1.0 Executive Summary 2.0 Situation Analysis

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1.0
Executive Summary
2.0 Situation Analysis
Starbucks Coffee has been established as one of the most recognizable and
successful coffee brands in the world. The coffee market is drastically changing on
a daily basis and this section of the marketing plan is designed to show where
Starbucks is in this current market.
2.1 Starbucks Vision and Mission Statement
Mission Statement: The mission of Starbucks is to establish Starbucks as the
premier purveyor of the finest coffee in the world while maintaining our
uncompromising principles while we grow
1) Provide a great work environment and treat each other with respect and
dignity.
2) Embrace diversity as an essential component in the way we do
business.
3) Apply the highest standards of excellence to the purchasing, roasting
and fresh delivery of our coffee.
4) Develop enthusiastically satisfied customers all of the time
5) Contribute positively to our communities and our environment
6) Recognize that profitability is essential to our future success.
Vision: To inspire and nurture the human spirit one person, one cup and one
neighborhood at a time.
Objectives:
Our Coffee- It has always been, and will always be, about quality. Were
passionate about ethically sourcing the finest coffee beans, roasting them
with great care, and improving the lives of people who grow them. We care
deeply about all of this; our work is never done.
Our Partners- Were called partners, because its not just a job, its our
passion. Together, we embrace diversity to create a place where each of us
can be ourselves. We always treat each other with respect and dignity. And
we hold each other to that standard.
Our Customers- When we are fully engaged, we connect with, laugh with,
and uplift the lives of our customers even if just for a few moments. Sure, it
starts with the promise of a perfectly made beverage, but our work goes far
beyond that. Its really about human connection.
Our Stores- When our customers feel this sense of belonging, our stores
become a haven, a break from the worries outside, a place where you can
meet with friends. Its about enjoyment at the speed of life sometimes slow
and savored, sometimes faster. Always full of humanity.
Starbucks Coffee Marketing Plan 2010

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Our Neighborhood- Every store is part of a community, and we take our

responsibility to be good neighbors seriously. We want to be invited in
wherever we do business. We can be a force for positive action bringing
together our partners, customers, and the community to contribute every
day. Now we see that our responsibility and our potential for good is
even larger. The world is looking to Starbucks to set the new standard, yet
again. We will lead.
Our Shareholders- We know that as we deliver in each of these areas, we
enjoy the kind of success that rewards our shareholders. We are fully
accountable to get each of these elements right so that Starbucks and
everyone it touches can endure and thrive.
2.1.1 Review of Mission Statement and Vision

Entry-level baristas at Starbucks get a full 24 hours training, which better
prepares them to stay calm and courteous in high-traffic situations. To keep
improving service, managers incentives are tied to the ratings they receive from
disguised Starbucks quality assurance agents, who visit at least three times a
quarter. In a 2009 Study by Business Weekly Starbucks ranked tenth in customer
service, top in both the food and coffee industries. The study was based upon
aggregated scores for each individual brand across the complete studies in J.D.
Power's 2008 database. To supplement the brands in J.D. Power's database, 3,000
BusinessWeek readers were surveyed and asked to nominate three companies
they felt were best and three they felt were worst at providing customer service.
More than 1,000 readers responded with 2,423 "votes" and 1,850 "complaints."
Finally, Both sets of date were combined, the people and process scores to
establish the "Service Score. Starbucks received a B+ in both the peoples grade
and the process grade and 62% of respondents said they would definitely
recommend the brand to a friend. Judging by this information, Starbucks is meeting
its customer service goals set forth in the mission statement and the company
vision.
A highly emphasized goal of Starbucks is to maintain good relations with
employees and make it a pleasant place to work. Since Starbucks began with a
single store in 1971, its overriding philosophy has been this: "Leave no one behind."
With that in mind, new employees get 24 hours of in-store training, steeping them in
information about coffee and how to meet, greet and serve customers. Full healthcare benefits (medical, dental, vision and alternative services) are offered to all
employees, including part-timers who work at least 240 hours per calendar quarter.
As a result of such measures, Starbucks employees have an 82 percent jobsatisfaction rate, according to a Hewitt Associates Starbucks Partner View Survey.
This compares to a 50 percent satisfaction rate for all employers and 74 percent for
Hewitts "Best Place to Work" employers.

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The company also encourages community involvement by donating $10 for
each hour that an employee volunteers to a nonprofit or charitable organization.
Profits from sales of the companys logo-emblazoned "coffee gear" are channeled
into clubs and services for employees, which include everything from running
groups and bowling leagues to quilting and book clubs. Employees can donate an
amount of their choice to a voluntary "CUP (Caring Unites Partners) fund," which is
used to provide grants to fellow employees who fall on hard times. And every year,
as part of its Earthwatch program, the company selects a few employees to travel to
coffee-producing parts of the world, where they learn firsthand about environmental
and conservation issues from the growers. Last year two were selected; this year
five are going.
In review, Starbucks is meeting all goals set forth in both the vision and
mission statement, however, this brings forth the question of whether or not that
translates into success/profit.
2.2 Major changes to the external environment of the coffee industry
Potential changes in the market include, new market entrants, changes in
the price of coffee, changes in buying habits of both the company and consumers,
and whether or not the market has become saturated through continuous
expansion.
2.2.1 New Market Entrants and Market Share Analysis
It is clear that the coffee market is rapidly growing and changing due
to new market entrants and continuous changes in consumer habits. Fierce
competition and exponential growth in the coffee segment keeps operators on their
toes, but recent years appear to have started a vibrant new chapter in coffees long
history.
Quick-service operators are taking advantage of the growing popularity of
coffee-based beverages by launching new products. Traditionally, Starbucks and
Dunkin Donuts have vied for market supremacy in the category, however, with the
launch of McDonalds McCafe specialty coffee line, as well as surprising entries into
the category from Coldstone Creamery, Emerald City Smoothies and 7-Eleven, the
race for market share is heating up.
"We stayed away from the coffee thing for years, trying to stay on brand,"
stated Al Schriber, a partner at Emerald City Smoothies, which added a line of hot
nutrient-enriched coffees called "JavaFit" in February. In testing the coffees, the
company found that consumers were interested in a hot coffee that fit with the
brand's emphasis on healthful living, reported Nation's Restaurant News (June 1).
Whether a broader line of specialty coffee is in the company's future remains to be
seen.
Cold Stone's recently launched line of Sweet Cream Lattes is part of a plan
designed to grow the chain's average unit volume sales from $360,000 to $500,000.
"We were noticing that if a group of four came into a Cold Stone, three might get ice

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cream or a shake, but the fourth would go down the street for an ice-blended
coffee," stated president Dan Beem. Mr. Beem also stated that the coffee drinks are
expected to increase the chain's overall traffic.
Since 2002, the number of coffee transactions in foodservice outlets
increased 24%, according to the NPD GROUP. The quick-service segment is the
driving force being that trend. More recent NPD surveys, however, indicate that
foodservice operators traditionally known for hamburger and donut offerings may be
gaining market share from gourmet coffeehouse chains. Looking at data from the
period January through March 2009, compared with the same period last year, the
total number of coffee servings within the quick-service segment was estimated to
total 1.4 billion. Of that, 653 million servings were reported as specialty coffees. The
number of specialty coffee transactions from hamburger restaurants was up 61%,
accounting for 10.9% of specialty coffee servings within quick service. For the
comparable period, specialty coffee transactions at doughnut outlets were up 26%,
accounting for 18.7% of servings. Meanwhile, the number of specialty coffee
servings at coffeehouse concepts declined 10% for the same period to 49.2% of
servings.
Recent customer satisfaction surveys indicate that the perception of quality
and value for specialty coffees from hamburger restaurants is improving as more
chains have launched specialty coffee lines. Last year, Burger King launched its
Mocha BK Joe, a cold coffee drink, while Wendys announced in May that it plans to
launch coffee-flavored smoothies. Other quick-serve restaurants such as Subway
and
Sonic
have
launched
coffee-based
drinks,
as
well.
In hopes of gaining additional market share, convenience store operators
such as 7-Eleven are continuing to roll out ice-coffee and other specialty coffee
drinks. Iced-coffee has gotten so popular over the last year; it has passed iced tea
in sales as a breakfast drink, according to the NPD Group. The number of morning
meals that included iced coffee more than doubled over the past five years from 2%
in 2004to 4.6% through February 2009, reported USA Today (June 15). Women and
teenage girls are the most likely consumers to purchase iced coffee drinks. Teen
girls are 84% more likely to purchase iced coffee than the average American, while
women age 18 to 34 are 68% more likely. "This is clearly a female drink," according
to
Harry
Balzer
of
NPD.
Last year, coffee passed soft drinks to become Americas number-two
beverage after water, according to the annual National Coffee Drinking Trends
study conducted for the National Coffee Association. Experts say theres still room
for growth. McDonalds getting into it is the writing on the wall, Inman says. This
trend hasnt even started yet. Its where fast food was in the 1960s.
The rise of specialty coffee to widespread popularity mimics that of the
upgrading of many other American consumables, including wine, bread, cheese or
chocolate. In each case, once consumers tasted better quality, for many there was
no
turning
back.
Another factor boosting coffees popularity is that its an affordable luxury.
The best gourmet coffee sold in the U.S. today costs perhaps 32 cents a home-

