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How Starbucks Uses Market Research to Propel the Brand

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Starbucks has been a successful company over many decades largely because of its stellar business strategies. The company  expertly employs market research to keep its offerings and marketing messaging in line with consumer sentiment.

Market Research Methods

Market research can take many different forms, including following cultural trends, monitoring social media, gathering consumer feedback and in-store product testing . Starbucks does all of these and more.  

One notable way that Starbucks conducts its own form of market research is through its My Starbucks Idea platform, which it rolled out in 2008 as part of the company's "Transformation Agenda" at the time. Since then it has gone through some different iterations, but the basic idea behind it remains the same: customers, potential customers, and employees can go to the website to submit any ideas they have for new offerings, changes they’d like to see to anything that already exists, requests to bring back old products, and more.

The company also takes advantage of social listening, which involves monitoring digital platforms such as Facebook, Instagram, Twitter, and Reddit to find out what customers are saying about the brand and collect feedback that could help the brand improve. As of December 2018, Starbucks had 11.5 million followers on Twitter, 17.3 million followers on Instagram, more than 37 million likes on Facebook, and nearly 200,000 subscribers on YouTube.

Starbucks regularly tests new products in select stores, which helps the company figure out if it needs to make any changes before launching them in other markets — or if it will even continue the launch in other markets. Starbucks also uses data from several market research firms, as well as data gleaned from its own stores, to shape its new product lines.

Example: Dairy-Free Alternatives at Starbucks

Examples of how Starbucks has used market trend data, digital consumer feedback and in-store product testing are the launches of its dairy-free milk alternatives .

Market research company Mintel reports that during the period from 2012 to 2017, overall sales of dairy-free milk alternatives in the U.S. grew 61 percent, with almond, coconut, and soy milk being the most popular types. Starbucks has kept pace with this trend among health-conscious consumers and customers with special dietary limitations. The company began offering soy milk in 2004. In 2015 it launched drinks with coconut milk, and in 2016, it began offering almond milk. Starbucks also began offering oat milk in its European stores in 2018 to keep up with trends there.

The company says that a major reason that it launched these dairy-free milk alternatives was that they were some of the most requested offerings on its My Starbucks Idea platform. During 2014, the company also tested the use of coconut milk in stores located in Cleveland, Los Angeles, and Oregon. The results of the tests and combined market research were positive enough for Starbucks to begin rolling out coconut milk nationwide.

At the time of the coconut milk launch, former Starbucks Vice President of Brewed Espresso, Christine Barone, told MarketWatch , “Delivering the options our customers want is always the highlight of my day. We have a high bar for anything we pair with our high-quality espresso and this coconut milk is smooth and perfectly complements the coffee.”

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Starbucks’ Use of Market Research Propels the Brand

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Starbucks expertly employs market research to craft marketing messages and stay informed about consumer sentiment. Businesses in the coffee industry are susceptible to many external risks, most of which they are not able to control or even influence. The list of external threats is long, ranging from vagaries in the weather to ethically sourced coffee, and Starbucks must develop agile strategy to deal with both its internal environment and the external market environment.

How Market Research Supports Starbucks Business Strategy

Starbucks has been a successful company  over many decades largely because of its stellar business strategies.  The company engages in both horizontal and vertical integration.  Horizontal integration is evident in  Starbucks’ evolution of products .  Vertical integration can be seen in the acquisitions that support the supply chain and business operations.  

Market research is appropriate for each change  in the integration of operations that will be customer-facing or will impact the services customers experience.  Consider that  Starbucks has conducted market research  on dairy substitutes in its hand-crafted coffee beverages.  Note also that  Starbucks is highly attentive to monitoring social media  networks for consumer brand affinity and customer complaint.  Starbucks also actively solicits customer suggestions on its website.  

Market research can take many different forms and can also be conducted on the major channels.

For their market research on dairy substitutes in coffee beverages,  Starbucks employed at least these three market research approaches :

• Cultural trends (the dairy “problem,” health conscious consumers, nut allergies)
• Environmental factors  in supply chain management (the almond crop “problem”)
• Social media monitoring ( word-of-mouth ,  brand ambassadors )
• Customer preferences  tracking (website customer comments)
• In-store product testing

At 84,000 votes, coconut milk is the second most-requested improvement pitched to  MyStarbucksIdea.com  which is a website where customers offer ideas and suggestions on a wide range of topics.

Starbucks vice president of brewed espresso, Christine Barone, told MarketWatch that,

“Delivering the options our customers want is always the highlight of my day.  We have a high bar for anything we pair with our high quality espresso and this coconut milk is smooth and perfectly complements the coffee. I personally love it in an iced vanilla latte.”

The Non-Dairy Market Research Question

Health-conscious consumers and customers with special dietary limitations, such as allergies to nuts (almond milk) and lactose intolerance (dairy products), are seeing the results of voicing their preferences to Starbucks and other coffee beverage companies.  Despite a market nervous about nut allergies, Peet’s Coffee, a Starbucks rival in California, offers lattes and other beverages with almond milk.  During the past year, the Coffee Bean & Tea Leaf chain has offered its customers almond-coconut milk as an alternative to dairy.  Starbucks first offered soy milk to customers in 1997 and other major coffee house chains provide soy milk as an alternative to milk.

Mintel, the market research company, reports that during the period from 2011 to 2013, overall sales of dairy milk products and nondairy alternatives grew a scant 1.8 percent to $24.5 billion (Reuters). During the same period of time, sales in the alternative milk category rose 33 percent to nearly $2 billion, making it the fastest growing category within the dairy milk products and nondairy alternatives group 9 (Reuters).

Starbucks regularly tests products in stores.  During 2014, Starbucks tested the use of coconut milk as a non-dairy alternative to milk and cream in the brand’s hand-crafted beverages.  The market research took place in Starbucks stores located Cleveland, Los Angeles, and Oregon.  The results of the market research were sufficiently positive to cause Starbucks to select coconut milk instead of almond milk as an alternative to traditional dairy products in coffee beverages.

Environmental Considerations

The almond industry won’t be happy with Starbucks’  choice of coconut milk over almond milk, but drought-weary California residents may view this decision as an environmentally responsible decision.  The $11 billion almond growing industry will miss the boon of being picked by Starbucks, but absent the increased market, at least some water will be kept from irrigating what would doubtless be ever burgeoning almond orchards.

The demand for water is less for coconut trees than for almond trees or fields of soy beans.  But that does not mean that coconut trees get a free pass.  While the environmental impact of coconut tree farming is light, concerns about the small coconut farmers have emerged.  The demand for coconut products has increased 10 percent annually since 2013, but production has only increased 2 percent.

Starbucks reports that the coconut milk they use will be “certified vegan and made from single-origin coconuts” grown on the Indonesian island of Sumatra.  The Asian and Pacific Coconut Community reports that one out of five Filipinos earn their living through some aspect of the coconut industry.  Yet, according to the United Nations Food and Agriculture Organization (FOA), coconut trees in India, Indonesia, and Thailand are aging and will soon cease producing at commercially viable levels.  Environmentalists are concerned that smallholder farms will be consolidated and production will be intensified.  Starbucks has worked determinedly for ethically sourced coffee beans.  Perhaps the Starbucks Coffee Company will also work to support the survival of a small-scale, environmentally friendly global coconut trade.

Article originally published by The Balance on August 13, 2016 by Gigi DeVault  https://www.thebalance.com/starbucks-use-of-market-research-propels-the-brand-2297155

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The Secret to Starbucks’ Brand Success

The concept of the world being flat has extended beyond geographical boundaries to the rapid blurring and demolition of economic ones. Globalisation is not an expansionary mindset anymore and in many cases, a strategic imperative to identify growth opportunities. Organisations are increasingly looking beyond their national markets. E-commerce and the emergence of digital and social marketing practices have led to a level playing field for organisations and customers and have redefined competition. Price wars have become increasingly common. Established brands are increasingly under threat from emerging private label brands.

