 2008 (Premiumization)

Growth in education

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: Nestl Investor Seminar 2008 (Premiumization)

The value proposition: the promise

"For Starbucks, it's not just selling the coffee, but selling the experience Eileen Wall

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 Starbucks experience

The value proposition: what is being delivered

It is what the company does, not what it says, that reinforces the brand

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)

Howard Schultz CEO & Chairman Starbucks

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 Pleasant Atmosphere Relaxed environment Coffee taste Cleanliness of store See and be seen Packing of coffee Appropiateness of prices Customer 1 2 3 4 5 11 22 Brand 8 9 3 11 10 1

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

Source: www.customerthink.com

19July 2010 (P. la Castellana, Madrid) 2

Source: www.customerthink.com

The Growth Strategy: until 2008

It was so focused on growth by opening new stores that it lost touch with its core customers Rohit Deshpand, HBS

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 saturated

Starbucks 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

Rohit Deshpand Profesor Marketing Harvard BS

The Growth Strategy: the global crisis

Starbucks 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

Theres 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
The great thing in the world is not so much where we stand, as in what direction we are moving Oliver Wendell H.

Centralize Marketing and closely tie it to the strategy (CEO involvement) Monitor what the customer wants in order to avoid gaps between what is delivered and what is perceived Deal with increasing local competition Communicate what makes Starbucks different Consistently deliver on what is promised Monitor and evaluate service

Further questions
O traveler, there is no path. Paths are made by walking. Antonio Machado

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 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?

When is a market saturated? Is Starbuck opening new stores in strategic locations? What drives Starbucks to open new stores?

Gianpaolo | Lucas | Thomas

Thank you for your time