starbucks brand audit

Starbucks Coffee Brand Audit

Simon Mc Nally

Simon Mc Nally Starbucks Brand Audit May 10th 2010

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Table of Contents

Company Analysis ..................................................................................................................................3

Market Analysis ......................................................................................................................................3

Brand Analysis ........................................................................................................................................4

Consumer Analysis .................................................................................................................................5

Competitor Analysis ...............................................................................................................................6

Strategy .....................................................................................................................................................7 Key Fact ..............................................................................................................................................................7 Target Group .....................................................................................................................................................7 Proposition..........................................................................................................................................................7 Role of Advertising ...........................................................................................................................................7

Appendices ...............................................................................................................................................8


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Company Analysis Starbucks has been dedicated to building a brand that was known for its quality, ethical sourcing and its human connection. They want the brand to bring friends together, inspire conversation and finally to been seen as a brand that helps to make the world a better place, through numerous CSR initiatives. The Starbucks brand has been part of the company since it began operations and has been a unifying element throughout its international expansion. As the parent corporation and the brand are synonymous, they naturally provide heavy financial support for the brand. Nielsen released figures showing that Starbucks invested $43 million in marketing in 2009. Currently the company is a very favorable position for the brand. They are experiencing increasing profits, further international expansion and have been making good decisions in relation to cost reduction activities such as, shutting down a number of under performing stores in the U.S. Kraft currently licenses the right to sell Starbucks into grocery stores; it was first introduced in September of 1998. This was in order to accelerate the growth of the Starbucks brand. Starbucks felt this agreement would bring together their expertise in sourcing, roasting, and packaging of the highest quality specialty coffee with Kraft's extensive knowledge of marketing, selling, and distributing packaged foods directly into to grocery stores. Kraft has found that licensing Starbucks has filled a gap in their product line and therefore show great support for the brand. Kraft distributes 29 varieties of Starbucks coffee to over 25,000 grocery stores all over the U.S., as well as to club stores. Howard Schultz (Starbucks CEO) stated that the agreement was a natural extension of their global brand building strategy and represents a significant step toward becoming one of the most recognized and respected brands in the world.1 Problems The company faced some widely publicized lawsuits in 2008/2009 that for some consumer may result

in negative associations with the brand. Opportunities The company has several ties to very ethical organizations i.e. Product (Red), Fair Trade and the

Rainforest Alliance; as CSR becomes a more influential factor in consumer decision making Starbucks can leverage these associations to help protect or grow their market share.

Market Analysis Starbucks is seen to be a specialty coffee that competes in the roast coffee segment, which encompasses all whole bean and ground roast coffee. There has been year on year growth in the roasted coffee segment. The specialty segment sales are still recovering from their decline in 2009, however analysis of quarter one figures, shows that this market is currently experiencing good growth. This continual segment growth is in part because consumers are spending more on coffee in grocery stores, while reducing their expenditures at coffeehouses. This seems to be driven largely by recessionary pressures. At present the key dynamic within this segment, is the increasing number of varieties offered by each brand. More and more established brands are diversifying their varieties to compete more effectively with specialty brands.


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Analysis has shown that in late 2008 the retail price of coffee began to slowly decline, however, 2010 has seen the end of that decline with market prices seeing an increase again. This trend is expected to continue rising until 2014. To further support this, projected harvest figures for 2010, suggests that there will be fewer coffee beans harvested this year. This will limit supply, which in turn will increase demand resulting in increased prices. Problems More and more established brands are expanding the number of varieties they offer; this creates

increased competition for Starbucks as a specialty coffee, as well as price competition or more similar products.

Opportunities Starbucks has a better coffee supply chain (as its services both the coffeehouses and retail) than many

of the brands it competes with in the retail segment; they can utilize this to ensure the low harvest does not effect them as much as it does their competition.