Given the massive interconnectedness of the business world and emerging models of competition and growth, how can organisations maintain their core underlying brand identity? In addition to competitive market factors, worldwide external shocks like the global recession have also severely impacted businesses at both local and global level. The key question that emerges is that whether there is now a continual need for brands to adapt or face the threat of extinction if they practice consistency.

Introduction to Starbucks

To find answers to some of these questions, let us look at one of the world’s most iconic brands – Starbucks. Founded in 1971 in the city of Seattle, USA, the brand has changed the way the world drinks coffee outside home and work. Starbucks has been responsible for creating the concept of a third place between home and work where people can relax, enjoy a cup of coffee and experience the inviting ambience. It is often said that Starbucks taught America how to drink coffee and is now continuously teaching the world.

The global expansion of Starbucks has been rapid and strategic. It opened its first international store in Tokyo in 1996, entered UK in 1998 and opened its first Latin American store in Mexico City in 2002. The footprint of the brand increased to cover Russia in 2007 and it opened its first store in Ho Chi Minh City, Vietnam in 2013. In February 2014, it entered Brunei, the 15th market in the Asia Pacific Region and the 64th market globally for the company. In 2015, it opened stores in Panama and reached the milestone of achieving 99% of ethically sourced coffee. The company has more than 30,000 stores in 80 countries worldwide as of June 2019, and is expected to maintain a strong growth momentum.

On 3 April 2017, Starbucks’s former CEO Howard Schultz passed the leadership baton to Kevin Johnson, who will be the president and CEO moving forward. Kevin Johnson served the company in its board of directors since 2009 and has been the COO of Starbucks since 2015. Since Kevin Johnson took over as CEO, the company has successfully executed on its strategic plans, including innovation in coffee, elevated food options and innovation in premium craft iced teas.

Starbucks brand philosophy

Since its founding days in the early 1990s, Starbucks has strived to build its brand identity by offering customers a relaxing and enjoyable experience. From the very beginning, the experiential aspect of the brand has been consistently and effectively implemented in all its stores across the world. In addition, Starbucks has also built its brand on things that tend to be out of the box, by consistently defying conventional wisdom.

When companies were aggressively advertising, Starbucks decided not to advertise. When cost cutting was the dominant paradigm of the industry, Starbucks chose to emphasize non-routine procedures to create excitement among the baristas instead of streamlining procedures to minimize cost. Unlike most other companies, Starbucks made its employees its partners, by offering them stock options and health insurance. In 2014, it announced that it would pay for its US employees to complete an online bachelor’s degree at Arizona State University. Although the pros and cons of this employee benefit and Starbucks’ motivation behind the offer were widely debated, it again defined the organisation’s intent to go against the norms.

Starbucks’ approach towards gathering customer insight is also quite unique and different compared to multi-million dollar marketing research budgets utilised by global organisations. Going against rigorous and complex customer surveys, Starbucks chose casual and informal chats with customers to capture overall mood, understand experience with the store and gather valuable feedback. It is not that Starbucks does not conduct quantitative market research. It has in fact successfully used research findings to shape its market entry strategies in many countries. The key aspect to highlight here is the fact that the organisation does not have a rigid, compartmentalized view of understanding customers. These clever and innovative ways of understanding its customers has enabled Starbucks to build an iconic global brand that has resonated with customers across the world for almost 50 years now.

By offering a pleasurable and relaxing customer experience, Starbucks has been successful in focusing the customers’ attention on the quality of the experience, the enjoyable memories that can be woven together in its stores and not on the pricing of its products. An interesting piece of research conducted in 2013 using neuroscience research techniques in Germany suggested that customers would be willing to pay more for a Starbucks coffee, if the brand decides to charge it. Because neuroscience research looks at changes in brain activity when exposed to brands and price points, the results were considered more believable than traditional market research. The real-world evidence of this power in the mind for the brand is the popularity level it enjoys even though the pricing is higher than many of its competitors.

The Starbucks mission statement reads as “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. In his book Onward, former Starbucks President and CEO Howard Schultz says, “Success is not sustainable if it is defined by how big you become. Large numbers that once captivated me – 40,000 stores – are not what matter. The only number that matters is ‘one’. One cup. One customer. One partner. One experience at a time”. The company operates with a strong sense of attention towards details, and replicating a consistent customer experience across all its stores and its products is a critical focus area. In February 2008, it closed more than 7,000 stores across the United States for “Espresso Excellence Training”, where it worked with around 135,000 baristas to enable them to pour a perfect espresso shot and steamed milk properly.

In addition, another pillar of Starbucks’ brand philosophy is to be a responsible and socially ethical company. This includes responsible purchasing practices, including supporting farmer loans and forest conservation programs; as well as creating opportunities through education, training and employment. Starbucks also initiates many programs to reduce its environmental footprint through energy and water conservation, recycling and green construction.

For example, it sources 99% of its coffee ethically through Coffee and Farmer Equity (CAFÉ) practices thus halving its carbon footprint, partners with the U.S. Green Building Council to apply Leadership in Energy and Environment Design to its stores, and publishes its annual Global Social Impact Report. In its latest 2019 letter to shareholders, it has announced its aspiration to be resource positive – storing more carbon than the company emits, eliminating waste, and providing more clean freshwater than it uses. It plans to do this through:

• Expanding plant-based options on its menu
• Shifting from single use to reusable packaging
• Investing in innovative and regenerative agricultural practices, forest conservation and water replenishment in its supply chain
• Investing in better waste management practices to ensure more reuse and recycling, and eliminate food waste
• Developing more eco-friendly stores, operations, manufacturing and delivery

These are examples of consistency, attention to detail and a strong customer orientation in practice.

Brand strategy

Branding has been one of the pivotal elements of Starbucks strategy over many years. The company has invested significantly in creating a standardised look and feel of its stores, merchandise and food and drinks. The Starbucks Siren logo is one of the most recognisable logos in the world. The global expansion strategy has a key objective of recreating the Starbucks experience in every new country the company enters. This essentially results in a similar kind of experience in its stores, whether it is located in New York, New Mexico, Moscow, Tokyo or Shanghai.

The brand strategy, as mentioned before, focuses in detail on the experience the store creates. This has always been the cornerstone of the company’s philosophy and values. In the United States, where the company estimates that majority of its stores will become drive through, it has embraced stunningly appealing design principles to create stores out of unused shipping containers. Interiors of stores are continuously spruced up through clever and artistically appealing ways of using definite materials, lighting arrangements etc. In its international stores, the strategy is around localising some of the store elements but still staying true to the Starbucks experience.

The first strong indication that Starbucks is planning to move its focus beyond coffee and into other beverages and food products was when the company logo was redesigned in 2011 to remove the words “coffee” and “Starbucks”. This logo is in use till date and is one of the most visual and recognisable elements of the company.

The company’s brand strategy has kept pace with time and has evolved to take advantage of new and emerging customer engagement platforms. The company operates a website called ideas.starbucks.com, where customers can leave ideas for the company to expand and improve its products and customer experience, improve engagement with the community and enhance social responsibility. This is akin to the emerging methodology of “crowd-sourcing” in the field of innovation.

The brand has a sizable social media and digital presence, which has received renewed focus in recent years. This has been driven by the need to better engage with customers and also be visible on platforms where target or future customers spend time online. The brand has an active Facebook page, a Twitter account, Instagram page, a Google+ community, a Pinterest page and a video channel on YouTube. In 2015, Starbucks collaborated with Duracell Powermat to roll out wireless charging in its UK stores, thereby adding to the customer experience and bringing digital innovation into its stores.

The brand invests heavily and believes strongly in mobile marketing. It has embraced digital innovation by developing and rolling out a Starbucks app for paying for products, tipping baristas, earning and redeeming rewards. As at December 2019, it has 17 million Starbucks Rewards members in US and 10 million members in China. In April 2019, it responded to customer feedback and tweaked the Rewards program mechanics to enable occasional customers to redeem their stars more quickly for beverages. Besides its success in using technologies like QR codes, coupon downloads and virtual gift cards in its promotional campaigns, Starbucks has leveraged on Artificial Intelligence to allow customers to place their orders via voice command or messaging interface through the mobile app. This has resulted in a tangible increase in customer engagement, reflected by a 20% increase in Starbucks Rewards member spend.