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brewed cup, says Ric Rhinehart, executive director of the Specialty Coffee
Association of America, or SCAA. In hard times, consumers may buy cheaper wine,
but coffee is relatively recession-proof. You can drink specialty coffee anytime and
not feel bad about it, Rhinehart says. Chicago-based market research firm
Technomic reports that consumption of hot specialty coffee has grown 14 percent in
each of the past three years. Some 82 percent of American adults are coffee
drinkers, up from 79 percent in 2004. The SCAA reports the specialty market
topped $12 billion at the end of 2008. Additionally, the number of coffee shops in the
United States has grown from 1,640 in 1991 to nearly 24,000 at the end of 2008.
The bulk of those, about 11,000, belong to the Seattle-based company that coffeewatchers agree almost single-handedly brought specialty coffee to the masses.
Starbucks capitalized on the trend to better coffee by offering a unique new
presentation of that coffee, Rhinehart says. Americans werent used to espressotype drinks. We were starting to take more meals and beverages out of the home.
Starbucks was in that perfect spot of having a unique product, they offered great
value, there was a new consumer patternand they were cognizant of their place
in the social fabric, as a third place for people to gather.
2.2.2 Coffee production and Pricing Trends
As opposed to futures prices, now of US 1.22 (Jan 09), average retail prices
during the mid-2000 decade (2005) averaged about US $3.20 per pound. The
United States consumes one-fifth of global coffee production - it is the worlds
largest consumer of coffee.
The U.S. Department of Agriculture's December 2006 estimate for 2006-07
was that world coffee production had increased to 128.6 million bags, up 4.9 million
bags from its June 2006 estimate. Production in 2008-09 was estimated at 13%
above the 2006-07 period. Coffee production in 2008 is now estimated at
approximately 120 million bags.
World coffee exports totaled 7.75 million bags in July 2008, an increase of
1% compared with the volume of 7.67 million bags recorded in July last year. Total
exports in the first 10 months of coffee year 2008-09 (Oct-06 to Jul-07) were up by
13.3% from the same period last year, totaling 81.52 million bags compared to
71.94 million bags in the prior year.
Total annual production of coffee was estimated at approximately 6.8 million
tons in 2007 and was expected to grow to about 7.5 million tons during 2010.
Coffee is normally shipped in bags weighing 60 kilos or about 130 pounds.
The top 5 global producing countries of coffee in 2009 are as follows:

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Country
Brazil
Vietnam
Columbia
Indonesia
Ethiopia
Estimated Production
(millions of bags)
35
18
12
6
5
2.2.3 Changes in buying habits of both Starucks and Consumers

Starbucks initiated C.A.F.E. (Coffee and Farmer Equity) Practices to
evaluate, recognize, and reward producers of high-quality sustainably grown coffee.
C.A.F.E. Practices is a green coffee sourcing guideline developed in collaboration
with Scientific Certification Systems (SCS), a third-party evaluation and certification
firm. C.A.F.E. Practices seeks to ensure that Starbucks sources sustainably grown
and processed coffee by evaluating the economic, social and environmental
aspects of coffee production against a defined set of criteria, as detailed in the
C.A.F.E. Practices Guidelines. Starbucks defines sustainability as an economically
viable model that addresses the social and environmental needs of all the
participants in the supply chain from farmer to consumer.
Starbucks bought 367 million pounds of coffee in fiscal 2009. Eighty-one
percent of that 299 million pounds worth from C.A.F.E. Practices approved

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suppliers. Starbucks paid an average of $1.47 per pound for green coffee in fiscal
2009.
Fair Trade Certified coffee empowers small-scale farmers organized in
cooperatives to invest in their farms and communities, protect the environment, and
develop the business skills necessary to compete in the global marketplace.
Starbucks began purchasing Fair Trade Certified coffee in 2000, helping
grow the market for Fair Trade Certified coffee in the U.S. And in 2009, increased
purchases to 40 million pounds making Starbucks the largest purchaser of Fair
Trade Certified coffee in the world.
Coffee consumption in the United States has increased steadily since the
1960s. Through the recent recession, coffee was essentially recession-proof. Daily
consumption of coffee beverages among consumers remained unchanged as
compared to 2009, with 56% of adults partaking. 84% of consumers have not
changed their consumption habits despite the economic environment.
2.2.4 Has Starbucks saturated the Market?
Today, consumers enjoy having a coffee place that's right around the corner
and worth the price. Unfortunately, it is common belief that, Starbucks took the
demand of the consumer a step too far, by over saturating the market with stores.
One of the best examples of over saturation can be found in a strip mall in
Colorado. Exactly three Starbucks locations can be found; no more than 750 ft
away from one another, and two of the three stores are only 200 ft away from each
other. By flooding the market with spots for coffee, Starbucks has been wasting
growth potential, and opting for current market optimization. Unfortunately, the
optimization is becoming wasteful and hurting the brand image.
In a number of press releases, Howard Schultz, Chairman and Founder of
Starbucks, has mentioned the loss of original roots associated with becoming a
chain store. The focus on coffee shop ambiance was the root to Starbucks'
success, but somewhere along the line the company lost the entrepreneurial spirit.
It is not just the fact that Starbucks is now on every block that has hurt the
company; it is the loss of the entrepreneurial spirit that has affected the public
opinion. At one point in their history, Starbucks was seen as a coffee shop
dedicated to customer satisfaction. After rapid expansion and growth Starbucks is
now seen as a corporate giant concerned with one thing; profit. This problem was
quickly addressed with the return of Howard Shultz, and the effects are starting to
be noticed by the change in public opinion.
2.3 Consumer Profile and Target Market

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Starbucks strategy has been to position itself as an upscale brand and
differentiate its offerings as being not just coffee products, but rather a rich
"experience". This Starbucks "experience" has been the company's selling point.
The company initially targeted young college students, social classes, and
neighborhoods that would be most receptive to the idea of buying $3 a cup of coffee
and spending time with friends at their stores. With rapid growth and expansion,
Starbucks target market expanded rapidly to include every individual of every age.
The company targeted small towns, rural communities, ethnic neighborhoods,
highway rest stops, and even markets already saturated with various coffee shops
("Starbucks Corp: Long-Term Growth Goal Raised To 30,000 Stores World-Wide").
What began as a niche target market eventually came to include consumers from
all
facets
of
life.
Starbucks is often considered an affordable luxury, enabling the Company to
broaden its demographic reach in recent years. Five years ago, the typical
Starbucks customer was older, had an advanced degree and more disposable
income. Today's Starbucks customer has expanded to include a younger (13
percent 18-24 years old), more diverse (37 percent multi-cultural), and slightly lower
average income ($55,000 per year).
"We are reaching more and more new customers by introducing innovative food
and beverage products with broad appeal and by taking our stores into increasingly
diverse markets," said Jim Alling, president, Starbucks Coffee U.S. "By connecting
with customers, serving the highest quality coffee and striving to consistently deliver
legendary service, our store partners are at the core of the Starbucks Experience."
2.3.1 Specific Consumer Profile
Starbucks target consumer:
The target consumer is age 25 to 35 and is a college graduate. The
consumer is single and devoted to their career, which is most likely in a corporate
business setting. They work from nine to five, five days a week and spend time at
home on their work. The consumer is middle class and is more concerned with
image and status rather than price. The consumer seeks quality and convenience.
They regard relationships very important and enjoy small talk with family and friends
in a relaxed social setting.
2.4 Revenue Sources