Brand Analysis The true business of Starbucks brand is to deliver high quality coffee, that people truly enjoy experiencing. Starbucks is an experience brand that requires the consumer to connect with it on an experiential level that fosters brand relationships. Starbucks is one of the largest online brands in the world.2 It currently is the number one ‘Liked” brand on Facebook3 and has over 140,000 Twitter followers.4 Within the retail market Starbucks currently has the 3rd largest market share. The brand is renowned as a premium supplier of specialty roast coffees from around the world. It is known in the market for its high quality, but also for its high retail price. Starbucks current marketing goals are to remind people of the exclusivity of Starbucks coffee, and reverse the idea that Starbucks has become to mass marketed. They also want to promote a greener, more economically friendly brand image, through many different green initiatives, such as the “Green Project” in New York (Appendix 1). Previous advertising for Starbucks retail coffee has consisted off a five print ad campaign that ran in the New York Times in 2007.5 This campaign was one of very few ran to promote their retail coffee, since it began licensing and was supported by both Starbucks and Kraft. They convey that Starbucks will really help you enjoy this moment that bit more, by servicing a want (Appendix 2). It is interesting to note the minimal advertising Starbucks uses to promote its brand, yet they still manage to hold third place in the market. This is due to Kraft’s excellent distribution channels and the shelf space they have always supplied for Starbucks. The most predominant forms of advertising the brand has executing, has focused mainly on online. They use, Twitter advertising, Facebook, Foursquare and blogs to communicate with their consumers. They feel that as this is an interactive type of brand, these channels are far more appropriate. Furthermore it helps increase recognition and recall for the brand in general. Starbucks points of differentiation are its association to high quality, its rich history, being a socially responsible company and its ability to make consumers feel like they are at a coffeehouse when they are drinking Starbucks at home.6


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Problems Some consumers consider Starbucks to have become too capitalist; they believe that the brand is mass

marketed; yet they still try to portray it as exclusive. Opportunities Starbucks can highlight the numerous CSR programs it is involved with, to help build a better brand

attitude, which will help increase consumer loyalty. Therefore people will be more inclined to choose Starbucks when making a decision, which 51% of consumers make whilst at the retail store.7

To utilize its online position to ensure that people are equally aware of Starbucks retail availability, as they are of its coffeehouses.

Consumer Analysis Starbucks is purchased by a combination of brand loyal consumers and brand switchers, who make up a large percentage of the market (63%)8. Starbucks retail consumers tend to fall between the ages of 18 – 44. They start at 18 years old; as this tends to be the age people first move out of home for college etc. and hence begin grocery shopping for themselves. People above 45 years of age, tend to favor national brands (Folgers & Maxwell House), as they consider Starbucks to be overpriced. Roast coffee drinkers tend to come from middle – high median income households, where as low median income households tend to favor instant coffee.9 Starbucks consumers are set to gain from several different benefits depending on what purpose they are drinking the coffee for. It can be drunk to enjoy the taste, to give energy, for enjoyment, for relaxation or to improve concentration. Consumers believe that Starbucks will deliver a high quality cup of coffee, that they have standards that make them consistently reliable and that by buying Starbucks you are supporting one of the many causes they support.10 Business for Starbucks retail coffee comes from current users, either those who are loyal to Starbucks or who are not loyal to any one particular brand and therefore switch between Starbucks and other brands. They also source new business from new entrants to the market (i.e. people living away from home for the first time, etc.). Consumers have a good knowledge base for Starbucks, this is evident as they are number one ‘Liked’ brand on Facebook, they are the number one most branded or engaged names on the Internet and they are the number three coffee sold through grocery stores in the U.S.11 Consumer blogs and fan pages have shown that Starbucks have a very good brand attitude among its consumers. Current consumer behavior varies from being good for brand loyals, to behavior that could be improved for those who currently switch between brands. Prospects have knowledge of Starbucks; they will also have either a positive or negative attitude developed towards the brand. However, this may change after prospects have actually interacted with the brand. It is important to ensure that new entrants to the market firstly understand the category need, only then should Starbucks try and sell them their brand. These are everyday people, who go to college or work and enjoy having coffee. They have time to brew the coffee and most likely have some say in the type of coffee brought into their home, as they are old enough to drink it. Consumers tend to have positive thoughts when interacting with Starbucks. Although it should be noted that some consumers may be stressed and using coffee for relaxation, this suggests coffee has positive connotations for them. When they are in the grocery store they are thinking in terms of needs and wants,