Brand communication

The Starbucks Siren and its iconic green is synonymous with its quality coffee beverages and relaxing coffeehouse experience all over the world. This would not have been possible without consistent communication of its brand elements, which are one of Starbucks’ most valuable intangible assets. In October 2019, the brand’s internal creative team published its full branding guidelines on its website. Through its refreshed design principles which emphasizes legibility and clear communication, as well as expressiveness and emotion, the brand demonstrates its unwaveringly clear and consistent positioning.

A brand campaign has the purpose of developing a brand with the aid of communication. In 2014, Starbucks launched its first global brand campaign titled “Meet me at Starbucks”. The campaign chronicles a day in the life of Starbucks through a mini-documentary format. The campaign was shot in 59 different stores located in 28 different countries, using 39 local filmmakers, 10 local photographers and one director coordinating all the people involved.

Starbucks is not a stranger to brand and marketing campaigns and has spent significant amounts of money in various campaigns. During the low growth phase of the company in 2008, it invested around USD 200 million on campaigns. The first global brand campaign in 2014 is a deviation from its existing brand promotion and communication strategy, where the focus has always been on its products. But the key thing to note is that the campaign still focuses on the customer experience, which is a direct link with the core values and philosophy.

Starbucks’ brand promotion strategy is still unique, unconventional and does not follow tried and tested advertising models. Starbucks rarely advertises on billboards, newspapers, and magazines and through posters. The company’s few television ads generally focus on specific product offerings highlighting the Starbucks way of preparing them and for promotional campaigns (e.g. free latte till noon on 14 March).

The company has strongly believed in developing and building the brand through word-of-mouth channels and by being visible in a consumer’s life. This brand building principle is clearly reflected in the company’s brand promotion and communication strategies.

Future challenges for Starbucks

Starbucks has had its fair share of challenges in its history. In 2008, the company was on the verge of bankruptcy when Howard Schultz came back as a CEO. He is credited to have successfully turned around the company into a global powerhouse of today. When he came back during those difficult phases, cost cutting and gaining efficiency in operations were made the primary focus areas. More than 800 Starbucks stores were closed in the United States alone over 2008 and 2009. The global recession also made it difficult for the company to come out of its low growth phase due to continuous cutback on customer spending. This experience of Starbucks raises some fundamental questions about the future of the brand and the strength of its brand equity.

Despite the popular notion supported by hard facts and latest research, which argues that brand equity is the surest way to protect competitive advantage, the global recession and the consequent focus on pricing to win customers did erode Starbucks’ equity at that time.

These events beg the obvious question – when fundamental changes happen in the macro environment, should an iconic brand like Starbucks stay true to their strategic vision or continually adapt to regain competitive advantage? Another important question, in light of the vulnerability of brand equity to major external shocks, is whether iconic brands should continue to invest, build and maintain their brands in phases of long-term uncertainty, low growth, deep recession and sustained cutback in customer spending?  Answers to these questions will lay the foundation for how Starbucks wishes to address future challenges in its growth path.

Increased competition: As Starbucks continues to expand into new markets and consolidates its position, it will increasingly come across different levels of local and regional competition. Some of these has and will come from local chains or independent coffee shops and some from Starbucks’ global competitors.

The experiential aspect of the brand has always been the key differentiator for Starbucks. But the same consumer, who Starbucks educated in drinking coffee, has a much more evolved, finer and sophisticated taste for outside coffee drinking. These developed and refined preferences increases the propensity of switching and puts the Starbucks brand loyalty at risk. Local coffee chains with strong heritage or those who position themselves as gourmet and unique can easily replicate the experience through offering superior products. Starbucks customers, who are used to paying a premium for higher quality, will be open to switching wherever the same levels of quality and experience can be recreated.

Additionally, Starbucks needs to be aware of local competitors. For example, founded in 2017, Luckin Coffee is a fast-growing coffeehouse brand in China which is built on the same differentiation strategy as Starbucks. By May 2020, Luckin Coffee had aggressively expanded to 6,912 stores, exceeding the 4,700 Starbucks stores in China but later shut down unprofitable and under-performing locations, leaving it with 4,792 stores in February 2021. In July 2020, Luckin Coffee was found to have overstated revenue and understated net loss in 2019, which resulted in a USD 180 million SEC penalty, de-listing from the Nasdaq and subsequent filing for bankruptcy protection under Chapter 15 to allow restructuring of its financial obligations.

While the consequences of the exposed scandal are still evolving, the brand is still undeniably a strong competitor in the Chinese market. The main reasons for its popularity are freebies, 1-for-1 promotions, 50%-off discounts, and delivery service offering convenience to customers. In order to win over a greater pie of the market, Starbucks needs to be sensitive towards local preferences and constantly provide the customer with a value-adding experience. One way it has done so is to offer larger spaces for community meetups to facilitate the Chinese communal culture, as opposed to individual spaces in the West.

Constant need for innovation: The Starbucks Idea portal is a nice start, but Starbucks needs to have a strong innovation strategy in place to compete effectively in international markets.

Innovation seems to have become a buzzword that is as much misused by the popular press as it is by many brands. Although innovation can be conceptualized in myriad ways, in this context it is used to mean a continuous, organization wide process that allows companies to simultaneously make incremental improvements to existing products and/or services, while investing in the development of breakthrough and significant inventions.

Given such a nature of innovation, it is a fundamental building block of iconic brands. Leading brands create their corporate strategies with an inherent strategic element encompassing innovation. Brand strategies that are envisioned with innovation as one of the core elements affords the brand a long lasting competitive advantage that would even withstand system level shocks such as recession.

Competitors easily copy the innovation concepts in the coffee drinking industry, which include different origin espressos, season specific drinks, new flavors and additives and promotions. For Starbucks, innovation should not be limited to bringing new products to markets, but should be extended to encompass many internal functions such as innovation in channel communication (with customers and other stakeholders), innovation in organizational cultures (work practices and internal brand practices) and innovation in implementing cost-cutting and efficiency-enhancing strategies. Such an inclusive notion of innovation facilitates achieving dual purposes that eventually supports a brand’s competitive advantage. Most of these are not new processes for Starbucks to administer but there is a need for consistent implementation across their global operations.

One very good innovation in channel communication is the launch of the social gifting feature ‘Yong Xing Shuo’ (Say it with Starbucks) in Feb 2017 on Weixin, a sister product of WeChat targeting Chinese domestic users. It encourages everyday acts of kindness and appreciation among family and friends, by enabling users to instantly and conveniently gift a Starbucks beverage or digital gift card.

First, innovation will allow Starbucks to refine and redefine its core brand philosophy in line with changing customer needs. The core brand promise can easily get lost in the competitive clutter in the marketplace. Such a scenario will become even more plausible when the brand experiences an external shock. In such cases, the brand has to reach out to the customers to reinforce that aspect of the brand that earned the loyalty of the customers in the first place.

Second, innovation will allow Starbucks to continually adapt to the changing needs of customers, thereby protecting its competitive advantage. Whenever competitors challenge with either lower priced products or imitation of the overall branding experience, innovation will allow Starbucks to reach out to its customers in novel ways that would reiterate the core brand promise.

Need for diversification: Starbucks placed the strongest possible hint of its future diversification strategy by redesigning its logo in 2011. In 2014, it formally announced the launch of a programme titled Starbucks Evenings, which will see thousands of the company’s stores selling alcoholic beverages over the next few years. So, there are sure signs that the brand is taking diversification as a strategy to identify and unlock growth opportunities seriously.

In addition to expanding the beverage portfolio to include alcoholic beverages, the next opportunity lies in innovation of the food products served in its stores. Many of Starbucks’ global competitors position themselves as not only coffee outlets but also more like cafes. Innovation in food is specifically important for Starbucks to establish foothold in emerging markets or where the coffee drinking culture is in its nascent stage. In many Asian and Latin American countries, coffee drinking is a mealtime ritual, where the importance of food consumption is high. To consolidate in such markets, having a differentiated food offering in its stores will be critical for Starbucks.

