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BLM&P Research Starbucks
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Starbucks
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BLMP Research
• Lourdes Becerra
• Brian Litke
• Kari McLean
• Rebecca Prindable
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Decline in Sales
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Apr. 29, 2009-- Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its second quarter ended March 29, 2009.
Net revenues of $2.3 billion, a decrease of 7.6 percent
• Comparable store sales of negative eight percent; compared to negative
nine percent in Q1 2009
• Cost reduction of approximately $120 million versus target of $100 million
• EPS of $0.03; Non-GAAP EPS (excluding restructuring) of $0.16
Second Quarter 2009
Fiscal Highlights
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Starbucks Problem
• Decrease in:
• profit margin
• drop in sales
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Income Statement
Year Revenue
($ mil.)
Net Income
($ mil.)
Net Profit
Margin
Employees
Sep 2008 10,383.0 315.5 3.0% 176,000
Sep 2007 9,411.5 672.6 7.1% 172,000
Sep 2006 7,786.9 581.5 7.5% 145,800
Sep 2005 6,369.3 494.5 7.8% 115,000
Sep 2004 5,294.2 391.8 7.4% 96,700
Sep 2003 4,075.5 268.3 6.6% 74,000
Sep 2002 3,288.9 215.1 6.5% 62,000
Sep 2001 2,649.0 181.2 6.8% 54,000
Historical Financials & Employees
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Decline in Sales
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Decline in Sales
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Coffee Market Overview • 54% of US adult population are coffee consumers1
• Americans drink more than 488 million cups of coffee a year2
• US coffee drinkers spend on average $164.71 per year on coffee3
• Average coffee consumption in the United States is 3.1 cups of coffee per day (NCA). Per capita, men drink approximately 1.9 cups per day; women drink an average of 1.4 cups of coffee a day (NCA)4
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Coffee Market Overview
• 80% of coffee drinkers now make coffee at home with
brand name coffee (not trading down to no-name brands)1
• McDonald’s McCafe beginning to dent Starbucks2
• 60% of Americans have scaled back on fancy/expensive coffee since June 20083
• 90% scale back to save money3
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Unemployment Rate
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242,933,996 women and men
Ages 15-100+
Median age (years) 36.8
US Population Estimate as of July 1, 2008
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Earnings
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Starbucks Background
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Starbucks Data • Founded in 1971 in Seattle’s Pike Place Market
• Mission Statement: To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.
• Guiding Principles:
• Contribute positively to our communities and our environment.
• Recognize that profitability is essential to our future success.
• Starbucks Corporation's Common Stock is traded on NASDAQ, under the trading symbol SBUX.
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Starbucks Stores
• 4,500 stores in 47 countries • North America
• Europe
• Middle East
• Latin American
• Pacific Rim
• Stand-alone stores
• Kiosks
• Inside retail stores • Also own Seattle's Best Coffee and Torrefazione Italia coffee
brands*
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Starbucks Consumer Data
• Starbucks drinkers 29.1% single
• 27.2% professional/management jobs
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Starbucks Store Products
• More than 30 blends of coffee
• Tea
• Bottled beverages (protein shakes, water, juice)
• Pastries, fruit, sandwiches, cheese plates
• Merchandise:
• Coffee
• Tea
• Music CDs
• Mugs
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Starbucks Products in
Grocery Stores
• Coffee
• Ice cream
• Bottled frappucinos
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Starbucks Cards
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Starbucks Cards
• According to official Starbucks fact sheet: Starbucks Card, a reloadable stored-value card, surpassed the $2.5 billion mark for total activations and reloads since its introduction in 2001. Due to its success in the U.S. and Canada, the Starbucks Card global program has been launched in other international markets, including Mexico, Hong Kong, Australia, Thailand, Greece and the United Kingdom. Other markets (Japan, Taiwan and Spain) have a stand-alone Starbucks Card program, specific to their market
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Starbucks Cards
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Corporate Social Responsibility
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Corporate Social Responsibility
• Hot cups use 10% recycled content
• New Vivanno cold cups use 15% less plastic and emit 45% fewer greenhouses gasses in production than industry-standard PET plastic and are recyclable
• Discount if you bring your own cup
• Chemical-free organic and fair trade coffees
• Starbucks(RED)
• Ethos water
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• Measures annual greenhouse gas emissions
• Encourages suppliers to adopt more environmental practices
• Purchases renewable energy (20% in US and Canada)
• Adjusts thermostats to reduce electricity usage
• Water-efficient fixtures
• Energy-efficient lights
• LEED certification for Seattle Support Center
• Recognized by the EPA as the Green Power Partner of the Year in December 2006
Developed the online Planet Green Game to educate players about climate change and every-day behavior change.