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Starbucks Corporation generates revenue both from its company-operated
retail stores and from specialty operations. From 2004 to 2008, Starbucks grew its
revenue by 14.5% CAGR, culminating in 10.4 billion in sales in 2008. Starbucks
generated double-digit percentage earnings growth since it's inception. Through its
company-operated retail coffee houses, Starbucks sells high-quality whole bean
coffee, freshly brewed coffee, premium teas, a variety of cold blended beverages,
various food/pastry items, and coffee/beverage related equipment and accessories,
as well as a line of CDs. In 2008, Starbucks operated 7,238 retail stores in North
America and 1,979 stores internationally. Its retail-operated stores generated 84%
of its total revenue.
Third Place Experience
Starbucks success is due in large part to the trendsetting triumph of its
coffeehouses as an informal and convenient "third place" outside of home and
work, ideal both for informal meetings and a quiet moment away from the hubbub of
daily life. Wi-fi Internet access in all stores also makes it a place where customers
can work. Book and music events also take place at Starbucks, in accordance with
the company's goal of making each location a community center of sorts to garner
the loyalty of local customers.
Specialty Operations
Starbucks specialty operations segment tries to develop the company's
brand through third parties outside the traditional coffeehouse. Specialty retail
operations accounted for 16% of Starbucks total revenue in 2008.
Licensed Stores: Located in places like airports and supermarkets, licensed stores
generate licensing fees and royalties as well as revenue from Starbucks coffee,
tea, and CDs resold in the licensed locations. In 2008, Starbucks had 4,329
licensed stores in North America and 3,134 abroad, accounting for 48% of Specialty
Ops revenue and 8% of total revenue.
Packaged Tea and Coffee: Starbucks sells its packaged coffee and tea as a retail
product at various food stores. This accounted for 21% of company's specialty
revenue and 3% of total revenue.
Branded Products: Starbucks has partnerships with Pepsi and Dreyer's to develop
and distribute ready-to-drink beverages and ice creams. This accounted for 4% of
company's specialty revenue and 1% of total revenue.
Foodservices Operations: Starbucks sells its coffee to foodservice operators like
restaurants, offices, hotels, and cafes (including the Barnes and Noble Cafes) that
operate under different licensing contracts. This segment accounts for 25% of
company's specialty revenue and 4% of total revenue.
Other: Starbucks also has entertainment business relationships with Hear Music,

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Satellite XM Radio (24-hour Starbucks Hear Music digital music channel), and
provides wireless broadband Internet service in company-operated retail stores in
U.S and Canada. Starbucks also has a credit card agreement with Chase. This
division accounts for 2% of specialty revenue and less than 1% of total revenue.
2.5 New Product Release
In March 2009, Starbucks introduced its new-technology instant coffee

packets called VIA "Ready Brew", unveiling it in New York City with subsequent
testing of the product also in Seattle, Chicago and London. The VIA flavors Italian
Roast and Colombia were then rolled out in October 2009, across the U.S. and
Canada with Starbucks stores promoting the product with a blind 'taste challenge' of
the instant versus fresh roast. The consumer test showed that many people could
not tell the difference, often preferring the instant over the fresh brewed. Some
analysts worry that by introducing instant coffee Starbucks will devalue its own
brand. The successful launch was soon followed by a Decaf Italian Roast, and later
with a sweetened version called "iced" (even though all VIA varieties can be made
directly as an iced drink). In October 2010, Starbucks expanded the VIA selection
by introducing four new presweetened flavored versions: Vanilla, Caramel,
Cinnamon Spice and Mocha.
3.0 Competitive Analysis

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The coffee bean provides a livelihood for over 20 million people worldwide
with an estimated worldwide retail sales expected to grow by a compounded rate of
6.9% from 2005-2010, reaching $48.2 billion by 2010, according to the U.S. Market
for Coffee and Ready-To-Drink Coffee. Starbucks' marketing strategy involved
positioning its Starbucks outlets as a place where consumers can spend time other
than their home or work. This was done by making each of its stores as comfortable
and relaxing as possible. They want to be known as the third place, home, work,
and then you have Starbucks. The coffee giant achieved these using creature
comforts, such as comfortable furniture and relaxing music. Over the past several
years, Starbucks also included offerings such as wireless internet, handicapped
access, complimentary books, and common areas for collaboration. While
Starbucks stores are positioned as locations where customers can spend time in a
comfortable setting, their product lines are positioned at the higher end in regards to
prices and quality.
3.1 Starbucks Competitors
Starbucks competitors in the coffee beverage sales include 7-Eleven,
Dunkin Donuts, BIGGBY Coffee, Caribou Coffee, McDonald's, Panera Bread, and
Einstein Bagels. Competitors such as McDonald's and Dunkin Donuts not only have
extensive menus, but also the financial resources and position to leverage their
strengths to threaten Starbucks profitability.
3.1.1 Dunkin Donuts
Dunkin' Donuts is an international donut and coffee retailer founded

in 1950 in Quincy, Massachusetts by William Rosenberg. It is now headquartered
in Canton, Massachusetts. Despite originally focusing on donuts and other baked
goods, over half of Dunkin' Donuts business today is in coffee, making it more of a
competitor
to Starbucks as
opposed
to
traditional
competitors Krispy
Kreme and Tim Hortons.
3.1.2 Caribou Coffee
Caribou Coffee is a specialty coffee and espresso retailer, the second
largest in the United States after Starbucks. Caribou sells gourmet coffees, teas,
and bakery goods in 415 company-owned coffeehouses in 16 states and the District
of Columbia, as well as 80 franchise locations worldwide. Caribou Coffees revenue
for
year
2009
was
282.6
million.
3.1.3 McDonalds
McDonalds executives came out swinging when they announced their
assault on the comfy world of coffee shops. After the success of its upgraded drip

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coffee which even managed to snag a thumbs-up from testers at Consumer
Reports earlier this year the fast food chain known for super-size meals is
gearing up for a massive expansion into the world of lattes.
We want to move from beverages as an accompaniment to being a
beverage destination, Don Thompson, president of McDonalds USA, said in a
meeting with analysts Tuesday. Our speed, our convenience, the value that we can
afford to customers without quality comprise will make us a formidable player.
Restaurants will offer lattes, mochas, cappuccinos and espressos with a choice of
different flavorings and milk. Industry watchers say the drinks cost about 50 cents
less than at Starbucks. McDonalds is a semi-recent competitor for Starbucks that
has evolved over the past few years. A 12-ounce cup of brew starts at $1.40 at
Starbucks, a penny more than the average McDonald's brew price. A small
McDonald's latte costs $1.99 compared with $2.45 to $3.15 at Starbucks.
3.1.4 Others
In terms of perception, 7-Eleven and Dunkin Donuts provide coffee in a "nononsense fashion", which attracts customers who are extremely price sensitive.
Caribou Coffee's environment is similar to that of Starbucks because of furniture,
free Internet, and cozy surroundings, but their lack of market expansion has
prohibited them from gaining the notoriety Starbucks has achieved. Finally, BIGGBY
Coffee is in the middle ground where the likes of Dunkin Donuts and Caribou Coffee
separate themselves. Small independently owned coffee shops also compete with
individual locations of Starbucks, however, they do not own enough of the market
share to have a major effect on the Starbucks Brand.
3.2 Competitive Advertising
We get a lot of questions on the competition and that everyone seems to be
picking on Starbucks through their advertising as they try to reposition Starbucks as
expensive or snobby, and, boy, when is Starbucks going to start advertising and join
in that coffee conversation?" Starbucks Chief Marketing Officer Terry Davenport told
investors in New York. "We're not going to get into that conversation. We're not
going to get sucked into the, 'My coffee is better than your coffee,' price point type
of coffee conversation. We're going to play at a much higher level." Starbucks is
relatively new to the advertising game after two decades of building its brand on
word of mouth. However, armed with newly hired advertising agency BBDO New
York, Starbucks placed two commercials recently. One, which ran during the
"Saturday Night Live" show before Election Day, advertised that Starbucks would
give out free coffee Nov. 4. The second ran on the heavily traveled Wednesday
before Thanksgiving, on the Weather Channel and CNN, to let customers know that
Starbucks would be donating portions of coffee sales to help African AIDS victims.
The coffee giant also is turning to cheaper modes of advertising via YouTube,
Facebook and Twitter.