Consistency in the brand experience: Starbucks puts a lot of emphasis on recreating similar levels of brand experience in each of its stores across the world. The attention to detail to achieve this is commendable. But, recreating the brand experience needs to tie-in strongly with the specific country’s culture and practices.

Starbucks is not a stranger to creating a coffee drinking experience or even educating a consumer segment in how to drink coffee outside home and work. But the concept of cultural differences in terms of how time is spent outside and for what activities need to drive the local marketing strategies for the brand. So, if the core brand values is to create a third place to have a coffee, meet and greet your friends and have a relaxed experience, then these experiences should match with the local culture.

One good example is its expansion into China – how did it manage to launch so successfully in a culture of primarily tea drinkers? The key was market research. To make its menu more relevant to Chinese consumers, Starbucks introduced beverages that included local tea-based ingredients. Market research revealed that the Starbucks experience appealed to those aspiring to Western standards or those climbing the social ladder in their own culture. Additionally, the company also found out that the Chinese market was not a homogenous one especially in terms of spending power. Responding to this, Starbucks initiated partnerships with local coffee companies to better understand the intricacies of local tastes and preferences.

Pricing and targeting: Just like the McDonald’s Hamburger Index, there seems to be a need to develop a Starbucks Latte Index. Pricing of its products, especially for the hot and cold drinks on offer should be a crucial part of Starbucks’ country strategy. Though the brand has always targeted the upmarket customer through a premium pricing strategy in majority of the markets it operates, the strategy needs to hold in new markets the brand enters. Premium pricing has its potential pitfalls in many markets due to the following reasons:

• Only a specific sub-segment of the population can be the target market, which in many instances can be very small or niche
• Younger age groups, who would tend to display behavioral patterns that match the external coffee-drinking, spending time with friends etc. type of needs may not be able to afford Starbucks products

Premium positioning may lead to a perceived image of the brand to be too upmarket, which can drive away from the core brand values of being the neighborhood’s coffee shop. In emerging markets and also in countries where the coffee drinking culture is not established, it is important to strike a balance on these two key aspects.

To be successful in its international growth and expansion strategy, Starbucks needs to have a strong innovation mindset and the ability to locally customise its product offer and positioning of its stores. The brand has taken rapid strides towards implementing an organisational wide innovation strategy by investing in new technology, redesigning store layouts and investing in new concept stores.

In addition to improving the customer experience, which has always been the primary focus area of the company, the future innovation focus areas increasingly need to be around the product offering.

The company, without doubt, is a successful global marketer with significant experience in entering and establishing themselves in new markets. But as it expands and grows, it needs to reassess constantly and keep its ears close to the ground to understand consumer preferences. Innovation and operational efficiency would be the bedrock for Starbucks to continue to gain success internationally and also in existing markets.

Last but not the least, it needs to evolve and elevate the customer experience of drinking coffee in its stores continuously. This is important because customers get educated very quickly in today’s inter-connected world and their levels of expectation around basic and hygiene customer experience is constantly being elevated. So, a brand experience that is superlative today may just become a regular one tomorrow. Starbucks has to stay on top of this curve to be continuously competitive and differentiated in the eyes of the customer.

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Starbucks is undoubtedly one of the world’s most identifiable brands – exhibiting an innovative and fresh approach to their brand and marketing strategy. The Starbucks Marketing Strategy has helped their brand reach epic heights thanks to their out-of-the-box campaigns and unmatchable commitment towards keeping their quality and brand consistency across multiple touchpoints and locations.

Not many brands globally have the ability to produce humongous marketing budgets like Starbucks, so replicating its marketing strategies at the same level is nearly impossible. However, a few core principles behind the Starbucks marketing strategy can be adapted and implemented by almost any brand.

In this post, we’ll cover the entire journey of Starbucks’ marketing strategy of building one of the biggest brands in the world. We’ll also go through the tactics they are currently using to continue to meet their customer’s (high) expectations and keep their legacy intact. Plus, we’ll cover a slew of actionable takeaways you can use to implement similar marketing strategies and basic branding principles into your business.

Here’s what we have covered:

• Introduction – Mapping the marketing strategy journey
• Industry overview and analysis
• Mission and ideology
• Zooming on the target audience
• The classic siren logo
• What defines Starbucks’ marketing strategy – aligning with the four P’s
• Building the brand
• Best marketing campaigns – the brightest shining stars
• Worst marketing campaigns – the regrets

What the future holds

Introduction – mapping the starbucks marketing strategy journey.

Starbucks Corporation is an American company, founded in 1971, based out of Seattle, WA, is the brainchild of stalwarts – Jerry Baldwin, Zev Siegl, and Gordon Bowker. They started their journey by selling coffee beans. Selling premium coffee drinks it’s famous for now was a far-away dream back then.

Today, they have around 182,000+ employees across 19,767+ outlets and licensed stores in over 62 countries. Their products include roasted and handcrafted high quality/premium-priced coffee , tea, and a variety of fresh food items and other experimental flavored beverages.

In 1986, the original owners (Jerry Baldwin, Zev Siegl, and Gordon Bowker) sold Starbucks to Howard Schultz, its former manager. After that, Howard Schultz took over the brand with his transformational vision and built it into today’s coffee behemoth with a net worth of US$3.59 billion.

Industry Overview and Analysis

Starbucks primarily operates and competes with all the comparatively retail coffee and snack joints like Dunkin’ Donuts and Aroma Joe’s. Due to the recent global economic crisis and industry-wide revenue decline in the US, the brand took a major hit of around 6.6% decrease in revenue this year, amounting to $25.9 billion. Before this, the industry experienced comparatively consistent growth. Due to the economic crises, consumers spent less on luxurious things like eating and drinking out, choosing to purchase low-price items instead of high-priced products. And, this hard-truth of the industry showed Starbucks its lowest drops.

The industry is now expected to grow at an annualized rate of 3.7% in the next five years, pulling the revenues up by a whopping $35.1 billion in the US. This growth is primarily driven by an improving economy and an increase in consumer confidence. The market is dominated by Starbucks with market share of 35.7%, followed by Dunkin Brands with 23.6%, and other competitors like McDonald’s, Costa Coffee, Tim Horton’s, sharing the rest of the pie.

Mission and Ideology

Starbucks has completely transformed its brand image from being just another bean roaster in the 1970s to the world’s leading coffee-inspired drink shop. The original vision of Starbucks is well-reflected in its initial mission statement stating:

“Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”

After Howard Schultz bought the company in 1987 from its founding members, he has focused on creating Starbucks as “the third place” . The idea of making that third place is one that exists between work and home, a place of comfort and solace. And, this idea of the “third place” formed the basis of Starbucks new mission statement:

“To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” The central ideology that drives Starbucks’ success is to create a comfort zone and a personal connection between the customers, the baristas, and the brand.

Targeting Their Audience

As the company mission seems self-explanatory, Starbucks is genuinely all about connecting with their customers. And, here is one of the most critical marketing strategy questions – who are the right customers?

According to their research report in 2017, Starbucks’ target audience is middle-aged men and women who have apparently higher purchasing power. So, the big riddle that needs solving is how they convince their customers to fork over that kind of cash rather than just brew coffee at home or move to a more affordable coffee house?

According to Starbucks, they focus ruthlessly on delivering a remarkable and consistent customer-centric approach, offering unforgettable experience every time customers walk into their stores. By focusing on the “third place” theory, they give their customers a place to interact freely, assuring the most premium customer experience that justifies the drink price.

Customers report an affinity for ordering a good coffee cup and sitting in the shop with their laptops. That’s what defines Starbucks’ Stay as long as you want marketing strategy.

The beauty of all Starbucks’ marketing strategy and branding is “consistency” – both with their vision and their target audience. As a universally recognized brand, Starbucks has definitely defined how it wants to be viewed by its customers globally. Their consistent vision spans across every message they send, every piece of branded collateral they create, and every aspect of their in-store design and experience.