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for most coffee would fall into the want category rather the need category. It is important for Starbucks to understand and utilize this fact. Brand interaction can also be influenced through the use of in-store displays and promotions. Problems The younger market, which is the market Starbucks is favored in, they tend to enjoy energy drinks

etc. more than the taste of coffee. Opportunities Starbucks could increase consumer usage of the product, especially amongst current brand switchers.

This could be achieved by increasing the number of consumers making Starbucks their choice whilst in store, through the use of sales promotions.

Grow market share by retaining consumers, as they get older – don’t let them move to Folgers/ Maxwell House. But still target new entrants to the coffee market who are more inclined to buy Starbucks.

Competitor Analysis Starbucks two key competitors are Folgers and Maxwell House (39% market share, owned by Kraft Foods). They hold the majority of the market between them, as they are two of the best-established brands in the market. Furthermore they are competitively priced and are expanding the number of varieties they offer to compete more directly with Starbucks. Mintel and recently conducted store checks identify Folgers as Starbucks largest competitor in the retail market. It is becoming more of a threat as it diversifies the variety of coffee they have on offer. J.M. Smuckers bought the brand and several others from P&G, when P&G divested itself of its coffee division. Folgers have the best established brand in the segment, with a strong market share (53%) and a long company history. It should however by noted that Starbucks had consist facings across both stores visited, where as, Folgers had a high number of facings in one store and low the other. Other competitors it is important for Starbucks to look out for are Steep & Brew and Cameron’s Coffee who both have in store coffee cylinders and grinders. This along with their wide ranges positions them strongly against Starbucks. Caribou Coffee was a small coffee chain that grew nationally and began selling through grocery stores, in much the same way as Starbucks did. Caribou often have in store coffee docks, which helps draw attention to the brand. Dunkin’ Donuts (distributed by J.M. Smuckers) and White Castle (Brewed by Wallingford Coffee Mills12), are two competitors who have also made the move from being stand-alone coffeehouses/restaurants, to selling coffee through retail channels. Presently, Starbucks holds higher market share than both of these; however Dunkin’ Donuts’ market share is increasing and furthermore they have currently increased the number of varieties they offer. Strengths Many competitors have cost efficient process that allows them deliver coffee at more affordable

prices than Starbucks, these prices have become even more attractive as recessionary pressures continue.

Weaknesses Many competitor products are not considered to be as high quality as those offered by Starbucks.


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Problems Folgers holds a very strong market position, as it expands the number of varieties it offers to compete

more directly with Starbucks, furthermore it has the ability to offer a far lower price. Opportunities Starbucks is seen to be one of the highest quality coffees available through retail channels; they

should leverage this as more people turn away from coffeehouses due to budgetary constraints, but still want to enjoy a quality cup of coffee.

Strategy

Key Fact From conducting this brand audit, I have deduced that a key opportunity for Starbucks is to increase the purchase frequency of current users. The main message that Starbucks should convey to consumers should aim to affect the behavior of these users.

Increase the purchase frequency of Starbucks amongst current consumers, in particular those who like Starbucks but switch between brands regularly.

Target Group Sources of Business Starbucks should source business by increasing the purchase frequency of existing users; it can do this by encouraging current brand switchers to choose their coffee more often. Brand switchers represent 63% of the roast coffee market and Starbucks could increase its sales if it could increase its brand position in these switchers’ repertoires. This will help ensure that users continue to purchase Starbucks and will allow them in time to penetrate the 45+ years of age market.