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3.3 Features, Advantages and Benefits of Starbucks
Starbucks has several features that help them continue to succeed in their
coffee segment. They have many specialty coffee selections, flavors, and variety.
For example, ice coffees, frappuccinos, smoothies, tea, and holiday specialty drinks
in different seasons.
Advantages of Starbucks include the atmosphere that going into a
Starbucks portrays. Many people go to Starbucks for the surroundings and to hang
out, not just to enjoy their coffee. The employees or baristas have been trained
not only about the Starbucks Corporation, but about the coffee market as a whole.
Starbucks continues to higher people that enjoy there type of surroundings and love
what they do. It is an advantage to see a happy employee who enjoys their job; it
makes the consumers experience that more enjoyable.
Benefits of Starbucks are the free Wi-Fi service so the business
professionals can come in and work on a lunch break or in the evenings. This is
also beneficial for college students to study during finals week. Starbucks is all
about the experience and being able to provide their consumers a high quality
coffee. I believe that is also a benefit; they only provide the best coffee, which is
why they charge a higher price.
3.4 Perceptual Map of Starbucks and its Competitors (Coffee Shop Market)
The graph below illustrates customer perceptions regarding various brands:
3.5 Marketing Mix
In order to maximize their brand awareness and establish themselves as the
most recognized and respected brand in the world and within their target market,
Starbucks implemented a well-integrated marketing program that would utilize a
marketing mix (product, price, place, and promotion) that would satisfy the needs
and wants of its target market. The four elements of marketing mix that Starbucks
utilized are as follows.
3.5.1 Product
Starbucks product-mix expanded from 30 varieties of whole bean coffees to
eco-friendly cappuccino, coffee makers, and other Starbuck paraphernalia. Its
product offerings have also expanded beyond pastries and coffee to oatmeal,
smoothies, and wraps to keep up with the competition and satisfy more customer
needs.
The company has also been constantly introducing new products, such as
"Instant via Ready" and "Full Leaf Tazo Tea Lattes" and "Tazo Tea Infusions". The

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Instant via Ready is an instant coffee that the company claims is indistinguishable
from its regular brewed coffee (Jargon). Full Leaf Tazo Tea Lattes and Tazo Tea
Infusions are the company's new tea offerings through which it hopes to attract tea
drinkers. The company also offers Starbucks coffee and cappuccino makers for
consumers who wish to replace their existing home coffee makers.
3.5.2 Price
Starbucks products are priced higher due to perceived upscale image
attached to its brand. The company also began to offer $1 bottomless 8 oz. cup of
coffee, with unlimited refills that cost approximately 50 cents less than any other
Starbucks products. The company is also implementing "value strategies" that
would emphasize more on inexpensive coffee products rather being perceived as
unaffordable to price-skittish consumers. For example, the company introduced
$3.95 "breakfast pairings," including popular breakfast items paired with a coffee,
and highlights $2 brewed coffees instead of the more expensive specialty drinks.
3.5.3 Place
Starbucks can be found in any neighborhood where there is a perceived
high traffic for its stores. Starbucks outlets can also be found in-store of various
large chains including Barnes & Noble and Target. Their locations are extremely
conducive for individuals that are on the go and for those who enjoy reading or

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listening to music. Starbucks has also been recently testing "stealth outlets", where
the store is named after the street it is located on. The new stores attempt to
"localize" Starbucks stores with no Starbucks logo on any of the products being
offered there, and instead have the specific street address as the brand name.
3.5.4 Promotion
Starbucks has implemented numerous promotions to reach its target
markets.
Promotions
are
listed
as
follows:
One of the promotions that Starbucks has used is the Starbucks Card. Starbucks
Card is an initiative that offers customers the opportunity to promote company's
products through a referral system. When a customer purchases a gift card, it not
only shows brand loyalty, but it also provides the company with free advertising, and
brings in new customers. Starbucks also provides a card for corporate sales, which
are used for extrinsic rewards to show employee appreciation for a job well done, or
a
gift
to
client
or
a
vendor.
Coffee services delivered to offices without coffee size restrictions.
Appealing to a diverse customer base by offering international teas and coffees to
accommodate those customers that want a taste from home or for locals that enjoy
tea.
Using philanthropy as a means for promotion - Starbucks contributes to several
non-profit organizations as a way to improve brand image and awareness in local
communities.
3.6 Establishing Competitive Advantage
This section will explain in detail what differentiates Starbucks from its
competitors. The evaluation will consist of analyzing the marketing concepts,
principles, and strategic tools that Starbucks utilizes in differentiating themselves.
Starbucks is a company that has differentiated itself by convincing
consumers that it is selling more than a cup of coffee. Further, their brand image is
associated with a sense of community activism. Starbucks feels that if they can
identify with customer's societal endeavors, they would be differentiating
themselves on these principles. A company's ability to adapt to changing markets
wants and needs is a key to its survival. Starbucks is a great example of a company
that has done a tremendous job in this area. The company managed to maintain the
wants and needs of the customers at the top of its list, and through a differentiated
strategy earned incredible revenues from a readily available commodity, coffee.
Starbucks is selling an easily accessible tangible product, but has evolved
into a company that is doing much more than that. There is also a philosophy and
an image Starbucks is attempting to promote through its products. The company is
heavily involved in public relations, promoting an image of a responsible company

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that has the resources to make good on its promises. Starbucks promotes ethical
sourcing, environmental stewardship, and community involvement and goes as far
grading itself on the company's website ("FY 2008 Global Responsibility Report").
The company boasts of being ethically committed to all stakeholders in the
business - from the coffee bean farmers to the issues of climate change. Starbucks
maintains that being ethical is a top priority of the organization. Starbucks is also
very much involved in community activities. The company sent 2,000 volunteers to
Louisiana to help locals get their lives back on track after Hurricane Katrina, and in
several communities laid sod, and planted over 1000 trees ("FY 2008 Global
Responsibility Report"). As one volunteer said, "Starbucks is all about the human
connection" - this statement is a powerful representation of what the company
represents. The focus on the greater good of the customers is what Starbucks
wants to be known for. Starbucks wants its customers, and potential customers to
perceive them as a company that has a positive impact on the world. This is one of
the ways Starbucks is using marketing concepts to strengthen its marketing
strategy of a differentiator.
4.0 SWOT Analysis
4.1 Strengths
-
Wide range of coffee-products sold through the companys retail operations
Research and development capabilities leveraged to strengthen product

portfolio
Operations in more than 50 countries and relationships with established

players such
as Kraft, PepsiCo, DreyersGrand ice cream
It is a global coffee brand built upon a reputation for fine products and
services
The organization has strong ethical values, commitment to the environment,

and community activists.
Starbucks stores offer a wide choice of regular and decaffeinated coffee

beverages, a broad selection of Italian-style espresso beverages, cold blended
beverages, iced shaken refreshment beverages, a selection of premium teas, and
distinctively packaged roasted whole bean coffees in both US and international
markets. Furthermore, it also offers variety of fresh food items, including healthier
choice selections focusing on high-quality ingredients, nutritional value and great
flavor. Food items include pastries, prepared breakfast and lunch sandwiches,

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oatmeal, and salads as well as sodas, juices and bottled water. Additionally,
Starbucks is a retailer of specialty coffee in the world. Starbucks also sells coffee
and tea products and licenses its trademark through other channels such as
licensed retail stores. Starbucks operated 8,832 company operated stores and
7,803 licensed retail stores worldwide as of September 2009. Such an extensive
product offering enabled the company to enhance its reach, cater to a wider
customer base and meet their diverse needs efficiently.
The core strength behind Starbucks's brand is the quality of its products.
The company has a strong research and development team which is responsible for
the technical development of food and beverage products and new equipment.
Starbucks's strong research and development capabilities enable it to focus on
relevant product innovation, expansion and leveraging of its existing products and
sales channels. For instance, in FY2009, the company launched Starbucks VIA
ready brew coffee to capture a significant share of both the $21 billion global instant
coffee category and the single-serve market and further expanding its coffee
expertise and leadership in local and international markets. Starbucks VIA is made
with a proprietary, US patent-pending microgrind technology to preserve the
coffees taste, quality and freshness. Additionally in September 2009, the
companys brand Seattles best coffee introduced Just Pure Flavor, an innovation
for fresh brewed coffee that offers customizable flavor by the cup. The new flavors
use no dairy, sugar or artificial sweeteners, and add less than 50 calories to a 12 fl.
oz. (5 calories) beverage.
Starbucks invests substantial amount of resources on technical research
and development activities including customary product testing and product and
process improvements. For instance, Starbucks spent approximately $6.5 million,
$7.2 million and $7.0 million during FY2009, 2008 and 2007, respectively on its
research and development activities. Starbucks's focus on quality and product
innovation help sustain the brand value of the company and introduction of new
products at regular intervals helps them to stay competitive.
Starbucks is well positioned to increase its revenues, customers base, and
profit margins through its expanded presence in international markets. Starbucks
currently operates in more than 50 countries.The companys international markets
include Argentina, Australia, Austria, Brazil, Bulgaria, Canada, China, Czech
Republic, France Germany, Greece, Hong Kong, Indonesia, Ireland, Japan,
Malaysia, Mexico, Middle East New Zealand, Peru, Poland, Portugal, Romania,
Russia, Singapore, South Korea, Spain Switzerland, Taiwan, Thailand, Turkey and
the UK.
Additionally, Starbucks also has established relationships with Kraft Foods,
the largest confectionery, food and beverage corporation in the US. For instance,
Starbucks sells its branded packaged coffees and teas in grocery and warehouse
club stores throughout the US through its licensing relationship with Kraft Foods.
Kraft Foods manages all distribution, marketing, advertising and promotion of
Starbucks products. Additionally, Starbucks also sells packaged coffee and tea
internationally both to warehouse club stores, such as Costco Wholesale, and to