The Classic Siren Logo

To understand Starbucks’ marketing strategy, we must first look at Starbucks’ branding ideology. Let’s start with their logo. Over the last five decades, the Starbucks logo has gone through only four redesigns to create the iconic symbol that graces your exotic coffee cups today.

Though, looking at the geographically diverse customer base, redesigning the logo is no way easy. By operating in 60+ different countries, it is challenging for them to appeal to their existing audience base – so logo remains the primary factor of connection and recognition.

The original logo was first created in 1971.

The original logo pulled heavily from the brown palette which is thought to stimulate the appetite. The essence of the logo we know so well today was present believe it or not in the original logo seen here from all those years ago. The Starbucks name is attractively wrapped around the circle, the siren is in a similar position and pose, and the font screams Starbucks even from the first iteration.

In 1987, shortly after the buyout led by Schultz, the Starbucks logo underwent its first re-imagination by designer and original sketch artist, Terry Heckler.

“To symbolize the melding of the two companies [Il Giornale and Starbucks] and two cultures, Terry [Heckler] came up with a design that merged the two logos. We kept the Starbucks siren with her starred crown, but made her more contemporary. We dropped the tradition-bound brown, and changed [Starbucks] logo’s color to Il Giornarle’s more affirming green.” –  excerpt from Howard Schultz’s book  “Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time” 

“As a team we were like, ‘There’s something not working here, what is it?’ It was like, ‘Oh, we need to step back and put some of that humanity back in. The imperfection was important to making her really successful as a mark.” – Connie Birdsall, Global Creative Director.

Ultimately, the day was a triumph for minimalism as the new logo dropped the Starbucks Coffee name entirely and bathed the now well-known siren brand mark in kelly green. Simple, elegant, and still used as the main logo today.

Everything looks, sounds, and feels like Starbucks – even the basic coffee cup. The Starbucks experience is consistent whether you’re at your home, reading social media posts, watching tv ads, or interacting with their brand in any way, anywhere. And, a significant factor behind this is their “legendary siren logo.”

What Defines The Starbucks Marketing Strategy- Aligning with the four P’s

Starbucks is no doubt expertly acing the four P’s throughout their marketing mix. Let’s dive in to see how they pull it off:

Starbucks’ product provides high-quality coffee and ambiance to justify its pricing to their target audience. As the customers pay for premium coffees, they need to create the “differentiation,” assuring that it tastes better than any other brands like Macdonald’s, barista, etc. Essentially, Starbucks is taking a prestige approach to their overall product marketing strategy offering the best in the industry products.

They promise to craft high-quality premium cups with perfection every time to ensure that the customers never turn away or move to some other competitor.

This is a time-tested marketing strategy that will strengthen brand positioning and affinity over the long-term.

In 1990 Starbucks sold their coffees at a premium price which is 25% higher than other brands, because of this only 4% of their expected sales were achieved in the US. But by 2000, the sales increased exponentially by around 40%, and this was majorly due to “The Starbucks Effect,” as confirmed by the Harvard Business Review.  This essentially was a study tying the location of Starbucks stores to higher home values. Prestige pricing not only helps them uphold their promise of quality, but also caters directly to their ideal customer’s lifestyle choices.

<image>

Breakdown of the profit per latte sold.   |  Source

By offering customers exceptional drinks, snacks and other beverages, Starbucks has changed the entire game. How? Simply because people were willing to pay for it.

Starbucks uses diverse platforms and channels to market/promote its brand and launch new products, including social media, TV spots, and ads. The mix of marketing media makes their brand recognizable, and its consistency makes it more recognizable compared to other coffee brands, which helps them stand out in consumer’s minds.

Promotion isn’t cheap. However, compared to the other brands like Apple and Nike, Starbucks spends significantly less on its marketing/promotions. But they still create an impact.

Read anything about Starbucks; they always boast about creating “the third place” . The idea of creating that third place is to build a comfort zone between work and home.

They never compromise on this, replicating the same environment and ambiance in each store.

Building the Starbucks Marketing Strategy With Brand

Content is the king that defines the blood of every brand. So, Starbucks’ content exhibits its dedication to consistency and innovation. Every piece of content published, follows the same visual and language patterns, following a set of guidelines that are easy for their customers to understand.

Take a look at a few examples to analyze the “Starbucks vibe.”

The Best Starbucks Marketing Strategy Campaigns – The Brightest Shining Stars

Jumping on the trend.

Here is Starbucks’ most-memorable campaign, back in 2013, which instantly hit the chord with the audience. This campaign took a blizzard to hit in the Americas for Starbucks – celebrating warm coffees in the winter shivers. Starbucks explodes with Facebook and Twitter posts around the snowstorm called Nemo. Nothing extraordinary- it is just people standing in the snowy winter holding a cup of warm coffee. These were promoted through Facebook and Twitter with hashtags (#Nemo or #blizzard).

The red cup contest (#theredcupcontest)

Starbucks red cups became a tradition, it is the ultimate sign to show that Christmas is here, and sometimes even a reason for hype and controversy . In 2014 and 2015 they posted a contest using #redcupcontest on Instagram. The customer had to share a photo with their red cups for a chance to win one of five prizes, and of course, the content should include the #redcupcontest hashtag. At the end of 2015, a photo was shared every 14 seconds on Instagram Starbucks, and in the first two days, it shows 40,000 entries throughout the contest.

How did the contest become so successful?

Firstly, we all love taking photos of food and drinks as it is, and another excuse to do that won’t go unnoticed. The key to social media success is presenting customer-generated content, and when it is coupled with the excitement of the holiday, it works even better. A good-hearted holiday-themed contest looks much more tempting and attracts a massive audience in the least time.

Charity Campaign

When we combine charity and customer engagement with any social media platform – the empathy-stuck success is always assured. And, Starbucks pulled the right string. Starbucks donated to FourSquare, an AIDS awareness organization. Every time someone checked into one of their coffeehouses in the US and Canada, $1 would be directly donated to them. Then, Starbucks set a limit of $250,000 on its donation during this campaign. Before that, they’ve donated around $10m to the RED charity’s fight against AIDS movement.

Meet me at Starbucks campaign

Starbucks is an excellent place for first dates, meetups with friends, and even lunches with strangers. Knowing this fact, the company launched the “Meet Me at Starbucks” social media campaign in 2014. Starbucks gave its customers a chance to win free coffee by sharing their meeting at Starbucks experience. This campaign ran for the whole year! Now you can imagine the unmatchable level of response to that. Customers had to post with #HowWeMeet to spread the content and participate in the contest – and who doesn’t want to feature at the Starbucks? The campaign was introduced worldwide, so their customer read others’ exciting stories to unleash a new Starbucks vision. And, finally ended up participating in the contest themselves too!

The Worst Starbucks Marketing Strategy Campaigns – The Regrets

Spread the cheer campaign.

#spreadthecheer social media campaign was introduced at the time of Christmas. The main idea of this campaign was to spread a cheerful holiday message to everyone. Unfortunately, the timing of the campaign was off. They’ve introduced the campaign after cutting some of their employees’ wages and had not been paying the corporation tax in England. So, you can see how the thing could’ve backfired at Starbucks. In short, the hashtag was hijacked by angry users and misused to confront the company on taxes, maternal leave, wages, and whatnot.

Race Together Campaign

The most scandalous Starbucks marketing campaign, Race Together, started with CEO Howard Schultz, pointing out the importance of the conversation surrounding race issues. For more, you can go through the real story behind Starbucks. Most embarrassing moment in history.

The campaign hit a backlash on social media and was terminated within six days.

Starbucks is no doubt the world’s one of the most loved brands, winning many awards including – “Best Business”, “Most Admired Company”, “100 Best Corporate Citizens” and so on. While its quality of coffee is always unquestionable, but the price, according to the domestic stores is very high. It is far away for a middle-class person to touch.

