STARBUCKS EVENINGS MARKETING PLAN - Damiete …

[Pages:19]STARBUCKS EVENINGS MARKETING PLAN

MKTG 5007: Fundamentals of Marketing

Damiete Chamberlain Oyibo Nancy Nallelhi Mendoza Solis Jenny Mourao Juliana Esper Sabrina Souza de Moreas Figueiredo Tazmin Karmali

Date: April 15, 2015

Contents

1. STARBUCKS' OVERVIEW .................................................................................................................................................. 2 2. PRODUCT OFFERING AND CHANNEL STRATEGY ............................................................................................................. 3 3. SITUATION ANALYSIS ...................................................................................................................................................... 3 3.1 SWOT................................................................................................................................................................................. 3 3.1.1 Strengths ........................................................................................................................................................................ 3 3.1.2 Weakness ....................................................................................................................................................................... 4 3.1.3 Opportunity.................................................................................................................................................................... 4 3.1.4 Threats ........................................................................................................................................................................... 5 3.2 PORTER 5 FORCES ....................................................................................................................................................... 5 3.2.1 New market entrants: Low ............................................................................................................................................ 5 3.2.2 Bargaining power of buyers: Medium to High............................................................................................................... 6 3.2.3 Bargaining power of supplier: Medium to High Pressure.............................................................................................. 6 3.2.4 Threat from substitutes: High ........................................................................................................................................ 6 3.2.5 Rivalry among existing players: High ............................................................................................................................. 6 4. MARKET OVERVIEW AND TARGET MARKET ................................................................................................................... 7 5. MARKETING OBJECTIVES AND STRATEGY ........................................................................................................................... 7 6. MISSION STATEMENT.......................................................................................................................................................... 8 7. MARKETING MIX AND MARKETING OBJECTIVES ................................................................................................................ 9 8. FINANCIAL ANALYSIS......................................................................................................................................................... 11 9. CONTINGENCY PLAN ......................................................................................................................................................... 14 Works Cited........................................................................................................................................................................... 15

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1. STARBUCKS' OVERVIEW

Starbucks is a leading retailer of specialty coffee, with over 21,000 retail locations in 66 countries (Starbucks Company Profile, 2015). Today, along with high-quality coffees, the company also sells tea and other beverages, a variety of fresh food items and packaged food goods. The first Starbucks location was established in 1971 in Seattle, Washington, United States and expanded to Canada in 1987 in Vancouver, B.C. With just under 40 Starbucks locations per one million people in Canada, Starbucks has a far reach that exceeds even that in the U.S. per capita (Babad, 2014).

Starbucks' strategy has always been to differentiate itself from the typical coffee shop by providing each customer with a unique Starbucks Experience. The Starbucks Experience is built upon superior customer service, maintaining stores that reflect the personality of the communities in which they operate and building a high degree of customer loyalty (Starbucks Annual Report, 2014). Howard Schultz, the company President and CEO, defined the atmosphere in Starbucks as "creating communities in the third place between home and work" (Larkin, 2015).

Starbucks focuses on five criteria that define the company's work - handcrafted, artistic, sophisticated, human, and enduring (Millman, 2011). With an emphasis on quality, the Starbucks brand has become one of the most recognized and respected brands in the world and the company's main objective is to maintain this status (Starbucks Annual Report, 2014). The company's current strategy to achieve this is through a continued global expansion of its store base as well as diversifying its product mix (Starbucks Annual Report, 2014). It has become increasingly important for Starbucks to branch into different markets due to stagnant coffee sales (Wright, 2015). In Canada, Starbucks occupies the third positon in market share of coffee retailers, after Tim Hortons and McDonalds (with the introduction of McCaf?). Starbucks sales in 2013 totaled over $900 million (Euromonitor International, 2014). One of the new concepts that the company has introduced is Starbucks Evenings, a program in which select Starbucks locations will serve wine and beer alongside a small menu of shareable plates in an evening ambiance.

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2. PRODUCT OFFERING AND CHANNEL STRATEGY

The Starbucks Evening program, which initially launched in Seattle, Washington in October 2010, consists of a menu of wine and beer as well as a selection of a few light, savory bites available after 4pm (Franson, 2014). The wine options are available by the glass or bottle and the beer is sold in bottles only. In the U.S., the wine menu varies by location and offers a mix of local and international wines from both small and large wineries. In keeping in line with the chain's recent shift to steer away from a generic "cookie cutter" brand (Wright, Starbucks drinks in local flavour, 2014), this same formula for selecting a mix of local and international wines should be adhered to when the program is introduced into Canada.

The Starbucks Evenings program also commands certain premium details to enhance the high-end feel of the menu. The food items are served on elegant flatware and with silverware instead of plastic utensils, wine is served in contemporary stem-less goblets and beer is served in custom glassware (Friend, 2012). Starbucks Evenings locations are also selling the wine goblets which are branded with the Starbucks name printed with a selection of four unique phrases on them. The wine glasses are manufactured by Riedel, a high-end brand of glassware (Riedel Wine Glasses at Starbucks, 2012).

