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Trouble Brews at Starbucks: - Lauranne Buchanan and Carolyn Simmons 2009
Trouble Brews at Starbucks: - Lauranne Buchanan and Carolyn Simmons 2009
Trouble Brews at Starbucks: - Lauranne Buchanan and Carolyn Simmons 2009
STARBUCKS
-Lauranne Buchanan and Carolyn Simmons
2009
Presented by-
Group-7 : FM-02
Anushka Choudhary- 024010
Kanika Gulati - 024023
Rahul Singh Tanwar - 024038
Shubham Gera - 024048
Vasu Baghla - 024059
Shubham Sethi - 024069
Background
● The Starbucks Coffee, Tea, and Spice Company was founded in Seattle in 1971 by Jerry
Baldwin, Gordon Bowker and Zev Siegl.
● A retailer selling only dark-roast, whole-bean coffee and not ground or prepared coffee.
● Howard Schultz,joined the company in 1982 as a marketing director.
● Howard Schultz vision was to open the coffee bars and to make a powerful connection
with the customers who love coffee.
● He left Starbucks and opened Il Giornale, Italian for daily when his bosses refused to his
idea.
● In 1987, he opened 3 espresso bars and acquired six stores, the roasting plant and the
name of Starbucks.
● He then opened various new stores in consecutive years.
● In 1992, Starbucks went public with over 100 stores, a strong balance sheet, a double-
digit growth and raised $29 million via IPO.
EXPANSION OF THE BUSINESS
New Product Development:
● Introduction of non-fat milk into coffees
● Introduction of cold blended beverage as Frappuccino
● Seasonal offerings like Strawberry and Cream Frappuccino
● Food items such as: gingerbread, cookies and pastries made their way into
the stores
● Introduced sandwiches and salads to cater for breakfast and lunch
● Development of products with other companies: Bottled frappuccino with
PEPSI, Ice cream with DREYER’s and Coffee liquer with JIM BEAM
Locations:
● In each region,a large city was targeted as ‘hub’ where professionals team
could be located and can serve as support for new stores
● Goal was to open 20 or more outlets in first 2 years
● Selected highly visible locations for their flagship stores
● Model for their location was dense store placement
● Clustered stores helped manage more traffic in crucial hours
● Ubiquity also helped them to increase their sales
Enhancing Customer Experience
Starbucks added music, books and movies to its product mix
Books : Starbucks offered Literary Magazine JOE, but it didn’t add any value.
The store then chose Mitch’s For One More Day as its first book.
25 Starbucks stores around the country offered discussion groups of the book,
complete with free coffee.
Movies : Starbucks made promotional deal with Lions Gate Entertainment for
Akeelah and the Bee.
Starbucks promoted aggressively by putting trivia games, distributing the
soundtrack. Use for in-store Wi-fi network for running trailers.
However, the box office receipts were disappointing.
Starbucks tried again with Arctic Tale, from Paramount Classics & National
Geographic Films.
The sales were again disappointing, but both the partners were pleased with
Starbucks effort.
Global Expansion
● 1995 : Expansion outside North America, with a partnership with SAZABY
Inc. to open Starbucks coffeehouses in Japan.
● 2008 : Starbucks had 4500 locations in 43 countries outside US.
All in all, it had lost the “romance and theatre” of coffee-making with its meteoric
expansion.
Competitors
While starbucks with it’s drive-through windows started looking like a fast-food
restaurant- competitors like Dunkin Donuts and McDonalds utilized this
opportunity to enter into high-end coffee segment
1. Dunkin Donuts
● It’s stores were found all throughout America
● They rolled out espresso in 2003 claiming it to be- cheaper, faster and simpler
than Starbucks
2. McDonalds