This was one of the reasons why many companies hit by the economic slowdown in 2008. In 2008 Starbucks was bankrupt because of the economic slowdown, they had to shut 600 stores all over the world. Its profit had fallen by 28-30% compared to the same period in 2007. The company has survived through many difficult cost-cutting phases, but they never let their brand image dilute. Starbucks has experienced some fundamental questions about the brand’s future and the strength of its entity.

The popular notion supported by hard facts and the latest research, argues that brand equity is the surest way to protect competitive advantage, the global recession and the focus on pricing to win customers. But Starbucks has only focused on three factors: their perfect cup of coffee, user-friendly stores with engaging technology, and happy customers.

Kevin Johnson, President and CEO of Starbucks, said, “The long-term investments we make collectively deliver an elevated Starbucks experience in our partners, our stores, beverage innovation and digital.” This long-term vision drives the sustainability of their enduring business.

The University of Kentucky research shows that the “rapid rise in coffee consumption in China, especially from 2004/05 to 2013/14, can be compared to a similar trend that occurred in Japan from 1964/65 to 1973/74, based on figures from the International Coffee Organization.”

China’s increasing demand for coffee is supported by a solid, growing economy, and changing trends of market demand. The appearance of coffee shops is no longer a curiosity but an integral aspect of the urban environment. China is increasingly developing a taste for coffee, albeit still primarily a tea-drinking country, which could have significant consequences for the world market,” a report by the International Coffee Organization emphasizes.

In this sense, China is Starbucks’s fastest-growing market outside the US and the second-largest market overall. As of December 29, 2019, there were 4,292 stores in China, a 16 percent growth from the previous year. Starbucks is attempting to weave China’s coffee culture with the “Starbucks Experience” – multiplying the number of stores. Starbucks partnered with Alibaba to improve its position, better connect with its consumers, and deeper integration in the Chinese market. And, more of such mergers can be expected in the near future globally.

Starbucks uses technology to provide good customer service and drive engagement.

It can be said that technology and digital engagement is what Starbucks is thriving on.

“Everything we do in technology is focused on the store’s customer connection, the human connection, one individual, one cup, one neighborhood at a time,” says Gerri Martin-Flickinger, executive vice president and chief technology officer of Starbucks.

The loyalty program for Starbucks Rewards expanded to 18.9 million active members in the U.S. during Q1 2020, up 16% year-over-year. This growth is very significant as clients who enter their rewards program prefer to focus more on showing a strong positive connection between the two. Also, in China, when the program was relaunched, the growth of its 90-day active Starbucks Rewards members saw a 40% rise over the prior year.

Starbucks, after Apple Pay, is currently the second most popular mobile payment service in the U.S., confirmed eMarketer . With nearly 25.2 million users in 2019, the Starbucks app represents 39.4 percent of proximity mobile payment users.

Ethical coffee source

To drive a responsible approach forward, Starbucks is extremely mindful of ethical outlets for the supply of its coffee. By using coffee and farmers’ equity (C.A.F.E.) methods, the organization

has succeeded in ethically purchasing 99% of the coffee. The business also uses Microsoft Azure-powered solution and blockchain technologies for seamless operation. By logging each step in a shared, transparent database that would give all parties a holistic view of the entire workflow, the company upholds the value of zero-compromises in the supply chain and the product quality.

Recently, Starbucks CEO expressed that the organization aspires “to become a positive resource, storing more carbon than we emit, eliminating waste, and providing more clean freshwater than we use.” To achieve this, Starbucks would move to a more environmentally conscious menu to do this, introduce recycled packaging, create more eco-friendly stores and operations.

Conclusion – the final word 

In addition to all the above micro-marketing efforts, through its partnership with Nestlé, Starbucks has taken a conscious step to deliver promising results for the future and also to establish a global presence. Its approved shop model could become more rewarding in the future with increasing consumerism and the demand for coffee in markets like India and China. The company continues to focus on enhancing operational values while guaranteeing the interests of customers by daily dividends. Overall, for Starbucks, which is scheduled to turn 50 years old in 2021, there is a long way ahead and the road they have chosen is indeed the right one!

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Ian has marketed for some of the world's best-known brands like Hewlett-Packard, Ryder, Force Factor, and CIT Bank. His content has been downloaded 50,000+ times and viewed by over 90% of the Fortune 500. His marketing has been featured in Forbes, Inc. Magazine, Adweek, Business Insider, Seeking Alpha, Tech Crunch, Y Combinator, and Lifehacker. With over 10 startups under his belt, Ian's been described as a serial entrepreneur— a badge he wears with pride. Ian's a published author and musician and when he's not obsessively testing the next marketing idea, he can be found hanging out with family and friends north of Boston.

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Starbucks Marketing Strategy: How Starbucks became the market leader by 'inspiring and nurturing the human spirit'

Learn about starbucks' iconic marketing strategy and advertising campaigns. read how starbucks aces the 4ps of marketing mix - product, price, promotion & placement..

• overview#goto" data-overview-topic-param="history">Brief history
• overview#goto" data-overview-topic-param="believe">What does Starbucks believe in?
• overview#goto" data-overview-topic-param="giant">A global coffee giant
• overview#goto" data-overview-topic-param="strategy">Starbucks' Marketing Strategy
• overview#goto" data-overview-topic-param="iconic">Iconic Marketing Campaigns
• overview#goto" data-overview-topic-param="regular">Thinking beyond regular coffee
• overview#goto" data-overview-topic-param="key">Key Takeaways

If you were to think of coffee, wouldn’t the classic siren logo printed Starbucks cup be the first thing to pop up in your mind? Starbucks is one of the world’s most popular and successful premium coffee brands. It is known for its premium coffee, which is made with fresh ingredients roasted in the Starbucks store every day.

Starbucks is an American multinational coffeehouse chain founded in 1985 and operates in around 80 markets! Starbucks has a whopping 36.7% market share in the United States alone.

You’d likely have a lot of questions now: how did Starbucks coffee manage to become so big? What makes them different from all other mass-market brands?

And most importantly, why is Starbucks the best at what they do? In this case study, we will dive into various aspects of Starbucks' marketing strategy.

A brief history of Starbucks

Starbucks was founded by three men — Jerry Baldwin, Zev Siegl, and Gordon Browker. The trio’s love for coffee and tea was something they had in common.

They drew inspiration from Peet’s Coffee and Tea, a small beverage store founded by a Dutch immigrant. Peet used first-grade coffee and tea beans. Its success cheered the Starbucks founders’ to start one on their own. That’s when, in 1971, they started their first store in Seattle. They named their new business Starbucks, after a fictional character in the Moby-Dick novel.

In the early 1980s, they already opened four stores in Seattle and outranked their competitors. However, at the same time, Siegl decided to part ways to pursue other interests and this led to Starbucks’ struggle for a brief period.

But, in 1984, things began to change for the better when Howard Schultz joined the marketing team as its Director. Schultz had a vision for Starbucks beyond just selling coffee and coffee beans. He wanted to create a unique customer experience that appealed to coffee lovers everywhere.

Schultz's vision came to fruition in 1987 when Starbucks opened its first store outside of Seattle. This marked the beginning of the company's explosive growth. By 1992, there were more than 400 Starbucks stores nationwide.

Going Global

In 1995, Schultz decided to take Starbucks international and opened its first store in Tokyo, Japan. Over the next few years, he opened additional stores in countries all around the world including China, Australia, Italy, Germany, and France.

Today, there are more than 32,000 Starbucks stores in 80 different countries.

What does Starbucks believe in?

Starbucks’ corporate mission is -

“to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.”

This statement emphasizes Starbucks’ dedication to providing customer engagement and customer satisfaction.

Also, Starbucks believed that it should be more than just selling coffee and about creating a community space where people can gather and socialize. This sentiment is summed up in its slogan, “The Third Place” and its corporate vision -

"to create moments of connection for everyone who visits our stores."

How Starbucks Became a Global Coffee Giant

As one of the largest chains in the world's coffee market, Starbucks is a company that is always worth taking a closer look at. Now, let’s explore its current business model and pricing strategy.