While employees at Starbucks Evenings locations will now have to meet provincial laws regarding alcohol service (i.e. In Ontario must be at least 18 years of age and have Smart Serve certification), guests of all ages are still welcome at all hours. As with regular orders at the store locations, food and beverage orders during the Starbucks Evenings are also placed with the barista, unlike full restaurant service. The regular coffee menu is also still available during the evenings.

Starbucks employs a system of relationships with suppliers to provide their snacks and pastries in their stores. The company's locations do not have full restaurant style kitchens and are not equipped to do more than brew coffee. This was a deliberate move by the company's CEO Howard Schultz who banned in-store baking in order to keep the smell of the coffee "pure" (Misonzhnik, 2013). The same strategy can be adopted in the Starbucks Evenings program where strategic relationships are set up with key suppliers to provide the stores with the food available at Starbucks Evenings while keeping the authentic smell which is an important component of the Starbucks brand (White, 2013).

3. SITUATION ANALYSIS 3.1 SWOT

3.1.1 Strengths Location: With just under 40 Starbucks locations per one million people in Canada, Starbucks has a reach that far

exceeds even the USA (The Huffington Post Canada, 2014). Starbucks Evenings introduction into the Canadian market would benefit from this extensive reach.

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 Customer loyalty: Starbucks has developed and maintained a devout customer base which they can pull from. It would not be hard to convince customers who are already in Starbucks as part of their normal routine to try out the Starbucks Evenings menu.

Diversity of product offerings: Starbucks as a leader in the coffee industry already has experience in diversifying their offerings. The company is known for its eclectic product options, allowing customers to tailor their drinks to their liking. Starbucks Evenings is another way to add to that diversity of product by naturally progressing into a different line of business.

Strong Brand: The Starbucks brand is one of the most recognized in the world - synonymous with quality. The brand plays on the ideas of the five filters such as handcrafted, artistic, sophisticated, human, and enduring (Millman, 2011). Starbucks Evenings still tightly intertwines with the Starbucks brand by going back to the original global campaign of "Meet me at Starbucks" (Interbrand, 2014).

Starbucks Experience: The Starbucks brand is more than coffee, there is a relaxed atmosphere associated with the brand and this can be translated into the Starbucks Evenings service. The design of Starbucks is deliberate to make customers comfortable by fostering interaction and enticing customers to stay (Larkin, 2015).

3.1.2 Weakness Strong brand: Starbucks first and foremost is a coffee brand. The company's strong brand identity might act as a

deterrent to its plans for diversification. Demographic: Starbucks Evenings identified target audience are women, aiming to appeal about 60% of their

population (Wright, 2015). This would lead to an exclusion of a still large demographic of men and those customers who are underage. Starbucks has not had reason to apply purchasing age restrictions at their stores, and this might prove a challenge to enforce.

3.1.3 Opportunity Untapped market: Starbucks Evenings presents an opportunity for Starbucks to take advantage of an untapped

market. While cafes serving alcohol have been widely popular in Europe and around the world for some time, this has not yet taken off in Canada. Starbucks has always been a pioneer in catering to the customer's needs. For example, Starbucks was one of the first stores where customers can go in and specialize their coffee order (Durham, 2007) this order process has been copied by other coffee brands worldwide. Now Starbucks can be a market leader by establishing Starbucks Evenings service. The Starbucks Evenings program would increase its market reach by including non-coffee drinkers in its clientele. Allowing the company to compete on a stronger base. Studies have also shown that coffee sales usually peak and decline at a certain point in the day. The study showed that 65% of all coffee is consumed during breakfast hours,

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30% between meals, and the remaining 5% with other meals (E-imports, 2015). Allowing the company compete throughout the day instead of just in the mornings when coffee drinking is predominant. Personality behind service: The Starbucks brand is known for its unique personality injected into their services. There is an opportunity for the uniqueness to be transferred into the Starbucks Evenings services. Starbucks Evenings' partnership with Reidel Glass Company is a great opportunity for Starbucks to offer continuity in their personalization service. They could also provide opportunities for customers to purchase these glasses incorporating the same marketing strategy that exists with the sales of the Starbucks coffee cups (, 2012). Opportunity to expand to have Starbucks Evenings as standalone shops where the times can be expanded. At the moment Starbucks Evenings is being introduced as part of the company's products depth, being available in the same locations that have regular Starbucks services there is an opportunity for Starbucks to eventually create a subband which operates separately from the Starbucks coffee shops allowing them to extend their business hours from the proposed start time of 4pm and accommodate early users.

3.1.4 Threats Brand Dilution ? Starbucks started off as a coffee shop and it has built its brand to be one of luxury in coffee.