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grocery stores through a licensing relationship with Kraft in Canada, the UK and
other European countries.
4.2 Weaknesses
- Product recalls by Starbucks affect margins and brand image
- The organization has a strong presence in the United States of America with
more than three quarters of its cafes located in the domestic market
- Starbucks has a reputation for new product development and creativity.
However, they remain vulnerable to the possibility that their innovation may
falter over time, and product acceptance will come to a halt eventually
slowing growth.
- Higher coffee prices compared to competitors
- Downward turn in economy, people being more conscious of their spending
habits and grabbing the less expensive option, Starbucks not being the one.
Starbucks has recalled few of its products in the recent times. For instance in
FY2009, the Consumer Product Safety Commission ordered recall of thousands of
Starbucks and Seattle's best coffee blade grinders. The recall was prompted as the
companys grinders can fail to turn off or can turn on unexpectedly, posing a
laceration hazard to consumers. The total recalls of company products included
530,000 grinders. Additionally, the company announced a voluntary recall of more
than 12,000 glass water bottles due to the possibility of lacerations. The US
Consumer Product Safety Commission and Health Canada claimed that while
removing or reapplying the bottles stopper, the bottle can shatter and cut the
consumer which strained Starbucks to recall its glass water bottles in FY2009.
Furthermore, Starbucks also recalled few of its products containing peanut butter
from its stores following an outbreak of salmonella in the US. Product recalls such
as these hurt the value of the Starbucks brand and lead to a decline in the demand
for its products.
4.3 Opportunities
- Cost reduction initiatives such as rationalizing of global retail network to
improve margins
- Entry into Europes ready-to-drink coffee sector and a tie-up with Arla Foods
- Introduction of Starbucks VIA coffee essence in Japan
- Stable credit ratings strengthen stakeholder confidence
The company in FY2009 initiated a cost reduction program to improve its
margins through rationalizing its global store portfolio. For instance, during the year,
Starbucks completed the closure of nearly 1,000 company-operated stores globally.
At the end of FY2009, approximately 800 US company-operated stores, 61 stores
in Australia and 41 company-operated stores in other international markets had
been closed. The remaining international store closures are expected to be
completed by the end of FY2010. Initiatives such as these helped the company to
improve its operational efficiencies through reduced cost expenditures. For

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instance, through closure of companys stores globally has led to cost savings of
$580 million in FY2009 for Starbucks, and few more closures expected in FY2010 is
likely to reduce further cost of the company which positively impact the margins.
Cost reduction initiatives and related operational efficiency efforts such as these will
significantly contribute to the margin improvement of the Starbucks.
Starbucks announced to enter the ready-to-drink (RTD) coffee products in
Europe in January 2010. The ready-to-drink coffee category market in Europe is
valued to be $550 million. Furthermore, during the same year, the company also
signed an agreement with Arla Foods, a leading producer and distributor of quality
milk products in Europe. Under the agreement, Arla Foods will manufacture,
distribute and market Starbucks-branded premium RTD coffee beverages in
Europe. The new relationship with Arla Foods complements Starbucks coffee
expertise and experience in the ready-to-drink coffee category. Furthermore,
extending the Starbucks brand into new distribution channels globally is a part of
the companys long-term plans to target international growth in key regions such as
Europe. The success of Starbucks premium RTD products in the US and Asia
demonstrates strong business opportunity for the company in European markets.
The companys decision to enter European markets through introduction of its
strong RTD coffee category products will boost its top line and also expand its
geographical reach.
After the companys successful introduction of Starbucks VIA ready brew in the
US, UK and Canadian markets in FY2009, it launched Starbucks VIA coffee
essence in FY2010, its first premium coffee stick product in Japan, where 63% of
total coffee sold is instant. The company will sell its Starbucks VIA coffee essence
product through 870 Starbucks stores in Japan and eventually expand distribution
to include grocery shops and other retail channel. Japan is one of the biggest
market at-home coffee markets valued at $5 billion. With the body, flavor and rich
aroma expected from Starbucks coffee,
Starbucks VIA coffee essence will create a new category for coffee drinkers
looking to enjoy Starbucks quality coffee in Japan. Additionally, Japan is a key
market for Starbucks as it eyes the $23 billion instant and single serve coffee
market. The launch of Starbucks VIA coffee essence in Japan is likely to expand
Starbucks customer base besides enhancing revenues.
Starbucks has been rated well by credit rating agencies on account of
recording strong financials for FY2009. For instance, the rating agency Standard
and Poors Ratings Services in August 2009, revised its outlook on the Starbucks
credit ratings to stable from negative based on improved credit metrics and
stabilizing performance. It also affirmed the BBB corporate credit rating on the
company and raised the short-term rating to A-2 from A-3. Strong financial
performance and improved cash flows were the main reason for Starbuckss
improved ratings. The stable credits of the company increase stakeholder
confidence and also provide an opportunity to raise finances to meet any expansion
plans in the future.

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4.4 Threats
-
Increased minimum wages affect operating margins
Discretionary spending negatively impact margins
Increasing health consciousness among Americans could reduce demand
Continued threat in the coffee competition
In recent times, tight labor markets, increased overtime, government-mandated

increases in minimum wages and a higher proportion of full-time employees have
resulted in an increase in labor costs, which could materially impact the company's
operating margins. The federal minimum wage rate in the US, which remained at
$5.15 per hour since 1997 reached $6.55 per hour in July 2008. It is expected to
further rise to $7.25 an hour from July 2009. Starbucks employed about 142,000
people in the US, as on September FY2009. Increased labor costs could increase
overall costs and affect the company's operating margins.
As a retailer dependent upon consumer discretionary spending, Starbucks will
face an extremely challenging FY2011. All major western counties including the US,
UK, Germany, France, Italy, Spain, Japan and Australia are in the grip of recession
and are forecast to remain so through 2010. Even the key emerging market
economies are currently experiencing downturns, including China, Middle East and
Brazil. The global economic downturn has led to a severe decline in consumer
confidence. Consumers also have less money for discretionary purchases as a
result of job losses, foreclosures, bankruptcies and reduced access to credit. A
decrease in consumer confidence and the resultant curbed consumer spending
would result in decreases in customer traffic and average value per transaction.
Starbucks's business is highly sensitive to changes in customer traffic, and the
current economic downturn would put downward pressure on the company's
margins.
Starbucks's products contain caffeine, dairy products, sugar and other active
compounds, the health effects of which are the subject of increasing public scrutiny.
It is suggested that excessive consumption of caffeine, dairy products, sugar and
other active compounds can lead to a variety of adverse health effects. Particularly
in the US, there is increasing consumer awareness of health risks, including
obesity, due in part to increasing publicity and attention from health organizations,
as well as increased consumer litigation based on alleged adverse health impacts
of consumption of various food products. Increasing health awareness among
American consumers could significantly reduce the demand for the company's
beverages and food products.
5.0 Market Research Findings