One thing that sets Starbucks apart from other coffee shops is its focus on customer engagement and experience. From the moment you walk into a store to when you leave, Starbucks employees are there to ensure your experience is perfect. This focus on customer service has helped contribute to the chain's massive success over the years. 

But what about its pricing strategy for profits?

Unlike many other consumer chains, Starbucks does not use a discount pricing strategy, and this actually enhances customer perception. That is, it charges exceptional prices for its premium products.

Customers who are willing to pay more for their coffee tend to view it as being of a higher quality. As a result, they perceive Starbucks as a premium coffee brand and are likely to be loyal customers.

While this might be seen as risky by some business owners, its premium pricing strategy has thus far proven to be successful for Starbucks.

So, what makes Starbucks' business model and marketing strategies successful?

Starbucks has always been innovative when it comes to its business model. Rather than just selling coffee, it expanded into food items, drinks, and even music. This means that they can reach a broader customer base, which in turn results in higher customer sales and profits.

Now, the story is no different due to its successful marketing strategies. This keeps the brand exciting and fresh, which helps it stand out from the competition.

There's no denying that Starbucks has a massive success story - but what exactly is the reason behind its successful marketing strategies? Let's take a look at Starbucks' marketing mix:

What is Starbucks' Marketing Strategy?

From the beginning, Starbucks' objective has been to create a "third place" beyond home and work where people can relax and enjoy good coffee.

Starbucks' marketing strategy has been designed to achieve this goal by targeting both regular customers and occasional customers with a consistent brand experience.

In the following sections, let us learn more about its key marketing mix strategies across price, placement, product, and promotion.

1.   Starbucks' Promotion

From its very beginning, Starbucks has heavily invested in promotional campaigns. These campaigns include TV commercials, print ads, and radio spots, as well as online marketing brand initiatives such as social media and search engine optimization.

Through its marketing mix, it attracts new customers and keeps the existing ones coming back for more. The premium global coffee brand focused a lot on building customer loyalty and customer retention.

The company sponsors major sporting events such as the Olympics and Wimbledon, and it even partners with other businesses to promote its products.

2.   Starbucks' Product

In its early days, Starbucks focused on selling high-quality coffee beans to consumers and businesses. It was not until later that they began to sell brewed coffee beverages. However, today, Starbucks offers a wide variety of drinks and food items, including pastries, sandwiches, and salads.

The company also sells Starbucks coffee beans and brewing equipment to customers who want to make their own coffee at home.

3.   Starbucks' Pricing Strategies

One of the factors that have contributed to Starbucks' success is its premium pricing strategy.

To reiterate, Starbucks sets high prices for its products but offers good value for money by providing excellent customer service and a comfortable environment.

That is, it sells coffee at least 25% higher than other value brands and still keeps up a great deal of customer loyalty. However, the chain does offer a few discount programs such as the Starbucks customer rewards program and student beans program at both local and international levels.

4.   Starbucks' Placement

Starbucks has placed its stores in strategic locations all over the world. Although it has many brick-and-mortar stores around the world, it also sells its products online through its website and app.

The company has been expanding its delivery services in recent years in order to deliver a good customer experience to its target audience and also reach more customers.

Iconic Marketing Campaigns by Starbucks

Starbucks' marketing campaigns were designed to entice even the ‘I’m not a coffee person’ beyond their natural target audience.

Let's explore some of Starbucks' most innovative marketing tactics that won millions of hearts -

Creative Cup Contests

#thewhitecupcontest.

In 2014, Starbucks ran a promotion called "The White Cup Contest" in which customers were invited to design their own Starbucks coffee cups. The winners would have their designs featured on Starbucks' limited edition products and merchandise.

Source: Consumer Value Creation

#theredcupcontest

Starbucks' red cups became an annual tradition — the symbol of Christmas — and sometimes prompted speculation. Earlier this year they started a #theredcup competition on Instagram. The winner can post a photograph of their RED Cup and use the hashtag theredcupcontest. 40,000 entries collected during the contest were collected on Instagram in 2015.

Source: Iris Worldwide

Tweet-a-coffee campaign

Tweet-to-coffee allows people to pay for coffee online by tweeting @tweetoffee and their friends. This link will give them $5 in rewards. The company's Twitter page received nearly 1 billion tweets. During the first two weeks of operation, there were nearly $180,000 in revenues.

Source: Starbucks Stories

Humans of Starbucks

Starbucks has been on a mission to humanize work for years now. To date, Starbucks is committed to this goal.

To do this, they have launched several initiatives over the years, including their “To Be Human” campaign. It aims to remind employees and customers alike that we are all connected by the shared feeling of humanity.

So far, the “To Be Human” campaign has been implemented in a few different ways. First and foremost, Starbucks has created a series of videos that highlight real-life stories about people connecting over coffee. These videos are being shown in stores all around the world, in an effort to create brand ambassadors organically, and vouch for the importance of connection.

Get into Cause Marketing

Starbucks has also partnered with several charitable organizations like Feeding America and Save The Children UK in order to support causes that align with their beliefs. For example, for every purchase made through their app during December 2018, they donated $1 to one of these charities.

Mobile App and Loyalty Programs

Starbucks knows that retail's future depends in some ways on technology. As another Starbucks marketing strategy, it launched a mobile phone app in 2009 and positioned it in a way that helps customers save time in long queues.

Source: Starbucks Malaysia Twitter

Unlike any other mobile phone app as a business strategy, Starbucks introduced a program on the Starbucks app called 'My Starbucks Rewards' that rewards customers for their continued patronage. In a few seconds, the Starbucks purchases will be rewarded for using the app to pay for their services.

Once they join, they start earning stars for all Starbucks transactions.

On accumulating enough stars, one can redeem them for rewards such as free coffee or free drinks, and food too. Say, for example, you can redeem 12 stars for a free beverage of any size.

Source: Starbucks

Giving back to society, nature, and itself

Starbucks' ecosystem has a long history of being involved in social responsibility programs. It introduced a comprehensive initiative that focuses on four key areas: environmental stewardship, ethical sourcing, community engagement, and employee well-being.

Environmental stewardship:

One of its primary goals is to reduce its environmental impact by becoming more energy efficient and using less packaging materials.

Some of the things that the Starbucks' ecosystem has done in order to achieve this include installing energy-efficient lighting systems and recycling coffee grounds into biodegradable cups.

Ethical sourcing:

Starbucks takes great care to ensure that its products are ethically sourced. This means that they only work with suppliers who meet their high standards for quality and sustainability.

Starbucks also supports sustainable farming practices through programs like Farmer Equity & Loan Assurance (FELA).

Community Engagement:

Starbucks believes in giving back to the communities where they do business. One way they do this is by partnering with local organizations to help fund literacy and education programs.

They have also created unique scholarship opportunities for employees' children who want to pursue higher education.

Employee Well-being:

Starbucks cares about the well-being of its employees just as much as it cares about the environment or ethical sourcing. This is why they offer health insurance plans, flexible working schedules, and training programs designed to help employees grow professionally.

In-store Marketing

While there are many different aspects to Starbucks’ marketing strategy introduced in-store, all of them revolve around one common goal – enticing customers inside the store so they can be sold on the brand!

Starbucks is a prime example of a company that uses in-store marketing to great effect. Their marketing mix includes a variety of elements, such as

Store Layout:  The layout of Starbucks stores is very carefully planned out in order to create an inviting environment. It has comfortable seating areas with counters where people can not only drink coffee, but also work or study.

Starbucks also started giving its customers free Wi-Fi in 2002. This encouraged customers to stay longer even after making purchases. Alongside, it attracted working professionals to engage in business or lunch meetings at the outlet all day long!

Source: Tech Log

Product Displays:  The products on display at Starbucks are always well organized. This makes it easy for customers to find what they’re looking for and helps them make quick purchase decisions. And, it is so well arranged that it helps with impulsive purchases, just like how you do in supermarkets!

Promotions:  Starbucks runs frequent promotions throughout the year in order to attract more customers. These vary from discounts on coffee drinks to freebies like pastries or stickers.

