Starbucks Managing A High Growth Brand: Case Presentation By-Diya and Shreesa

STARBUCKS
MANAGING A HIGH GROWTH BRAND
Case presentation by-

Diya and Shreesa
Company background
• Started by Seattle entrepreneurs Jerry Baldwin, Gordon
Bowker and Zev Siegl in 1971.
• Sold whole-bean coffee and coffee brewing equipment
• Not brewed in-store
• Purchased only Arabica beans from a carefully selected

suppliers
Company background contd..
 1982
 Howard Schultz joined the company.
 Transformed coffee retailer into café business
Growth & success factors
Mission
To inspire and nurture the human spirit –
one person, one cup and one neighborhood
at a time.
• Quality policy
• Third place
• Investing ahead of growth curve
• Innovation
• Adoption of new philosophies.
Growth & success factors
STARBUCKS spent more money on training

than on marketing.
Growing the brand
• Launched its international first store in Japan in 1996
and opened 25 new stores by 1998
Growing the brand contd..
• Word-of-mouth publicity
campaigns
• Highly skilled baristas
strengthened the brand
image
• “Hub” marketing strategy
Joint ventures and partnerships
• Host Marriott Partnership
Joint ventures and partnerships contd..
• United airlines partnership

• Other retail and service partnerships

• Partnership with Pepsi

• Joint venture Dryer ice-cream

Other partnership
Urban coffee opportunities

 Deal with Johnson
development Corp. to
bring Starbucks to inner
city of America
Other partnership contd..
Partnership with environmental agencies

 Alliance for environmental innovation
Initial Results
• In 1990s-Annual growth rate of sales and profit
exceeding 50%.
• 1995- Sold a special custom made CD mix, online and
in-store.
• 1998- Partnered with Oprah Winfrey and sold books
her book club recommended.
• 1999-Venture into Tea business- Tazo Tea, priced at
80% premium on average tea price.
Maintaining the Growth-
Acquisitions in 1998
Becoming a Global Brand
• Expanded international network beyond 300 stores.
• Acquired London based Seattle coffee company, with 56
coffee stores.
• Opened 40 new coffee stores in Britain, 2 in South
Africa and 1 in Kuwait.
• Acquired Pasqua Coffee Copmany, a California based
coffee retailer.
• It operated in more than 50 locations in San Francisco
and Los Angeles, incl. 8 California airports.
• Gave desirable exposure to business travelers.
Growth weakens-1999
• In 1998, added 500 employees per month.
• In 1999, posted revenues of $ 1.7 billion.
Challenge:-
• Manage growth and diversification
• Strengthening Starbuck's core values
• Keeping customers trustful and loyal to the brand
Meet the competitors!
• Caribou
• Dunkin Donuts
• McDonald's
• Burger King
• Carl's Jr
• Dairy Queen
Competition
• Dunkin Donuts-famous food and beverage, international
company headquartered in New York.
• Had cappuccinos and lattes and eliminated the need of
baristas with machines.
• Located its stores in price sensitive communities, where
Starbucks had just targeting.
• Combination of Speed, Consistency and up to 25% lower
prices
Strategy against competitors
Aggressive Expansion
• By 2006- Presence in 37 countries including Brazil,
Peru, turkey, Japan, Mexico, Jordan, India
• Stock being traded in Hong Kong Stock Exchange.
Fighting back
"the most recognized and respected brands in the world"-
Schultz
• Challenge in managing expanding global markets.
• Strenthghten its core product-coffee.
• Unveiled new Frappucino flavors and low calorie
drinks.
-Frappucino ranked 1st, 83% market share
• Introduced Double Shot, a chilled ready-to-drink
espresso drink.
- Ranked 2nd
Growth beyond coffee
1. Credit Cards
 Made it easier for customers to
purchase
2. Starbucks entertainment
 Investment in film industry
 Co-produced albums
3. Coffee-flavored Liqueur
 Sold at liquor stores and not
Startbucks stores
1999- $750,000 in sales per store

2004- $9,40,000 in sales per store
Growth concerns
• Could Rapid expansion in retail, product inventory
and strategic partnerships harm brand equity?
"We're not in the coffee business, serving people; we're

in the people business, serving coffee"
-CEO James Donald, 2005
Discussions
How would you evaluate Starbucks’ growth strategy?
Is word-of-mouth strong marketing tool than traditional marketing?
Has Starbucks’ gone too far in creating a “lifestyle” brand? Where should company
go next?
Thank You!

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STARBUCKS

MANAGING A HIGH GROWTH BRAND

Case presentation by-

• Purchased only Arabica beans from a carefully selected

STARBUCKS spent more money on training

• United airlines partnership

• Other retail and service partnerships

• Partnership with Pepsi

• Joint venture Dryer ice-cream

Urban coffee opportunities

Partnership with environmental agencies

1999- $750,000 in sales per store

"We're not in the coffee business, serving people; we're

How would you evaluate Starbucks’ growth strategy?

Is word-of-mouth strong marketing tool than traditional marketing?

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