Corporate Social Responsibility
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Employee Benefits
• Part-time and full time employee’s qualify for comprehensive benefits packages that typically include stock options through “beanstock”
• Also includes health, dental, vision and medical insurance for employees
• “Partner markout” - each week employees are given one pound of coffee, one box of tea and other various other starbucks products free of charge
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2009 Expansion Plans
Starbucks expects to add approximately: • 20 net new stores to global store base
• 320 net new licensed stores internationally
• 60 international company-operated stores
• 65 net new licensed stores in the U.S.
• (Net reduction of approximately 425 U.S. company-
operated stores)
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Third Place
• Meeting Place
• Business
• Social
• Study
• Read
• Music
• Recorded
• Live
• WiFi
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Social Media as of July 19th, 2009
• Official Starbucks page has 3,576,651 friends
• On twitter the official Starbucks has 251,716
followers
• Official itunes page to download CD’s, songs,
playlists
• www.marketingcharts.com ranked Starbucks
as the 6th ranked social brand of 2008
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Major Competitors
Locally-owned small chains
Independent coffee shops
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McDonalds
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Business Overview
• Operates hamburger restaurants
• Leading global food service retailer
• More than 31,000 local restaurants
• In 118 Countries
• Serves more than 58 million people each day
• Engaged in the franchise business
• Trade Symbol on Nasdaq MCD
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Social Media
• Launched Station M
• Private networking site for more than
650,000 hourly employees
• Used to post comments, photos, and
participate in contests
• United States and Canada
• Registered on Facebook, MySpace, and
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Social Media
• Facebook - 5,857,595
• Twitter – didn’t see one
• MySpace – Big Mac
Chant off (Contest
Winner) MySpace Job
Search
• Facebook - 4, 316
followers
• Twitter 870 followers
• MySpace – Profiles with
the name McCafè
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Corporate Social Responsibility
• Nutrition and Well Being
• High Quality Choices- develop menu offerings that
provide a range of choices that meet needs and
preferences and that fit in a balanced diet.
• Consumer Friendly Nutrition Information- provide
easier access to nutrition information
• Communicate Responsibly- Continue to refine
marketing and communication practices,
particularly to children
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Corporate Social Responsibility
• Environmental Responsibility
• Energy Efficiency- Find further ways to increase
energy efficiency restaurants to save money and
reduce environmental impact.
• Sustainable Packaging and Waste Management-
Continue exploring ways to reduce environmental
impacts of consumer packaging and waste in
restaurant operations.
• Green Restaurant Design- Enhance current strict
building standards to incorporate further
opportunities for efficiency and innovation in the
design and construction of restaurants.
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Corporate Social Responsibility
• Employment Experience
• Respect - Create a diverse and inclusive
culture where everyone feels valued and
respected.
• Commitment Enhancement- Continue to
enhance employment value proposition to
drive high levels of employee commitment.
• Talent Management- Attract, develop and
retain the most talented people at all
levels.
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Community Involvement
• Ronald McDonald House & Children’s
Programs
• Partnerships and Sponsorships
• Owner/Operation Involvement
• Disaster Relief
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Coffee Products
• House Coffee (free refills on black coffee)
• Iced Coffee
• Caramel
• Hazelnut
• Vanilla
• Regular
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Beverages
Espresso based coffees
• Cappuccinos
• Lattes
• Mochas
• Iced Lattes
• Iced Mochas
• Iced Premium Roast brewed coffee
• Hot Chocolate
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McCafé Beverages
• 2006 McDonalds Introduced Premium Roast drip coffee
• 2007 Introduced Iced Coffee and tested a full line of
espresso-based specialty coffees in Select U.S. markets
• 2009 McDonald’s launched McCafé Coffees
• McCafé can be found in more than 10,000 locations
• Tag line “McCafé Your Day!”
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Third Place
• Wi-Fi is found in more than 30,000
McDonalds restaurants world-wide
• Connect with payment
• Credit Card
• Subscriptions
• Prepaid Cards
• Promotional Coupons (sometimes)
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Locations
• Airports
• Gas Stations
• Malls
• Stand alones
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Marketing
• $100 Million
• TV
• Radio
• Out Door
• Internet
• Events
• PR
• Free Samples
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In May 2009, McCafé espresso based coffees
contributed to the increased sales of 2.8% for
McDonald’s in the United States.