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5.1 Starbucks Board of Customers
In September 2010, we designed a revolutionary market research plan
called the Starbucks Board of Customers. We decided to conduct a coffee
convention that completely analyzed every part of our operation. In order to gain an
unbiased and honest opinion, Polaris National Marketing Research Firm conducted
the convention. The convention took place in, Los Angeles, Seattle, Phoenix,
Dallas, Miami, New York, Charlotte, Atlanta, and on the Internet. The convention
provided consumers with the opportunity to taste new potential brewing flavors,
while they shared their opinion on what Starbucks needed to change.
The results were very eye opening and what we found was that Starbucks
had lost their personal touch and had become another profit hungry corporate
machine. The following opinions are those of real Starbucks customers. The people
interviewed ranged from Starbucks fanatics, average Joes, and anti-Starbucks
activists. We looked at every survey and suggestions submitted, (almost 500,000
surveys in total) and picked out the ones that represented what most customers
were saying.
Personalization is Key
The coffee is still as good as ever, the flaw is in the ambiance. The interior of
each Starbucks location is growing more and more placid; meaning it needs SOUL.
I recall a Starbucks in Kent, Ohio where students from the nearby university would
gather on all nights of the week to reminisce, relax, and enjoy coziness away from
school life. The employees were students as well and they joined their classmates
in discussions while still doing their job. The atmosphere at this Starbucks was
warm in the winter and vibrantly cool in the summer.
Being a college student who has recently moved to New York City, I have noticed a
slight similarity in the Starbucks locations herethe interiors are all the SAME. It
could be that the general method of Manhattan-ites is In quick to get my coffee and
go, but I am not always in a rush and would like some identity as a consumer. I
want to be able to say, Its MY Starbucks and they are MY Baristas. Kristopher
Patel, St. Johns University
Just as neighborhoods are unique, stores need to be unique
I think Starbucks can grow and maintain its core values, its soul if you will,
and allow for each store to create a unique ambiance. Neighborhoods are different
and if you want a neighborhood store, there needs to be flexibility to adapt and
customize for the consumer. Starbucks can function this way as long as the core
values are at the center of the issues. To do that, they need to get back to their
roots of being a coffee house with the smell of coffee and where fresh, custommade drinks are prepared the old fashioned way. Thats what made Starbucks.
Jamey Shields, Los Angeles, California
There are too many Starbucks

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It was OK when there were some. Not now. Just today I noticed a new
Starbucks on my work commute. Hmm, let me count the number of Starbucks or
other Starbucks-branded locations on my eight mile commute to work: theres one
Drive-thru location, three in Albertsons, one 24-hour Starbucks (2 blocks from
Albertsons), one inside target, and two more standalone Starbucks within a 4 block
radius of each other and the target outpost. And there are no large office parks on
my drive! In fact only a handful of people work on this route! Clearly this is far too
many Starbucks! They are starting to be to concerned with the quantity of stores
than the quality. Every Starbucks is the same and the flooding of the market is
starting to get frustrating. Jane-Ann Ervine, Dallas, Texas
Slow down!!
Everything needs to slow down at Starbucks. Its becoming a fast food
restaurant because the employees are letting it. There needs to be more of a
welcoming in-store feeling where people can enjoy a coffee without a lineup of 30
people and employees yelling triple skinny latte! Perhaps offering a few select
dine-in coffee services? I know this is bold and very different, but I feel like it reflects
the luxury Starbucks is trying to convey. Having a full-service coffee place also
allows for people who go to meet up for a coffee somewhere a little special to relax
and chat without all the hustle and bustle. Itll give a little revamp to the image, and
hopefully upgrade it a bit. Rob Stevens, New York, New York
Reach out to the College student and young businessman crowd
To reach the College/Young Businessman crowd, Starbucks must do three things:
#1) Offer free Wi-Fi. This is a no-brainer. I was going to study at a Starbucks
today but did not since they did not have free Internet.
#2) Create the next big coffee or non/coffee drink trend. Starbucks continually
tries to add to its offering, but few new drinks stick. Much of Generation Y began
their coffee addiction thanks to the cold blended Frappuccino drink that you can
now purchase anywhere. Whats the next big drink? I think itll be something noncoffee. Our generation loves energy drinksso how can we get a similar kick in a
better tasting WARM drink without coffee flavoring. Starbucks does this well in the
summer, but poorly the rest of the year, with their only real non-coffee offering being
tea and the popular Chai Latte.
#3) Treat each store as its own entity. I dont mean with store layout design.
Create buzz around each store if you want a local feel. Stores near college
campuses should be open 24 hours during finals week, or at least offer free drip
coffee during those weeks for anyone with a Student ID. Many small business
meetings occur at Starbucks. What are their needs? Wi-Fi, of course. But maybe
they also need to be able to reserve space to meet. Let them call in advance to
reserve a small, comfortable area in the corner for a set price. Does the area
mostly cater to families? Have toys for children to play with while the moms grab a

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Chai tea, or free treats if you bring in your dog. Cater to your local crowd, and theyll
keep coming back for more.- Eric Cassilious, ChangeThis.com
Enhance the sense of community that used to exist at Starbucks
The success of Starbucks rests in its ability to create a communitya place
where like-minded folks can come in and get a fantastic coffee experience. But
also, a place where customers can buy into an identity, a culture, and a community
of coffee-lovers and lingerers is the key. People can argue all day long about how
the coffee is prepared, but all functional things can be copied over time. There was
a time when carrying a Starbucks coffee cup as you walked down the street said
something very distinct and very positive about you. With ubiquity comes an
unavoidable backlash from the folks who long to be special, different, trendy and
admired. The trick now, and in the future, is for Starbucks to figure out ways to
continue to give customers the ability to be included in a community that enhances
their own self-worth. there will always be functional things they will have to do to
remain relevantsuch as offering new and different drinks, foods, music, etc. But
the real way to win in the long run will be to make the Starbucks cup cool. To carry
and the Starbucks couch cool to read the Sunday paper on. Make the Starbucks
community the community with which people want to be identified. The tastes, the
scents, and the theatrethese are now all costs of entry. The question iscan
Starbucks create a cool community out of ubiquity? Len Herstein, Charlotte,
North Carolina
6.0 Objectives
6.1 Expansion of specialty branch 15th Avenue
It could certainly pass as a stand-alone Seattle neighborhood coffee house.
There is an eclectic mixture of old wooden tables to sit at, and pictures by local
artists adorn the walls. Wine and beer are on sale, too, along with cheese and meat
plates. It feels cozy and not at all corporate. The only clue to the true identity of
15th Avenue Coffee and Tea is the small print on the door: inspired by Starbucks.
For inspired by, read owned and operated by. Our goal is to design new
specialty sub-brands in order to capture more of the coffee market. This will
effectively enable us to compete with small town, individual coffee shops, rather
than being seen as a corporate entity.
The objective is to have more than 200 locations in the United States by
year 2020.
6.2 Capitalize on the in-home brewing market
To capitalize on the growing market for single cup brewers, we are going to
channel a majority of our research efforts to design a new brewer that will allow
consumers to brew a single cup of Starbucks Coffee, in their own home. By the
year 2015, we aim to have more than 15 million brewing systems in the United
States.

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6.3 Launch ad campaign with a focus on in-home/on-the-go Via coffee
Over the past decade, we have not taken full advantage of the effects that
todays advanced media can have on a company or product. Beginning in January
2012, we plan on launching an add campaign advertising the release of our single
cup brewing systems.
6.4 Changing the focus from quantity of locations to the quality
Using the results from, Starbucks Board of Customers, we aim to increase
the quality of our existing retail locations. We also aim to slow the expansion of our
main retail locations to 100 per fiscal year. In the year, 2020, we will conduct
another Board of Customers convention to measure the success of our efforts.
7.0 Strategies
7.1 Expansion of Specialty branches 15th Avenue
We will conduct a year of intense market research in a potential location for
a 15 Avenue coffee shop. The Starbucks strategy for these specialty shops is to
shy away from the corporate Starbucks atmosphere and the current blanket
approach that they are currently in. These specialty shops will not display the
Starbucks logo and many consumers will not know the business is inspired by
Starbucks. A significant road names each specialty coffee shop in that area, hence
the only one that is now operating is named after 15 th Avenue. The name in itself
will give the location that its in a sense of their own special, unique coffee shop. We
will produce and design a customized experience for each location. For example, a
15th Avenue in Texas will differ from one in New York because of the lifestyles and
demographical difference between the areas. The locations of the 15 th Avenues
wont be that of Starbucks. Starbucks are generally located in well-populated
metropolitan cities. We want 15th Avenue to be in smaller cities to portray the home
town atmosphere specifically for each location. No 15 th Ave is going to be the same.
Starbucks is a brand with very high recognition that is compatible for any consumer;
their stores should reflect the same aspect as their product.
We are going to research and develop an in-home, single cup coffee brewer
that is similar to the new Keurig machine. It will be the Starbucks brand machine
and each single cup coffee cartridges will also be Starbucks brand. We believe this
will be a great success for Starbucks in the home brewing market. An example of a
similar product being a success is the Margaretville brand named blender. The
name of the blender has high brand recognition, which has made it a great success.
Starbucks has tremendous brand recognition; that is strictly their competitive
advantage over the Keurig machine, the name says it all. Starbucks plans to
eventually phase out their espresso machine and replace it with the Starbucks inhome brewing system. This strategy will greatly help Starbucks compete, if not take
th

