TakeAway: The ubiquity of Starbucks stores, combined with management resistance to further de-value the Starbucks “experience,” has left few opportunities for continued domestic growth of the Starbucks brand.
To provide growth opportunities for shareholders, Starbucks will roll out a second brand, Seattle’s Best Coffee, targeting the mass-market crowd.
In addition to distribution in fast-food outlets, supermarkets and coffee houses, Seattle’s Best will be sold in c-stores, coffee carts, and vending machines, places Howard Schultz would never consider for the Starbucks brand.
If successful, the venture will put Starbucks on the offensive against its fast-food rivals while minimizing cannibalization of Starbucks-brand sales.
* * * * *
Excerpted from WSJ, “Starbucks Targets Regular Joes,” by Kevin Helliker, May 12, 2010
In a counterattack against its lower-priced fast-food rivals, Starbucks Corp. plans to roll out a second coffee brand.
By autumn, Seattle’s Best Coffee … will be sold in about 30,000 fast-food outlets, supermarkets and coffee houses. … Eventually … the brand will also be sold in convenience stores, drive-through kiosks, coffee carts, vending machines and mobile trucks. …
The new push by Starbucks is a response to the invasion of the specialty-coffee market by McDonald’s Corp., Dunkin’ Donuts and other fast-food chains, which offer espresso-based drinks at lower prices than Starbucks.
…Starbucks has struggled to expand beyond a limited menu and a largely morning clientele.
… executives unveiled a new logo for Seattle’s Best, along with a new motto: “Great Coffee Everywhere.” The motto reflects the Starbucks theory that the success of McDonald’s and others in selling coffee has created a fresh opportunity to sell a mass-market brand. …
Associating Starbucks with a product sold from vending machines could … damage the brand’s upscale image. And it could cannibalize Starbucks customers. …
But Seattle’s Best is intended to appeal to just this sort of Starbucks critic. For those who find Starbucks coffee too strong-tasting, Seattle’s Best is promoting the “smoothness” of its blend …. For those turned off by the prices and ambiance at Starbucks stores, Seattle’s Best is touted as “unpretentious.” …
Pricing will vary widely. … Seattle’s Best beans will cost consumers less than Starbucks-brand beans but more than conventional brands …
Seattle’s Best helped pioneer the specialty coffee-house concept when it opened its first store in Seattle 40 years ago. … When Starbucks acquired it in 2003, Seattle’s Best had about 50 stores and a sizable supermarket presence, particularly in flavored beans, a lucrative category that Starbucks never entered.
Perhaps the most radical feature of the Starbucks strategy calls for selling Seattle’s Best from vending machines. Vending-machine coffee has long been regarded as a last resort, … But Seattle’s Best engineers have developed a coffee-making machine that Starbucks predicts will improve that image. …
Edit by DMG
* * * * *
Full Article
http://online.wsj.com/article/SB10001424052748703565804575238584204665378.html
* * * * *
The Homa Files 
Leave a comment