• MCD: Stock Quote
• $ 57.84 0.62 1.08%
July 17, 2009
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McDonalds vs. Starbucks
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Dunkin’ Donuts
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DunkinBeatStarbucks.Com
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Dunkin Donuts Data
• Founded in 1950 (Massachusetts)
• Franchised by 1955
• End of 2008- Number of stores
• 8,835 stores, with 6,395 franchised in the United States
• 2,440 in 31 countries
• End of 2008- Sales
• Overall company global sales reached $5.5 billion
• DD Specific Sales: $20.2 million
• Chicago has 476 Dunkin’ Donuts
• Dunkin’ Donuts is owned by Dunkin’ Brands, Inc. which is owned by a
consortium of private equity companies: Bain Capital, The Carlyle
Group, and Thomas H. Lee Partners. (Not publicly traded)
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Dunkin Donuts
• Slated as the “World’s largest coffee and
baked goods chain”
• Serves more than 3 million customers a day
• More than 52 varieties of donuts, and more
than a dozen coffee varieties (plus bagels,
baked goods, and breakfast sandwiches)
• Slogan: America Runs on Dunkin’
• As of 2009- new $100 million Ad Campaign
targeting “Hard-working Americans”: “You
‘Kin Do It!”
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“You Kin’ Do It!”
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“You Kin’ Do It!”
• "Prevailing over life's daily challenges
deserves acknowledgement and
appreciation, especially in difficult times. 'You
Kin' Do It' shines the spotlight on the
accomplishments of hard-working Americans,
while reinforcing that Dunkin' Donuts will
continue to fuel their busy day and provide a
bit of happiness without blowing the lid off
their budget," she said
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Dunkin Donuts
• "The price-value equation is starting to change," Passikoff says. "It's hard now to know what Starbucks stands for. That isn't a problem with Dunkin' Donuts.” (Forbes)
• In 2007, Forbes ranked “hottest coffee chain”
• Dunkin' Donuts has earned the No. 1 ranking for customer loyalty in the coffee category by Brand Keys for three years running.
• Middle class demographic
• Serves rural markets not feasible for Starbucks
• Some stores open 24 hours
• Drive-Through Window
• Not strong on “Third Place”
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Coffee Products Sold
• Dunkaccino
• Coolatta
• Indulgent Iced Lattes
• Hot Coffee
• Iced Coffee
• Latte Lite
• Flavored Coffee
• Turbo
• Bulk Coffee
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Other Beverage Products
• Iced Tea
• Hot Tea
• Chai
• White and Regular Hot Chocolate
• Smoothies
• Non-Coffee Coolattas
• Soft Drinks/Juices/Milk
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Other Products
• Donuts (+35 varieties)
• Munchkins (+9 varieties)
• “Fancies” (+9 varieties)
• Stick Donuts (+6 varieties)
• Danish pastries
• Cookies
• Brownies
• Cinnamon twists
• Bagels
• Flatbread sandwiches
• Breakfast sandwiches
• Croissants
• Muffins
• Some locations have
Baskin Robbins or
Dunkin’ Deli as well
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DD Employee Benefits
• Medical/Dental
• Basic Life Insurance
• STD/LTD
• FSA
• EAP
• 401 K
• Paid Vacation
• Paid Holidays
• Paid Sick Days (up to 8)
• Paid Personal Days (2)
• Paid Bereavement
• Tuition Reimbursement
• Group Auto and Homeowners Insurance
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Working at DD
• In December, 2006, the Boston
Business Journal reported that Dunkin'
Brands ranked # 2 in the 4th Annual
Massachusetts Corporate Reputation
Survey. Dunkin’ Brands had the best
finish for a consumer products company
in the survey’s four year history.
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Corporate Social Responsibility
• Social
• Nutrition Advisory Board, DDSmart, Bright
Choices, Dunkin’ Brands Disaster Relief
Fund
• Philanthropic
• Volunteerism, powerful support for local
communities, and non-profit partnerships
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Corporate Social Responsibility
• Economic
• Diversity and Inclusion- understanding and
reflecting the diversity of DD guests in all
aspects of the business
• 100% Fair Trade Certified Coffee Beans
• Support Community Development projects,
such as: Sustainable Agriculture, Healthcare,
Education, Women’s Leadership Training, and
Infrastructure Improvement
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Corporate Social Responsibility
• Energy Efficiency • Install sensory controls in bathrooms, offices, and storage closets
• Replace Analog HVAC with programmable HVAC
• Replace walk-in coolers and freezer motors with electronically
commutated motors
• Implement web-based energy mgmt system
• Carbon Footprint- 2008 • To understand their environmental baseline
• Identify Priorities
• Set measureable goals for improvement
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• LEED partnership/certified store opened
in 2008 in St. Petersburg, FL • Recycling: On-site Earthworm Casting facility, a collaboration between Dunkin'
Donuts and local company Mother's Organics (www.mothersorganics.com). The
solar powered tank houses 80 lbs. of small red earthworms that will eat the
waste produced by the store, such as coffee grounds and paper products. The
worms' waste will then be converted into fertilizer for local farms and gardens.