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over the in-home brewing. This will now make them a competitor of the in-home
brewers, for example Folgers.
7.3 Launch ad campaign with a focus on in-home/VIA coffee
The strategies in conducting a new ad campaign on the in-home coffee and the
new VIA instant coffee is the motto, You can take the luxury of Starbucks to your
home. Starbucks is known to have the best tasting coffee because they pay a
higher price for such a high quality. The high quality, luxurious coffee will now be
available in the single cup, in-home brewing machine or the VIA instant coffee
packets that have been taste tested with great success. We will have one page ads
in a handful of magazines that Starbucks has always ran in the past which are:
Rolling Stone, ESPN, Maxim, Lucky, Cosmo, US Weekly and Entertainment
Weekly. Starbucks has never done a large amount of advertising compared to
competitor, McDonalds who saturates the advertising market. There will be a select
few commercials that will be launched in the ad campaign. The commercials will be
informative of the new in-home brewing systems, (Starbucks single cup maker &
the VIA) but also focusing on the bring the luxury coffee home factor. The ad
campaign will be a large hit towards Folgers, who is a big leader in the in-home
brewing coffee segment. Starbucks will be in every aspect of the coffee market.
Each Starbucks will have a drive threw, for the grab a coffee and go drinkers, they
will still keep the same environment throughout the Starbucks stores, for the college
student and business professional target market, and they now will have the inhome brewing system along with a grab and go from home instant coffee.
7.4 Starbucks change in focus from Quantity of locations to Quality
We felt that the continuation of openings of Starbucks on every corner was
not in Starbucks best for future profits, the quantity shouldnt be the focus. The
focus of Starbucks is in the quality, not just the coffee, which has already been
established, but also the quality of the businesses. This strategy is more focused on
the launch of the 15th Avenue stores. We will conduct an undercover Starbucks
board that continuously listens to the customers opinions throughout the current
Starbucks locations and the new 15th Avenue locations that will be built. We want
the quality of each 15th Avenue to be sincere. Each 15th Avenue will be a different
experience that adapts to that location. These coffee shops will not have a
corporate feel like Starbucks tends to have. There will be large amounts of market
research done in each particular location that a store may be desired. We want to
know the location, environment, demographics, culture, and everything that has to
do with the city to be able to portray the third place, from work and home, as these
new 15th Avenue coffee shops.
8.0 Tactics
8.1 Expansion of specialty branch 15th Avenue
In order to create an effective, customized specialty sub-brand, we are going
to expand on our 15th Avenue Coffee and Tea locations. However, we are going to
take an extremely different expansion approach than we have in the past. We are

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going to open a new R&D department dedicated to developing six different
experiences customized to particular markets. For example, a 15th Avenue in a
suburb of L.A. may operate completely differently than one in Topeka, Kansas. The
goal is to do enough market research to design six different customized
experiences that we can then expand with a more personal approach to each
location. After the six experiences are established, potential franchisees will have
the option of applying to open a 15 th Avenue in their town. After an application for a
franchise is submitted, the R&D department will analyze the potential market and
decide which experience would be best for that particular location. This will enable
Starbucks to start penetrating the local markets with a personal touch rather than
the blanket approach of the past. Allowing private owners to own and operate a 15 th
Avenue will allow the stores to maintain their local, hometown, and personal
environment while offering the same great tasting coffee already produced at
current Starbucks locations. The thinking behind this approach is that the current
Starbucks stores are best in the metropolitan settings; however, lack the
environment to compete in smaller, less populated settings. This will allow
Starbucks to directly compete with small town coffee shops and create a wider
platform for Starbucks to penetrate the smaller markets.
In order to compete directly with Keurig, we plan on selling the Starbucks
Single Cup Brewers in all Starbucks retail locations, Wal-Mart, Target, and
anywhere that coffee brewers are sold. By creating our own brewers and cartridges,
we believe that we can gain a significant amount of control in the single cup market
because of the consumers desire to brew our coffee, one cup at a time.
8.3 Launch ad campaign with a focus on in-home/on-the-go coffee
This ad campaign will focus on sending the message that you can take the
luxury and status of Starbucks coffee, wherever you go. We hope to create the
belief that having a Starbucks brewer in your home gives you a status and luxury
that other brewers do not. We want to portray a luxury that no other brewer can
provide because we believe that no other company offers coffee better than ours.
For our on the go coffee Via coffee, we would like to have an add that shows
potential customers that the coffee tastes the same as coffee brewed the traditional
way. Our main marketing focus will be to prove that you can have the great taste of
Starbucks coffee, no matter where you go.
8.4 Changing the focus from quantity of locations to the quality
In order to accomplish this goal we are going to stop the expansion of our
current Starbucks retail stores and focus on changing the stores we have, back to
what made us so successful in the first place. To do so, we plan on establishing
regional teams to evaluate every one of our locations. After a thorough evaluation, a
report on the things we would like to emphasize and change will be sent to the store

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managers. A year later a follow up evaluation will be done and new assessments
will be made as to the success of the changes made. In the year 2020 we plan to
conduct another Board of Customers convention to benchmark our progress.
9.0 Financial Impact of the Marketing Plan

9.1 Income Statement (Numbers in Millions except per share items)
2010
2009
2008
Period End Date
10/03/2010
09/27/2009
09/28/2008
2007
09/30/2007
20
10
Period Length
53 Weeks
52 Weeks
52 Weeks
52 Weeks
52
Stmt Source
10-K
10-K
10-K
10-K
10
Stmt Source Date
11/22/2010
11/22/2010
11/22/2010
11/29/2007
11
Stmt Update Type
Updated
Reclassified
Reclassified
Updated
Re
Revenue
10,707.4
9,774.6
10,383.0
9,411.5
7,7
Total Revenue
10,707.4
9,774.6
10,383.0
9,411.5
7,7
Cost of Revenue, Total
8,010.0
7,750.0
8,390.4
7,215.01
5,8
Gross Profit
2,697.4
2,024.6
1,992.6
2,196.48
1,9
Selling/General/Administrative
Expenses, Total
569.5
453.0
456.0
489.25
47
Research & Development
0.0
0.0
0.0
0.0
0.0
Depreciation/Amortization
510.4
534.7
549.3
467.16
38
0.0
0.0
0.0
0.0
332.4
266.9
0.0
0.0
264.4
330.1
294.14
25
562.0
503.9
1,053.95
89
Interest Income (Expense), 50.3

Net Non-Operating
37.0
5.2
2.42
12
Gain (Loss) on Sale of Assets
0.0
0.0
0.0
0.0
0.0
Other, Net
0.0
0.0
0.0
0.0
0.0
Income Before Tax
1,437.0
559.9
455.7
1,056.36
90
Interest Expense
Net Operating
(Income), 0.0
Unusual Expense (Income)

Other
Total
Operating
53.0
Expenses, 293.2
Operating Income
1,419.4

27
____________________________________________________________________
___
Income Tax - Total
488.7
168.4
144.0
383.73
32
Income After Tax
948.3
391.5
311.7
672.64
58
Minority Interest
-2.7
-0.7
3.8
0.0
0.0
Equity In Affiliates
0.0
0.0
0.0
0.0
0.0
U.S. GAAP Adjustment
0.0
0.0
0.0
0.0
0.0
390.8
315.5
672.64
58
0.0
0.0
0.0
-17
Net Income Before Extra. 945.6

