Starbucks Design Brief

November 4, 2010

Benjamin Gadbaw Christopher Cannon Cooper Smith Tina Ye

Starbucks represents something beyond a cup of coffee.

HOWARD SCHULTZ

In 2009, Americans drank 146 billion cups of coffee

In 2009, Americans drank 146 billion cups of coffee (Thats $40 billion in sales)

= 1 BILLION CUPS OF COFFEE

= 1 BILLION CUPS OF COFFEE

Home Coffee Sales: $6.3 billion

($915 million in specialty coffee sales)

VIA US Instant Coffee: 5% market share

($100M rst ten months. Estimated $1B by 2015)

Competitor Revenues

(in billions)

25

McDonalds
20

15

10

Starbucks Dunkin Donuts

0 2005 2006 2007 2008 2009

McDonalds Latte:
(40 less than Starbucks)

$6.9 billion yearly sales:

(servs 30 cups of coffee every second)

Starbucks Response: 30,000 economy coffee outlets

(supermarkets, Burger King, Subway, AMC theater)

The Third Wave: +70% specialty coffee houses in 5 years

(thats one coffee house for every 14,000 Americans)

The battle within the company is making sure growth doesnt dilute our culture.
HOWARD SCHULTZ

Market Saturation: 900 Starbucks store closures in 2009

(within the United States alone)

Strengths

 Starbucks is the market leader in the coffee industry Product diversication  It has 16,635 stores in 40 countries worldwide including 11,068 stores in the United States  Company operated retail stores, (licensees, no franchises)  Customer service is excellent  Customers are satised with the quality and taste of coffee  High brand awareness and equity  Approx 13,000 valued and motivated employees, good work environment  Financial conditions of the company are good  Starbucks coffee shops locations are at convenient places like library, shopping malls and etc.  Starbucks making their business more environmental friendly  Customer base loyalty  Good relationships with suppliers  Product is the last socially accepted addiction

 Starbucks seeks to be an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work or the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.
HOWARD SCHULTZ

Starbucks Primo

Starbucks Roasting Plants

Kent, WA Portland, OR

Minden, NV

York, PA

Columbia, SC

Store Conversion Budget

Conversion to a Starbucks Primo will share many similarities with opening up a new store. The biggest expenses will be: Retraining or rehiring staff Redesign & remodeling of store Acquisition of furnishings and decor Acquisition of supplies & stock (complementary food items, coffee, liquors) Administrative and infrastructure changes

New store in 1995: $350,000 x 44% ination rate New store in 2010: $504,000

Cost of implementing a Starbucks Primo: $400,000

Implementation time per store: 3 months Foregone revenue: $250,000

Total cost of implementation per store is $650,000

1,000-1,500 square feet

1,000-1,500 square feet 4570 seats

1,000-1,500 square feet 4570 seats x 5 hours

1,000-1,500 square feet 4570 seats x 5 hours = 225350 people a night

1,000-1,500 square feet 4570 seats x 5 hours = 225350 people a night x $15/person

What does $15 look like?

5-cup Coffee-Tasting Flight: $18 ... paired with dessert offerings: $25 A single specialty coffee drink paired with a single dessert offering: $11$20 A couple alcoholic coffee drinks: $12$18

1,000-1,500 square feet 4570 seats x 5 hours = 225350 people a night x $15/person = $3,375-$5,250 per day x 365 days = $1.3 million$2 million a year

Projected Revenues

(per store)

$2M

(1,500 Sq. Ft. Stores)

$1.3M $930,000

(1,000 Sq. Ft. Stores)

Average Store Revenue (2009)

Projected one-year revenue

Starbucks Primo
.........

Starbucks
.........

Seattles Best
.........

Via

(Starbucks) Circadia

Positioning
Stumptown 15th Ave Local Cafs

HIGH-END

Nespresso

Peets Coffee
INDEPENDANT

Starbucks
CHAIN

Seattles Best

Neighborhood Corner Stores

Dunkin Donuts McDonalds

LOW-END

Positioning
Stumptown

HIGH-END

Starbucks Primo Nespresso Starbucks 15th Ave Local Cafs Peets Coffee
INDEPENDANT

Starbucks
CHAIN

Seattles Best

Neighborhood Corner Stores

Dunkin Donuts McDonalds

LOW-END

MondayFriday

WAKE

GET TO WORK

LUNCH

SLEEP

Weekend

WAKE

LUNCH

SLEEP

= 1 BILLION CUPS OF COFFEE

Long Term Benets

Increased visibility Increased respect among the coffee-drinking elite Strengthened brand equity

Thank you.