• Reusable Mug Program: Customers are encouraged to bring their own mug, and
will receive a discount toward the purchase of a beverage.
• Paper Hot Cups: Hot drinks are served in paper cups made from renewable
resources.
• Food Donation: Leftover baked goods are donated to America's Second
Harvest, a local food bank.
• Green Cleaning: Cleaning products meet LEED requirements and California Air
Resources Board (CARB) standards, better for the environment and customers.
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“Third Place”
• As of 2006, newly remodeled stores and new
locations will have WiFi capabilities and an all
day menu
• Don’t want to alienate people who want to
relax with their laptops
• Fundamentally- DD is devoted to quick
service at a lower price
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Social Media
• Facebook- 828,894 fans (as of 7/18/09)
• Twitter- 28,747 followers (as of 7/18/09)
• Dunkin’ Dave Twitter page
• Uses word “kin’” whenever possible
• Youtube- 1,754 subscribers, with 317,008
views (as of 7/18/09)
• DunkinBeatStarbucks.com
• Website dedicated to challenging Starbucks
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Promotions and Contests
• DD Perks and Fuel Rewards
• At participating gas stations in specified states
• For every $20 you spend with registered DD card,
5¢ off each gallon of gas
• $2 Bonus Game Day
• Specified games/stadiums
• Coupon
• Win free coffee for a year
(These are all current)
• DD rechargeable card
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Dunkin’ Run • A Way to order coffee on the go for you and your friends
• Has its own website
• Has received a lot of positive press regarding ease of large orders, and the free
iPhone application • Are you the person who always offers to make a Dunkin run for the office? Are you the person intern
who's always forced to make a Dunkin run for the office? (From Bostonist.com)
• Want to live in the future, Dunkin’ Donuts Style? (with link to iTunes store from Unofficial Apple web
blog)
• How it works: • Go to the Dunkin’ Run website on your computer, mobile, or iPhone application—this makes you “the
runner”
• Then choose which friends you want involved, entering either their mobile numbers or their email
addresses
• Order, DD then contacts your friends and tells them to do the same
• “The runner” (that’s you) goes and picks everything up—you have to either have the order on your
mobile, or on a computer print out
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Expansion Plans
• April 2009- 1st hotel restaurant location (North
Carolina)
• Plans to expand into airports, sports arenas, and
other lodging facilities
• US goal
• 15, 000 + stores by 2016
• Taiwan
• Plans 100 stores in next ten years
• South Korea
• Already has 191 stores, plans to open 100 more
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DD Co-branding
• Partnership with Boston Red Sox/Fenway Park
• Partnership with the New England Patriots- Northeastern roots
• Official in-flight coffee for Jet Blue airlines (2006)
• Partnership with Proctor & Gamble to sell DD coffee at retail
outlets (2007)
• Partnership with Hess Corporation and Sara Lee to sell DD at
non-traditional food service locations (2007)
• Partnership with Yahoo! To create new Dunkin’ Donuts-
branded video programs and a community website (2008)
• LEED certification for St. Petersburg, FL location (2008)
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Starbucks vs. Dunkin Donuts
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Starbucks vs. Dunkin Donuts
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Starbucks vs. Dunkin Donuts
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Caribou Coffee
• Founded 1992
• Mission Statement: Our mission at Caribou Coffee is to provide a total experience that makes the day better.
• Tagline: Life is short. Stay awake for it.
• Trading Symbol: CBOU on NASDAQ
• Almost 500 company-owned locations, 6,000+ employees • Includes 52 franchises
• Locations in 16 US states and the District of Columbia, some stores overseas
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Commercial Sales
• Club stores and grocery stores
• Mass merchandisers
• Office coffee providers
• Airlines and hotels
• Sports and entertainment venues
• College campuses
• Other commercial customers
• Catering
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Products Sold
• Desserts
• Sandwiches
• Salads
• Fruit
• Yogurt parfaits
• Muffins & breads
• Scones & cookies
• Donuts & bagels
22 types of coffee roasts 10 light, 12 dark, 5 decaf
Classics
Espresso
Lattes
Hot Chocolate/Cocoa
Cold
Smoothies
Coolers
Tea
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Other Products Sold
• 7 coffee gift sampler boxes
• Coffee of the Month Club
• Gift sets and Gift cards
• 10 flavors of coffee syrup; 5 sugar free flavors
• Travel mugs & tumblers
• T-shirt
• Bear-shaped stools and stuffed animal bear head
• Accessories – canister, stuffed moose, photo frame, coffee bag, lunch tote, lip “stuff”
• Equipment: home brewing systems, single cup coffee-making system, French press, grinders
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Corporate Social Responsibility
• Allocate funds to support socially responsible initiatives in coffee-producing communities.