Items
0.0
Total Extraordinary Items
Net Income
945.6
390.8
315.5
672.64
56
0.0
0.0
0.0
0.0
0.0
Basic Weighted Average Shares
744.4
738.7
731.5
749.8
76
Basic EPS Excluding Extraordinary Items
1.27
0.53
0.43
0.9
0.7
Basic EPS Including Extraordinary Items
1.27
0.53
0.43
0.9
0.7
Diluted Weighted Average Shares
764.2
745.9
741.7
770.1
79
Diluted EPS Excluding Extrordinary Items
1.24
0.52
0.43
0.87
0.7
Diluted EPS Including Extraordinary Items
1.24
0.52
0.43
0.87
0.7
Dividends per Share - Common Stock 0.36

Primary Issue
0.0
0.0
0.0
0.0
Gross Dividends - Common Stock
267.6
0.0
0.0
0.0
0.0
Interest Expense, Supplemental
32.7
39.1
53.4
38.2
8.4
Depreciation, Supplemental
509.2
533.0
547.8
466.16
38
Normalized EBITDA
1,834.7
1,307.2
1,206.5
1,413.1
1,1
Normalized EBIT
1,324.3
772.5
657.2
945.94
80
Normalized Income Before Tax
1,490.0
892.3
722.6
1,056.36
90
Normalized Income After Taxes
983.28
623.92
494.26
672.64
58
Total Adjustments to Net Income

28
____________________________________________________________________
___
Normalized Income Available to Common
980.58
623.22
498.06
672.64
58
Basic Normalized EPS
1.32
0.84
0.68
0.9
0.7
Diluted Normalized EPS
1.28
0.84
0.67
0.87
0.7
Amortization of Intangibles
1.2
1.7
1.5
1.0
1.2
Income Statement: 10-Year Summary

(in Millions)
Sales
EBIT
Depreciation
Total Net Income
EPS
Tax Rate (%)
10/10
10,707.4
1,437.0
510.4
945.6
1.24
34.01
09/09
9,774.6
559.9
534.7
390.8
0.52
30.08
09/08
10,383.0
455.7
549.3
315.5
0.43
31.6
09/07
9,411.5
1,056.36
467.16
672.64
0.87
36.33
10/06
7,786.94
906.24
387.21
581.47
0.73
35.84
10/05
6,369.3
796.35
340.97
494.37
0.61
37.92
10/04
5,294.25
620.63
289.68
388.88
0.47
37.34
09/03
4,075.52
432.47
245.07
265.36
0.33
38.64
09/02
3,288.91
336.89
205.56
211.39
0.27
37.25
09/01
2,648.98
288.05
177.09
180.34
0.23
37.39
9.2 The financial impact of expanding 15th Avenue

For one brick and mortar, 15th Avenue location, at approximately 12,000
square feet, the start up cost will range from $200,000 to $375,000 depending on
the price of land. After a significant amount of market research and a review of the
first 15th Avenue in Seattle, which had 1.1 million in profit for fiscal 2009, we believe
that the average 15th Avenue location will bring in $750,000 to $1,000,000 in profit
per year.
9.3 The financial impact of producing in home brewing division
The headquarters for our expansion will be located in Seattle, Washington.
In order to simplify the process and minimize costs we will outsource the production
of our products overseas at a cost of approximately $44.23 per unit (includes
transportation). An estimated start-up cost of the entire in home brewing division is
125 million. We believe that in the next ten years, our market share will increase
enough to position us as one of the top providers of coffee brewers in the United
States. This division has the potential to bring in an estimated 300 million dollars a
year.
9.4 Cost of Advertising

29
____________________________________________________________________
___
We would like to launch a 15 million dollar ad campaign. This includes,
hiring a marketing firm, market research, TV advertising, magazine ads, online ads,
and billboard ads.
10.0 Metrics
11.0 Contingency Plan
11.1 Expansion of Specialty branches 15th Avenue
We have read a few articles regarding the new 15th avenue coffee store and
they have raised the What If these people are right questions, 15th Ave Coffee &
Tea is an experiment doomed to failure, because there's no way a corporate coffee
chain can create an authentic neighborhood coffeehouse experience. Your favorite
local coffeehouse is the product of someone's passion, dedication, and probable
borderline craziness. 15th Ave is the product of corporate product design and
development. If this were to come true we would need to continue our focus on the
current Starbucks branches and the in-home brewing market. If the 15 th Avenue
ends up being unsuccessful a large amount of money would be lost, but we would
be able to recover through the continued business in the existing Starbucks stores.
We believe that this will be a great addition under the Starbucks name.
What if the Keurig coffee machine has already controlled the majority of
market share for the in-home coffee machine? We believe that our brand
recognition will not let this occur when we enter the in-home brewing market with
our Starbucks name. If Keurig has already gained majority of the market share we
will need to discuss alternatives ways to enter the market and conduct more indepth research, focus groups, on what the consumers would like to see in the inhome brewing market. We believe market research would need to be done on our
product itself to determine what the reasoning would be for not being able to take
over the in-home brewing market; it could be the price point, advertising, or that is
may not be something the consumer really feels the need to purchase. These are
all aspects that would be considered in the what if analysis.
11.3 Launch ad campaign with a focus on in-home/VIA coffee
What if our ad campaign does not clearly portray the message? What if we
did not use enough advertising? What if the money spent on advertising is not
working? If your ad campaign does not portray the message we will know this by
the number of sales after the ad launch. If sales do not increase at all within 4-6
months of the advertising launch we will need to reconnect and take a different
approach. The approach may be to focus on either just VIA or the in-home coffee
maker. Maybe the amount of information trying to portray both of the items is too
much for consumers to remember or engage in. If not enough advertising is the
case we will know this by consumers still not being aware of our product when we

30
____________________________________________________________________
___
conduct market research 6 months down the road after the advertising as been
launched. We would then decide to use more money into advertising, much like
competitor McDonalds does. We do not feel that a large amount of advertising is
the key to a successful coffee business, but if the lack of knowledge is significant
after months of advertising that may be our next focus.
11.4 Starbucks change in focus from Quantity of locations to Quality
What if the qualities of the 15th Avenue stores are not accepted in the
selected areas? What if adding additional stores is the answer in creating more
revenue? We believe that our extensive market research throughout the locations
of the stores will be sufficient enough that the coffee shops will be openly accepted
as a new aspect of their town. But, if they are not wanted or welcomed in the
community we would conduct more market research that included several intensive
focus groups to determine what would make it a better coffee shop for the
consumers to approve of in their area. If we are not creating profit throughout the
15th Avenue coffee shops within 6 months to a year we will need to reconvene and
determine whether opening up more Starbucks stores is the answer. We think the
15th Avenue stores are going to be a great success.

31

1.0 Executive Summary 2.0 Situation Analysis

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____________________________________________________________________

Starbucks Coffee Marketing Plan 2010

Our Neighborhood- Every store is part of a community, and we take our

2.1.1 Review of Mission Statement and Vision

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

The top 5 global producing countries of coffee in 2009 are as follows:

Starbucks Coffee Marketing Plan 2010

2.2.3 Changes in buying habits of both Starucks and Consumers

Starbucks Coffee Marketing Plan 2010

2.3 Consumer Profile and Target Market

Starbucks Coffee Marketing Plan 2010

2.4 Revenue Sources

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

2.5 New Product Release

In March 2009, Starbucks introduced its new-technology instant coffee

3.0 Competitive Analysis

Starbucks Coffee Marketing Plan 2010

Dunkin' Donuts is an international donut and coffee retailer founded

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Wide range of coffee-products sold through the companys retail operations

Research and development capabilities leveraged to strengthen product

Operations in more than 50 countries and relationships with established

as Kraft, PepsiCo, DreyersGrand ice cream

The organization has strong ethical values, commitment to the environment,

Starbucks stores offer a wide choice of regular and decaffeinated coffee

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Increased minimum wages affect operating margins

Discretionary spending negatively impact margins

Increasing health consciousness among Americans could reduce demand

Continued threat in the coffee competition

In recent times, tight labor markets, increased overtime, government-mandated

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

Starbucks Coffee Marketing Plan 2010

9.0 Financial Impact of the Marketing Plan

Stmt Source Date

Stmt Update Type

Cost of Revenue, Total

Research & Development

Interest Income (Expense), 50.3

Gain (Loss) on Sale of Assets

Income Before Tax

Unusual Expense (Income)

Starbucks Coffee Marketing Plan 2010

Income Tax - Total

Income After Tax

U.S. GAAP Adjustment

Net Income Before Extra. 945.6