Starbucks has moved from the traditional coffee shop but most of its growth in variety has been in the same realm of business, for example, Starbucks introducing products like Products like Evolution fresh juices and La Boulange food (Interbrand, 2014), is still closely related to the Starbucks brand. Venturing from non-alcoholic drinks to wines and beers is a transition that a few would struggle with. Cannibalization: There also exists the threat of cannibalization of Starbucks Evenings become the more recognizable brand and people waiting until 4pm in order to go into a Starbucks, there by taking over their initial products in their minds.

3.2 PORTER 5 FORCES

3.2.1 New market entrants: Low The threat to Starbucks as a new entrants is not that high. Starbucks has the advantage of already being the in quick serve industry, the company would just be looking into

diversifying their products and services. Starbucks has already established stores which they would be using to expand their business. There would be no

need to create new structures in which the Starbucks Evenings will run. This cuts the price threats most new entrants into the market face.

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3.2.2 Bargaining power of buyers: Medium to High The bargaining power of buyers is quite high with little to no switching costs associated with deciding to not take

advantage of the Starbucks Evenings service. The lifestyle choices of the buyers also impacts on their bargaining power. With only just under 44% of Canadians

admitting that they purchasing alcohol and 4.75% (Print Measurement Bureau, 2014) of Canadians visiting quick service restaurants, the consumers lifestyle might not fall in line with the service being offered by Starbucks evenings.

3.2.3 Bargaining power of supplier: Medium to High Pressure Starbucks Evenings success is determined closely by the company's ability to obtain and maintain a liquor license

allowing the company to serve alcohol on their premises. Starbucks Evenings would have to rely on the constant changes in the Canadian liquor licensing laws (Finkelstein, 2011). The suppliers have the power to control and determine the companies who would receive services. With a vast range of restaurants and bars in Canada and more expected within the next year, the supplier is not limited for choice. Also the suppliers have the flexibility to dictate the selling price according to the type of alcohol and food being provided (Woolley, 2013).

3.2.4 Threat from substitutes: High Buyers have a wide variety of options available to them. This could range from other bars and restaurants in the

area who also provide alcohol and dining services in their establishments. Buyers also have the choice of purchasing the same items being offered by Starbucks Evenings at stores and

supermarkets as substitutes and enjoying the items in the comfort of their own homes. This is especially possible due to speculations that there will soon be changes in alcohol regulations in Canada which would allow grocery stores to sell alcohol (McConnell, 2015).

3.2.5 Rivalry among existing players: High With over 27% of the Canadian population visiting a quick service restaurants between 1 - 5+ days every month,

there is a huge array of services competing for the consumers. The City of Toronto has over 8,100 restaurants, which represents 6.5% of all business in Toronto (Romano, n.d.). Starbucks would also have to compete with unlikely rivals who are also looking into expanding their service offerings. In 2014, KFC planned to launch Beer services with their usual chicken menu in select locations (Eads, 2014).

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4. MARKET OVERVIEW AND TARGET MARKET

The typical Starbucks consumer consists of high income earners, which makes up about 10% of the Canadian population (Statistics Canada, 2011). Loyal customers make up 20% of Starbucks' consumer base, making about 192 visits per year, while a regular customer makes about 72 visits per year (Lepore, 2011). Also, 60% of the company's consumers are women (Balkissoon, 2015).

The potential market for Starbucks Evenings are consumers of legal drinking age, which means over 18 years old in Alberta, Manitoba and Quebec and over 19 years old in the rest of Canada (Canadian Centre of Substance Abuse, 2014). As Starbucks seeks to expand its offerings to its established consumer base, the target demographic for this program is mainly women. In considering consumer behavior, and in keeping with the concept of being the "third place" and a relaxed environment, a main characteristic of the target market is those seeking an alternative to the noisy ambience of nightclubs and bars (International Business Times, 2015). Based on the fact that 76% of the Canadian population reported drinking alcohol in 2013 (Canadian Tobacco, Alcohol and Drugs Survey (CTADS), 2013), the potential market for this program is substantial.

Since the program offers only a selection of wine and beer, and not a full range of typical bar offerings, this program will target low to moderate alcohol consumers without alienating non-drinkers.

The Starbucks Evenings program will be available to consumers in select locations across Canada. The strategy for these locations is discussed further in analyzing the place component of the marketing mix.

5. MARKETING OBJECTIVES AND STRATEGY

The Starbucks Evenings program is part of a wider goal by the company to expand its product mix. As Starbucks traditionally earns 70 percent of its daily revenue before 2pm (Melnick, 2010) this initiative is aimed at increasing sales in the evening when coffee sales are slower. The expectation for the program is to double the revenue currently brought in during the evening hours at the specific locations where the Evenings menu will be offered. Given the fact that only one in three customers who visit Starbucks purchase food items with their beverage orders, another objective is to increase food sales (Wright, 2015). The Starbucks Evenings menu offers alternative appealing options to the retailer's typical bakery

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