• Focuses on charitable efforts in the areas of breast cancer, children’s literacy, and the environment
• Donations of coffee, coupon certificates for free drinks or free pounds of coffee, valid at Caribou Coffee retail locations
• A large portion of the coffees they source comes from Rainforest Alliance Certified producers
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Corporate Social Responsibility
• Offer ceramic mugs and plates for in-store dining
• Discount for bringing your own cup
• Chemical-free organic and fair trade coffees
• Napkins made of recycled materials
• Amy's Blend benefiting Susan G. Komen for the Cure
• Coffee Kids benefiting coffee-producing communities
in Central American and Mexico
• Grounds for Health, which provides cervical cancer
screenings for women in Mexico and Guatemala
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Team Member Discounts - On beverages, food, beans, teas & merch
Pay & Benefits - Pay increases, promotions and great benefits
Flexible Schedules - A wide range of shifts available, no late-night hours
Caribou College – Advanced training classes after initial in-store training
Health & Dental Insurance - Team Members regularly working at least 20 hours per week are eligible to participate. Eligible dependents include same-sex domestic partners.
Employee Benefits
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401(K) - a discretionary match, currently 25% on the first 5% you contribute at the end of each year, subject to a four-year vesting schedule
Life Insurance - Caribou Coffee provides basic life insurance to all Team Members regularly working 32 hours per week. Team Members can purchase supplemental coverage for themselves and their dependents. Eligible dependents include same-sex domestic partners.
Pool Leave - Full time Team Members who consistently work a minimum of 32 hours per week are eligible. Hours are accrued from the first day of employment. Pooled leave eligibility will begin after a Team Member completes six continuous months of service.
Employee Benefits
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Third Place
• WiFi at 300+ Caribou Coffee stores nationwide
• Meeting Rooms
• Musicians play at some Caribou stores
• Lodge feel with • Fake stone fireplaces
• Wood and slate floors
• Wood beams, Iron trim
• Iron moose
• Moose antler-shaped cut out product rack
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Social Media
• Facebook: 2,181 fans • 40+ additional fan group with 2,499 fans
• Two anti-Caribou fan groups with 24 total fans
• Twitter: 76,275 followers • Area-specific profiles with followers from 22 to 125
• Other larger Caribou profiles with 3,155 and 44,095 followers
• YouTube: 60 videos made about Caribou, only one official
video by Caribou Coffee experts (only 2 views for this one)
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Co-Branding
• Coca-Cola North America/Caribou Iced Coffee
• Frontier Airlines
• Mall of America
• Kemps Ice Cream/Caribou Coffee Flavor
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Additional Information
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Caribou vs. Starbucks
http://seekingalpha.com/article/31290-is-it-time-for-starbucks-to-buy-caribou-coffee
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Discovery
• Starbucks market share started declining before
downturn in the economy
• McDonalds share of the coffee market is increasing
• Starbucks major competitors include independent
shops and locally-owned chains, but each of these
doesn’t hold a significant portion of market share.
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Research Objectives
• How is Starbucks going to handle the
downturn in the economy?
• Why has Starbucks lost its appeal?
• What can Starbucks do to regain its
appeal?
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Research Methodology
• Non-probability sampling (convenience sampling)
• Mix of Starbucks and non-Starbucks consumers
• Project length, depth and budget unable to
support probability sampling
• Research used
• Quantitative
• Qualitative
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Observational Research
Disguised Observation at one
location of Starbucks and each
major competitor
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Starbucks Observational
Research
• Men 31
• Female 22
• Cold Beverages 23
• Hot Beverages 30
• Food Purchased 16
July 5th, 2009
10:00am-11:00am
Armitage and Hoyne
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Observational Research
• Men 24
• Female 16
• Hot 35
• Cold 4
• With Food 29
• Special Drinks 4
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Observational Data • Men: 63
• Women: 51
• Food purchases as well: 81
• Bagels, muffins, donuts, breakfast
sandwiches, other pastries, and ice cream
• Cold Coffee/Tea Drinks: 39
• Hot Coffee/Tea Drinks: 75
• Brought personal mugs: 7 * I felt awkward sitting in the DD location for an hour + (also received weird looks)
*Canal/Roosevelt location- also has a Baskin Robbins
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Caribou Observational Data
• # Women: 38
• # Men: 59
• Hot beverages: 54
• Cold beverages: 27
• Bottled beverages: 6
• Food: 20
• Large size: 30
• Medium size: 40
• Small size: 16
• Ceramic mugs: 4
8:30am – 10:00am on Friday, July 3, 2009
3025 Clark Street, Chicago
WiFi Available
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Qualitative Research
In-depth Interviews
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IDI
Nathan Fleischmann, age 27, worked at 444 N. Michigan Ave.