Proposition Starbucks proposition should seek to encourage users to purchase more, through the use of its product differentiation and added values. This proposition will increase purchase frequency of existing users by highlighting how Starbucks can satisfy one of their wants. Product Differentiation

Starbucks should portray the higher quality of its coffee versus its competitors It should also portray the CRS initiatives that purchasing Starbucks helps support

Added Values They should depict the feeling/emotion you experience when drinking Starbucks coffee The sensation you get when drinking Starbucks The positive emotion you can have from knowing you supported one of Starbucks CSR initiatives

Role of Advertising Modify Attitudes The role of advertising here should be to modify the attitudes of current brand switchers. Starbucks need to communicate how their coffee aligns with consumers’ wants to help build relationships between them and the brand. Knowing that this brand can fill their ‘want’, consumers are more inclined to purchase it, over other brands in their repertoire.


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Appendices


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Appendix 1: Green Project – New York City Link: http://www.youtube.com/watch?v=5xJX2ZgdlyM


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Appendix 2: New York Times Print Ad’s for Starbucks Retail Coffee


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Appendix 3: Store Check 1: Schnucks Grocery Store, Urbana Results:

0 5 10 15 20 25

Starbucks

Seattle’s Best

Papa Nicholas Coffee

Papa Nicholas Family Reserve

Culinaria

Schnucks

Full Circle

Kaldis

Caribou Coffee

Café Fair Coffee

Millstone

8 O’clock Coffee

Folgers

White Castle

Dunkin’ Donuts

Cameron’s Coffee

Percentage of Facings Per Brand(%)



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0 5 10 15 20 25

Starbucks/Kraft

Papa Nicholas, Inc.

Schnucks

Kaldis Coffee

Caribou Coffee

Steep & Brew

8 O’clock Coffee

Smuckers + P&G

White Castle

Dunkin’ Brands

Cameron’s Coffee

Percentage of Facings per Parent Company(%)



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Figures & Company Information Gathered During Store Check

Brands Number of Facings

Number of Varieties

Percentage of Facings (%)

Parent Company

Starbucks 40 19 17.02 Starbucks/Kraft

Seattle’s Best 10 7 4.26 Starbucks/Kraft

Papa Nicholas Coffee

14 9 5.96 Papa Nicholas, Inc.

Papa Nicholas Family Reserve

5 3 2.13 Papa Nicholas, Inc.

Culinaria 11 3 4.68 Schnucks

Schnucks 13 7 5.53 Schnucks

Full Circle 3 2 1.28 Schnucks

Kaldis 13 6 5.53 Kaldis Coffee

Caribou Coffee 11 8 4.68 Caribou Coffee

Café Fair Coffee 10 6 4.26 Steep & Brew

Millstone 12 12 5.1 Smuckers + P&G

8 O’clock Coffee

28 6 11.91 8 O’clock Coffee

Folgers 7 6 2.98 Smuckers + P&G

White Castle 4 2 1.7 White Castle

Dunkin’ Donuts 8 4 3.4 Dunkin’ Brands/P&G

Cameron’s Coffee

461 20 19.57 Cameron’s Coffee

1 #46 = 32 Shelf Facings & 14 Coffee Cylinders


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Appendix 4: Store Check 2: County Market, Champaign Results:

0 5 10 15 20 25 30

Starbucks

Maxwell House

Java Delight

Flavorite

Kahlua Coffee

Joe Coffee

Dunkin’ Donuts

Wild Harvest

8 O’clock Coffee

Folgers Coffee

Folgers Gourmet

Caribou Coffee

Café Fair

Steep & Brew




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0 5 10 15 20 25 30

Starbucks/Kraft

Kraft

County Market

Pernod Ricard USA

Joe The Art of Coffee Co

Dunkin’ Brands

Wild Harvest

8 O’clock Coffee

Smuckers + P&G

Caribou Coffee

Steep & Brew




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Figures & Company Information Gathered During Store Check 2 Brands Number of

Facings Number of Varieties

Percentage of Facings (%)

