1.0 Executive Summary 2.0 Situation Analysis: 2.1 Starbucks ' Vision and Mission Statement

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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.
Starbucks Coffee Marketing Plan 2010
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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.
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,
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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 health-care 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 job-satisfaction 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.
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.
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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 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
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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
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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 homebrewed 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 coffee-watchers 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
espresso-type 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 200607 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
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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:
Country
Brazil
Vietnam
Columbia
Indonesia
Ethiopia
Estimated Production
(millions of bags)
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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
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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
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
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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
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).

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"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
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convenience. They regard relationships very important and enjoy small talk with
family and friends in a relaxed social setting.
2.4 Revenue Sources
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
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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,
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
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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

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
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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
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
"no-nonsense 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
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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.
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
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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.
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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 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
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
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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 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
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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,
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nutritional value and great flavor. Food items include pastries, prepared breakfast
and lunch sandwiches, 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,
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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 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
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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 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
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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.
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, governmentmandated 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
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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

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
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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 antiStarbucks 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
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fresh, custom-made drinks are prepared the old fashioned way. Thats what
made Starbucks. Jamey Shields, Los Angeles, California
There are too many Starbucks
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 non-coffee. Our generation loves energy drinks
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so 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 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
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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.
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
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7.1 Expansion of Specialty branches 15th Avenue
We will conduct a year of intense market research in a potential location
for a 15th 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 15th 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 15th 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 15th 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 in-home brewing system. This strategy will greatly help
Starbucks compete, if not take 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
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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 in-home 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
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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 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 15th 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 15th 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
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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 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)

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2010
2009
2008
2007
2006
10/03/2010
09/27/2009
09/28/2008
09/30/2007
10/01/2006
53 Weeks
52 Weeks
52 Weeks
52 Weeks
52 Weeks
10-K
10-K
10-K
10-K
10-K
Stmt Source Date
11/22/2010
11/22/2010
11/22/2010
11/29/2007
11/29/2007
Stmt Update Type
Updated
Reclassified
Reclassified
Updated
Reclassified
Revenue
10,707.4
9,774.6
10,383.0
9,411.5
7,786.94
Total Revenue
10,707.4
9,774.6
10,383.0
9,411.5
7,786.94
Cost of Revenue, Total
8,010.0
7,750.0
8,390.4
7,215.01
5,866.61
Gross Profit
2,697.4
2,024.6
1,992.6
2,196.48
1,920.34
569.5
453.0
456.0
489.25
479.39
Research & Development
0.0
0.0
0.0
0.0
0.0
Depreciation/Amortization
510.4
534.7
549.3
467.16
387.21
0.0
0.0
0.0
0.0
0.0
53.0
332.4
266.9
0.0
0.0
293.2
264.4
330.1
294.14
253.72
1,419.4
562.0
503.9
1,053.95
893.95
50.3
37.0
5.2
2.42
12.29
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
1,437.0
559.9
455.7
1,056.36
906.24
Income Tax - Total
488.7
168.4
144.0
383.73
324.77
Income After Tax
948.3
391.5
311.7
672.64
581.47
-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
945.6
390.8
315.5
672.64
581.47
0.0
0.0
0.0
0.0
-17.21
Period End Date

Period Length
Stmt Source
Selling/General/Administrative
Expenses, Total
Interest Expense (Income), Net

Operating
Unusual Expense (Income)
Other Operating Expenses, Total
Operating Income
Interest Income (Expense), Net
Non-Operating
Income Before Tax
Minority Interest
Net Income Before Extra. Items
Total Extraordinary Items

Net Income
945.6
390.8
315.5
672.64
564.26
0.0
0.0
0.0
0.0
0.0
749.8
766.11
Total Adjustments to Net Income
Basic Weighted Average Shares
744.4
Starbucks Coffee
Marketing738.7
Plan 2010 731.5
33
_______________________________________________________________________
_
Income Statement: 10-Year Summary

(in Millions)
10/10
09/09
09/08
09/07
10/06
10/05
10/04
09/03
09/02
09/01
Sales
10,707.4
9,774.6
10,383.0
9,411.5
7,786.94
6,369.3
5,294.25
4,075.52
3,288.91
2,648.98
EBIT
1,437.0
559.9
455.7
1,056.36
906.24
796.35
620.63
432.47
336.89
288.05
Depreciation
510.4
534.7
549.3
467.16
387.21
340.97
289.68
245.07
205.56
177.09
Total Net Income

945.6
390.8
315.5
672.64
581.47
494.37
388.88
265.36
211.39
180.34
EPS
1.24
0.52
0.43
0.87
0.73
0.61
0.47
0.33
0.27
0.23
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

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
34
Tax Rate (%)

34.01
30.08
31.6
36.33
35.84
37.92
37.34
38.64
37.25
37.39
_______________________________________________________________________
_
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 15th 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
in-depth research, focus groups, on what the consumers would like to see in the
in-home 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
35
_______________________________________________________________________
_
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 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.

36

1.0 Executive Summary 2.0 Situation Analysis: 2.1 Starbucks ' Vision and Mission Statement

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1.0 Executive Summary 2.0 Situation Analysis: 2.1 Starbucks ' Vision and Mission Statement

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_______________________________________________________________________

1.0 Executive Summary

Our Customers- When we are fully engaged, we connect with, laugh

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

Our Shareholders- We know that as we deliver in each of these areas,

2.1.1 Review of Mission Statement and Vision

2.2 Major changes to the external environment of the coffee industry

Recent customer satisfaction surveys indicate that the perception of

2.2.2 Coffee production and Pricing Trends

2.2.3 Changes in buying habits of both Starucks and Consumers

2.2.4 Has Starbucks saturated the Market?

Starbucks Coffee Marketing Plan 2010

Starbucks target consumer:

Licensed Stores: Located in places like airports and supermarkets,

Branded Products: Starbucks has partnerships with Pepsi and Dreyer's

Foodservices Operations: Starbucks sells its coffee to foodservice

2.5 New Product Release

3.0 Competitive Analysis

3.5 Marketing Mix

4.0 SWOT Analysis

Wide range of coffee-products sold through the companys retail

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

beverages, a broad selection of Italian-style espresso beverages, cold blended

Product recalls by Starbucks affect margins and brand image

The organization has a strong presence in the United States of America

Starbucks has a reputation for new product development and creativity.

Higher coffee prices compared to competitors

Downward turn in economy, people being more conscious of their

Cost reduction initiatives such as rationalizing of global retail network to

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

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

5.0 Market Research Findings

9.0 Financial Impact of the Marketing Plan

Starbucks Coffee Marketing Plan 2010

Stmt Source Date

Stmt Update Type

Cost of Revenue, Total

Research & Development

Gain (Loss) on Sale of Assets

Income Tax - Total

Income After Tax

U.S. GAAP Adjustment

Period End Date

Interest Expense (Income), Net

Income Before Tax

Net Income Before Extra. Items

Total Extraordinary Items

Total Adjustments to Net Income

Basic Weighted Average Shares

Income Statement: 10-Year Summary

Total Net Income

9.2 The financial impact of expanding 15th Avenue

9.4 Cost of Advertising

Tax Rate (%)

11.0 Contingency Plan