Joshua R. Anthony, age 22, worked at 53rd and Harper, Hyde
Park
Q&A
What was a common drink?
• Nathan - COD (Coffee of the Day) & Frappuccinos, at that
time, surged after mid morning to early evening - especially
in the warmer months.
• Joshua – Hot coffee is what was usually ordered, but the
adventurous people would ask for a caramel macchiato or a
caramel frap.
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IDI What did you like about Starbucks?
• Nathan - Take turns running the shifts. They really teach you all aspects of running a coffee shop. It’s pretty checklist easy. But the variety of requests from people about drink preferences is what made it fun.
• Joshua – It was a family environment. Free coffee, free stock options, health benefits.
Describe your customers?
• Nathan - We had a TON of Tribune regulars and local morning commuters. We had a lot of regulars from the Realtor building next door. Regulars like we knew the lady who got the “red eye” (coffee with espresso shot) every morning at the same time.
(The tourists dominated the foot traffic from mid morning to late afternoon)
• Joshua – You have your regulars who you get to know by name or by the drink they like to order or just some other unique form.
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IDI Do you still go to Starbucks?
• Nathan – Yep, just not at much as I used to.
• Joshua – I occasionally go to see someone I use to work with; and there’s certain pastries you can’t get anywhere else.
Why do you only go occasionally?
• Nathan - I like a lot of the local places a lot. The local places tend to give back to the community more and their shops are more conducive to lounging around, they tend to be comfy.
• Joshua – Because it’s over priced.
Add your own comment
• Nathan – Starbucks has been slowly converting to the auto drink espresso machine where the barista doesn’t have much influence on the drink anymore. It takes a lot of the personality out of your local coffee place.
• Joshua – It doesn’t have a true coffee house feeling because they’ve incorporated too much into it.
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Qualitative Research
Focus Group
• Four Participants
• Female, age 27, Bachelor’s degree
• Male, age 32, College
• Female, age 36, Bachelor’s degree
• Female, age 58, Master’s degree
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Qualitative Research
Focus Group
• Topics of conversation
• Starbucks usage
• Attitude toward Starbucks
• Discussion of Starbucks ad Starbucks Corporate
Responsibility
• Suggestions for Starbucks
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Qualitative Research
Focus Group
• Starbucks Ad
• http://www.youtube.com/watch?v=ClM4pSv2hOo
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Qualitative Research
Focus Group • Focus Group video clips
http://www.youtube.com/watch?v=GhL6jHKNpHs
http://www.youtube.com/watch?v=siR5g43FdQs
http://www.youtube.com/watch?v=GH_WfiD2Amk
http://www.youtube.com/watch?v=QXbaRO_nUus
http://www.youtube.com/watch?v=bfGFsYRTAQk
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Quantitative Research
Survey - overview
• Online Survey (surveymonkey.com)
• Survey opened June 24, 2009
• Survey closed July 14, 2009
• 21 questions • General coffee consumption
• Starbucks specific
• Demographic information
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Survey - Distribution • Facebook
• Craigslist
• Twitter Groups • Starbucks, Caribou, Dunkin
Donuts, McDonalds & Nescafe related
• Blogs including: • Starbuckster
• Starbucksgossip
• Flicker Starbucks group
• Coffee Cup News
• Coffee Chats
• Beyond Madison Avenue
• Blogs including:
• Bizzia.com
• Sponkit.com
• 5 blogs before lunch
• Bliss Tree/Kettle and Cup
• Cape Cod Branding
• Sustainable Industries
• New West Missoula
• MommyGoggles.com
• Crisiboy.com
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Survey - Distribution
• Mall Intercept • Century City (4)
• Watertower Place (1)
• Very difficult
• Few results for time put in
• People put up barriers to approach
• Avoid eye contact
• In conversation with another person
• Listening to iPod
• Tourist Intercept • Ogden Slip/Navy Pier
• Easy- handed out to
demographics we were
missing
• People were tourists,
waiting for an attraction to
begin, very responsive
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Survey Results
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Female
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Top 3 Places to Purchase/Get Coffee Store # of