Parent Company

Starbucks 17 9 10.63 Starbucks/Kraft

Maxwell House 18 7 11.25 Kraft

Java Delight 8 7 5 County Market

Flavorite 8 2 5 County Market

Kahlua Coffee 3 2 1.88 Pernod Ricard, USA

Joe Coffee 2 2 1.25 Joe The Art of Coffee Company

Dunkin’ Donuts 7 6 4.38 Dunkin’ Brands

Wild Harvest 3 2 1.88 Wild Harvest

8 O’clock Coffee

11 6 6.88 8 O’clock Coffee

Folgers Coffee 40 12 25 Smuckers + P&G

Folgers Gourmet

5 2 3.13 Smuckers + P&G

Caribou Coffee 4 1 2.5 Caribou Coffee

Café Fair 121 10 7.5 Steep & Brew

Steep & Brew 222 14 13.75 Steep & Brew



1 All Business. (Manufacturing). [Online]. Available from: http://www.allbusiness.com/manufacturing/food-manufacturing-food-coffee-tea/727029-1.html [Accessed 4 May 2010] 2 Mintel. (Coffee). [Online]. Available from: http://academic.mintel.com.proxy2.library.uiuc.edu/sinatra/oxygen_academic/search_results/show&/display/id=393520/display/id=54692/display/id=470681 [Access 25 April 2010]


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3 Brand Week. [Online]. Available from: http://www.brandweek.com/bw/content_display/esearch/e3idee9d1f93a71c575788714aea0e275c0 [Access 16 April 2010] 4 Mintel. (Coffee). [Online]. Available from: http://academic.mintel.com.proxy2.library.uiuc.edu/sinatra/oxygen_academic/search_results/show&/display/id=393520/display/id=54692/list/id=54692&type=NSItem&class=AdvertisingNews/display/id=454012&anchor=454012 [Access 25 April 2010] 5 Coloribus. (Starbucks). [Online]. Available from: http://www.coloribus.com/adsarchive/commercials/kraft_starbucks/[Access 16 April 2010] 6 Blogs. (Starbucks). [Online]. Available from: http://blogs.starbucks.com/blogs/customer/archive/2009/04/30/sneak-peek-at-new-ad-campaign.aspx [Accessed 28 April 2010] 7 Media Buyer Planner. 2009. 90% of Consumers Still Make Unplanned Purchases; In-Store Messaging Effective. Media Buyer Planner. [Online]. Available from: http://www.mediabuyerplanner.com/entry/32443/90-of-consumers-still-make-unplanned-purchases-in-store-messaging-effective/ [Accessed April 2010]. 8 Mintel. (Coffee). [Online]. Available from: http://academic.mintel.com.proxy2.library.uiuc.edu/sinatra/oxygen_academic/search_results/show&/display/id=393520/display/id=54692/list/id=54692&type=NSItem&class=AdvertisingNews/display/id=454012&anchor=454012 [Access 25 April 2010] 9 Mintel. (Coffee). [Online]. Available from: http://academic.mintel.com.proxy2.library.uiuc.edu/sinatra/oxygen_academic/search_results/show&/display/id=393520/display/id=54692/list/id=54692&type=NSItem&class=AdvertisingNews/display/id=454012&anchor=454012 [Access 25 April 2010] 10 Starbucks Gossip. [Online]. Available from: http://starbucksgossip.typepad.com/_/2010/04/open-thread-conversationstarter-does-via-in-supermarkets-mean-less-pressure-to-peddle-it-in-the-stor.html#comments [Accessed 2 May 2010] 11 Mintel. (Starbucks). [Online]. Available from: http://academic.mintel.com.proxy2.library.uiuc.edu/sinatra/oxygen_academic/search_results/show&/display/id=393520/display/id=54692/display/id=470681 [Access 25 April 2010] 12 Rate It All. (White Castle Coffee). [Online]. Available from: http://www.rateitall.com/i-3962-white-castle-coffee.aspx [Access 25 April 2010]

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