Respondees
Ranked
1st
Ranked
2nd
Ranked
3rd
Starbucks 105 54 28 23
Independent 83 28 30 25
Local Chains 62 18 28 16
Dunkin’ Donuts 38 14 14 10
Grocery Store 37 18 8 11
Caribou 30 7 12 11
McDonalds 24 4 10 10
Home 12 5 3 4
Other 33 6 13 14
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Starbucks Experiences Coffee & Tea
• Coffee tastes burned/too strong/over roasting/bad tasting – 36
• Coffee tastes great/good - 30
• Consistent/dependable – 31
• Good food and coffee options – 9
• Tea not special/poor selections - 3
• Too many choices – 1
• Coffee sizes too frou-frou/pretentious - 5
• Like:
• Pike’s Peak blend roast – 1
• Holiday drinks – 1
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Experiences of Starbucks Environment
• Baristas are friendly – 30
• Baristas are snotty/snooty/fake – 4
• Fast/Good Service - 20
• Too expensive/over-priced – 20
• Like ambience/3rd place - 20
• Don’t like atmosphere – 5
• Hipper-than-thou feel - 1
• Convenient locations – 13
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Starbucks Experiences Pastries & Food
• Good experience – 5
• Pastries are divine – 1
• Not enough pastry choices/bad taste – 2
• Pastries only okay – 1
• Don’t like their food – 1
• Food okay but not at those prices – 1
• Like oatmeal – 1 (online debate on this, Starbucksters.com)
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Starbucks Experience Corporate Citizenship
• Disagree with mistreatment of labor force – 1
• Hear about good employee benefits – 3
• Dislike/distrust brand image (yuppie, corporate business) – 2
• Abhor right-wing politics - 1
• Hate their mega-ness - 1
• Edged out funky/local coffee shops/prefer local shops – 8
• Screwed local bakery (3-day lemon knot drop notice) - 1
• I like their image - 1
• Like social responsibility – 7
• Like employee policies – 1
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Starbucks Experience Miscellaneous
• N/A – 2
• Meh – 3
• Too much merchandising – 1
• Brew Starbucks at home and it isn’t burned, it is good – 1
• Hate tipping for normal service -2
• Starbucks Uber Fan (rave) – 3
• Starbucks Uber Foe (rant) – 2
• Lines too long – 1
• No pride in the products they serve - 1
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Suggestions for Starbucks Products
• Lighter roast coffees
• Stop burning coffee
• Simplify drink names (Tall/Grande/Venti)
• Increase # of flavors/specialty drinks
• Continue product diversification; keep focus on coffee
• Offer everyday coffee with lower price to compete against local brands, Dunkin Donuts (McDonalds will probably sell coffee retail)
• More wholegrain sandwiches (relates to focus group suggestion)
• Increase time between coffee-brewings
• Offer more combo deals
• Make sure food is fresh
• Make a frequent drinker card (same idea as Focus Group)
• Add sugar-free options to products besides just coffee (hot chocolate, apple caramel cider)
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Suggestions for Starbucks Products
• Expand Clover program – bring fresh brewed coffee to more markets
• Bring back training program for new employees (focus on drink
preparation, especially foaming milk)
• Espresso needs to be thicker and more “Italian” in style to make it good
enough to not make at home instead
• Bring back Lightnote!
• Start with better beans
• List fat content on foods/Offer really healthy food
• Free refills on black coffee
• Get better tea
• Discard: • Any beans roasted more than 2 weeks ago
• Any coffee ground more than 2 hours ago
• Any brewed coffee more than 1.5 hours ago
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Suggestions for Starbucks Other
• Lower prices
• Walk-thru windows (in cities, at Kroger’s)
• More drive-thrus
• Improve treatment of Starbucks employees
• Starbucks greenwashes – really go green (recycle, decrease waste)
• No more expansion
• Some stores can’t handle rush periods
• Get a microwave so I can heat up a muffin
• Watch out for McDonald’s! (Dollar menu?)
• Model condiments bar after Starbucks Japan (simple syrups, not sugar. Higher quality.)
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Suggestions for Starbucks Corporate Social Responsibility
• More sustainable products – not as specials
• Stop using paper cups (except for “to go” customers)
• Change bylaws to increase accountability for
corporate behavior
• Integrate more into local communities/neighborhoods
(community initiatives, etc.)
• Use local coffee in the area – good local coffee
producers
• Increase awareness about stuff Starbucks does for
environment & community (help me feel less guilty about going there)
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Suggestions for Starbucks Environment
• More live music in the evening
• Turn down the music
• Train staff to be more warm & friendly, not so
stressed out seeming
• Bring back normal chairs with tables
• Offer free standard Internet access/free internet all
the time to everyone
• Update store atmosphere, some are a little “cold”
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Survey Demographics
• Some High School 1.1% 2
• High School 2.7% 5
• Some College 13.4% 25
• Bachelor's Degree 54.0% 101
• Graduate Degree 25.7% 48
• PhD 3.2% 6
• Answered question 187
• Skipped question 1
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Survey Demographics
• Business 31
• Medical 13
• Student 12
• Unemployed 5
• Self employed 9
• Education 12
• Marketing/Advertising17
• Retail 4
• Barista 6
• Administrative 8
• Legal 7
• Music/Art 11
• Non-profit 10
• Social Work 4
• Writers 4
• Aviation 2
• Trade 3
• Retired 2
• Military 1
• Real Estate 2
• Engineer 3
• Textile Designer 2
• Clergy 1
• Life guard 1
• Homemakers 7
• Frustrated with work
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Survey Demographics
• Northwest Chicago
• 4 surveys
• Norwood Park
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Survey Demographics
• North/Central Chicago
• 48 surveys
• Edgewater
• Lincoln Square
• East Rodgers Park
• St. Bens
• North Park
• Wrigleyville
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Survey Demographics
• Near South Chicago
• 7 Surveys
• Pilsen
• Medical District
• University Village Little Italy
Near South Chicago
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Survey Demographics
• 31 surveys
answered were
from the Chicago
suburbs
• Northwest
• Southwest
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Survey Demographics
CA 18 TN 2
OH 10 GA 2
FL 7 NE 1
NY 6 OR 1
TX 6 NH 1
IN 5 MO 1
MN 5 NC 1
MI 4 CO 1
MA 4 WY 1
VA 4 VT 1
WA 4 WI 1
PA 3
Near South Chicago
86 from 23 other states
other than Illinois
Including Canada, Israel,
& Hong Kong
184 total surveys answered
179 zip code answers
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Research Objectives
• How is Starbucks going to handle the
downturn in the economy?
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Handling the Downturn
in the Economy • Research lower prices
• Partnership with local competitors
• Local community support initi�atives
• What a price reduction will do to Starbucks’ image or finances
• Impact and implementation of a less expensive regular coffee product
• Impact and implementation of a lighter roast coffee
• How people are using Starbucks as a Third Place (some use it socially and want more music, some use it for business and want music that is less distracting)
• In-store customer surveys (finding out what is important to their customer)
• Build stronger in-store promotion of the Gold Card and the Mini Card (especially utilizing their employees to inform customers)
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Research Objectives
• Why has Starbucks lost its appeal?
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Why Starbucks has lost its appeal
• Ruthless operator
• Negative corporate image
• Image over-powers product
• Expensive products
• Lack of healthy product
• Roast of coffee (burnt)
• Over-saturation of the market
• Lack of community involvement
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Research Objectives
• What can Starbucks do to regain its
�appeal?
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Regaining Its Appeal
• Increase partnerships with local businesses, including coffee related ones, to help with negative perception of over-saturation of the market
• Increase value of products, offer less expensive options
• Increase and promote healthy product options
• Increase community involvement, localized by neighborhood/location
• Pay attention to consumer survey findings
• Awareness of competitors’ strategies and tactics
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Research Findings
Starbucks consumers care about • Location
• Conveniently located
• Starbucks are everywhere
• Taste
• Enjoy Starbucks high-quality products
• Are particular about their coffee
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Research Findings
Starbucks consumers care about • Brand
• Are generally aware of Starbucks positive treatment of
employees
• Acknowledge that Starbucks takes positive steps to help
the environment
• Know that Starbucks products cost more but think they
are worth it (good value)
• Prestige
• Starbucks is positively perceived by many people
• Good place to meet people for business/social
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Key Findings
• Most groups are cutting back on expensive retail coffee to save $
• In our survey, age 55+ not cutting back at all/doesn’t apply
• Focus group members cut back
• In ranking of community involvement, environmental responsibility,
social responsibility and corporate image
• Some gender differences
• Education level differences
• Age differences
• Most people are either unaware of Starbuck’s contributions as a
corporate citizen or unclear on the specifics
• Starbucks has a loyal following but could bring more people in by
offering a lighter roast, less “burnt tasting” coffee
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Key Findings
• Starbucks has uber fans and uber foes; it needs to
stick to what makes the fans happy
• Fans appear to like the “clubbiness” of knowing how to order
a Starbucks coffee; should not change because others think
the names are frou frou/pretentious
• Because Starbucks is conveniently located, some
people might increase usage if there were a few
more options (lighter roast, less expensive coffee)
• Starbucks does not emphasize their lesser priced
coffee (coffee of the day)
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Research Recommendations
• Ceramic mugs for in-store customers
• Meeting rooms (like Caribou)
• How many stores can Starbucks close without damaging their reputation?
• How Starbucks can increase at home usage of products
• Impact and implementation of a lighter roast coffee
• How people are using Starbucks as a third place
• Socially/live music
• Business/music is distracting)
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Research Recommendations
• Research:
• Impact of a PR campaign about environmental and
social responsibility to raise awareness – identify
respected environmental organization or person for
endorsement
• Local community support initiatives
• What a price reduction will do to Starbuck’s image
and/or finances
• Impact and implementation of a less expensive regular
coffee product
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Questions?