Thinking beyond regular coffee

Starbucks’ success is attributed to its willingness in experimenting with new products and services. For example, they were one of the first companies to offer premium coffee drinks like latte and mocha.

Also, Starbucks launched an instant coffee line called Via which was a big hit among consumers.

Source: Dairy Foods Magazine

By constantly innovating and expanding its product lineup, Starbucks has been able to elevate its customer experience and stay ahead of the competition.

How Starbucks’ marketing strategy makes you hungry?

Starbucks is undeniably one of the most successful coffee chains in the world. But what sets them apart from other coffee shops? The answer is Starbucks' competitive marketing strategy, once again. 

Starbucks uses various marketing tactics to make us all crave its coffee, and one of the most effective methods is by making us hungry. But how? Here, we go.

Appetizing Colors:  By far, the human tendency has always been to stay healthy and inclined towards nutritious food. The general Starbucks appeal is created through consistent branding with the green color in Starbucks’ brand instantly reminding one of the natural ingredients. This free marketing pull encourages us to eat more, which then leads to us wanting caffeine for energy.

Aroma Marketing:

One of the other main reasons we get hungry at the store is because of the aroma that Starbucks sells. The premium Starbucks coffee tastes are owed to the freshly roasted coffee beans every day.

This creates a Pavlovian response where we start to salivate as soon as we catch a whiff of those delicious aromas.

Key Takeaways from Starbucks for Entrepreneurs

If you're an entrepreneur fascinated by the beverage industry, here are some major takeaways from Starbucks' marketing strategy and its business-

Focus on the Customer:  The first lesson is to always focus on the customer. This means putting their needs and wants first and making sure they are happy with your product or service.

Keep Things Simple:  Consistent Starbucks' branding and its simple operations helped them become successful worldwide. As an entrepreneur, it's important to maintain consistent branding and keep your business simple and streamlined. This will make it easier to manage and less likely to run into problems down the road.

Be Innovative:  Starbucks is constantly innovating and coming up with new products and services that appeal to its customers’ tastes. You should try to adopt innovative and new ways to improve your business.

Offer Unique Products:  Another reason for Starbucks' global brand success is its unique and premium coffee products. The company offers a wide range of products that cater to different tastes, which helps to attract new customers and lure the existing ones to come back for more.

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Starbucks Marketing Strategy: An In-Depth Look at What Makes Starbucks’ Marketing so Effective

With over 34,000 stores across 80 markets, Starbucks has become the world’s most valuable coffee brand worth $28 billion. Its continued growth is fueled by smart, consistent marketing strategies that appeal to diverse demographics worldwide.

This in-depth guide will analyze the key components of Starbucks’ marketing mix that drive its global success. We’ll explore specifics around branding, promotions, products, pricing, partnerships and localization that make Starbucks a case study for effective integrated marketing.

Crafting the Starbucks Brand

Starbucks by the numbers, crafting the starbucks experience, crafting the starbucks brand voice & personality, mastering localization & community connections, optimizing the retail experience, building brand relevance through partnerships, analyzing the starbucks menu strategy, optimizing the starbucks digital experience, integrating traditional media, optimizing social media presence, managing global consistency, evaluating the starbucks pricing strategy, building the starbucks employee culture.

Starbucks fundamentally reshaped consumer expectations around the cafe experience. The brand positioned itself not just as another coffeehouse but as a “third place” between work and home for community, connection and discovery.

Backed by market research, Starbucks knew that customers sought great-tasting coffee and an uplifting space to unwind, socialize or get work done. The brand delivered this through thoughtful store aesthetics, seating layouts, music and more.

Some key ways Starbucks positioned itself as an inviting lifestyle brand include:

• Warm Store Design  – Comfy couches and chairs, wood tables, earthy colours and textures that feel energetic yet calm.
• Upbeat Music  – Curated playlists spanning genres create a hip, feel-good vibe. Baristas have input on local musical tastes.
• Relaxing Aromas  – The smells of freshly roasted coffee and baked goods signal a welcoming refuge.
• Artistic Touches  – Local art, handwritten chalkboard menus and decor with regional flair make stores unique.
• Contactless and Mobile Options  – Technology like app ordering and in-store kiosks provide convenience without compromising personal connections.

This strategic brand positioning expanded the concept of cafes into community spaces buzzing with positive energy. Starbucks locations are just as suited for a casual chat as heads-down work.

As CEO Howard Schultz said, Starbucks aimed to become a “place for conversation and a sense of community. A third place between work and home.” This brand image resonated widely.

With over 153 million global rewards members and 30 million U.S. app users, Starbucks has tremendous direct consumer insight to continue evolving experiences.

Starbucks backs up its brand positioning by delivering an unmatched cafe experience customers crave. Key elements include:

Customer Service

Baristas are extensively trained as coffee experts, not just order takers. They guide customers through selecting beans, roast styles, flavours and preparation methods. Starbucks baristas must pass rigorous knowledge tests demonstrating their mastery. This expertise enhances the craft coffee experience.

Customization

With over 87,000 drink combinations, Starbucks lets customers tailor beverages to their tastes. Options like milk alternatives, sweetness levels, espresso shots and temperature allow personalized orders. Digital apps make customizing easy. This level of personalization builds loyalty.

Technology Integrations

Starbucks seamlessly integrates technologies like mobile order and pay into the experience without dehumanizing service. Customizations and rewards are synchronized across digital platforms and stores. Efficient pickup slots reduce waiting. Rather than being a tradeoff between speed and connection, Starbucks tech enhances both.

Loyalty Program

The Starbucks Rewards program engages customers by rewarding them at various tiers, from free add-ons to free drinks and merchandise. Exclusive offers and early access to new products entice members to visit and pay via the app. The program boasts 26.2 million U.S. members.

Accessibility

From braille menus to ASL video ordering to in-store sign language, Starbucks accommodates diverse needs. Stores have lowered counters, grab bars, ramps and wheelchair-friendly seating. This welcoming accessibility expands their audience.

By perfecting each touchpoint, Starbucks makes customers feel recognized. This drives emotional connections beyond convenience or product quality alone.

• 27.4 million global Starbucks Rewards members
• 28.7 million U.S. rewards members
• Over 87,000 possible drink combinations
• #1 most installed restaurant app in the U.S.

Starbucks’ brand voice and personality convey the optimism and connection its brand stands for. Key characteristics include:

Upbeat Messaging

The copy uses cheerful language like “Let the spring days begin!” and features smiling faces enjoying coffee. Vibrant colours reinforce energy and positivity. Starbucks avoids corporate cliches for a friendly neighbourhood feel.

Millennial Appeal

Starbucks’ social media tone resonates with younger audiences through playful jokes and pop culture references. Responding to user comments fosters relationships beyond broadcasting ads.

Customer Spotlights

User-generated content showing customers enjoying Starbucks in their own lives is frequently featured. This highlights community connections.

Local Tone of Voice

While maintaining consistent branding, regional social channels adopt local lingo and references tailored to those markets. Australian channels sound different than Brooklyn stores. Adaptation feels authentic.

Cultural Relevance

Special graphic designs and themes celebrate cultural moments like Black History Month, Pride Month, Diwali and Lunar New Year. This reflects diverse consumer lifestyles.

Sustainability Messaging

Communications highlight sustainability commitments like reduced plastic usage and recyclable cups. But Starbucks avoids preachy language, framing green steps as a shared journey.

This friendly, culturally relevant brand voice crafts hundreds of unique touchpoints between Starbucks and customers daily.

Despite its global scale, Starbucks excels at tailoring experiences to local tastes. They celebrate community connections through:

Hyper-Local Store Design

While following Starbucks brand guidelines, details like local artwork, regional materials and neighbourhood names on walls provide local flair. Special collection mugs showcase city landmarks. This customization makes stores feel unique.

Local Food/Drinks

Stores integrate local flavours in offerings like regional coffee beans, seasonal food items or beverages inspired by local tastes. For example, Mumbai stores offer Chai-spiced tea.

Music Curation

Baristas can curate in-store playlists around local music culture, like hip-hop in Atlanta or country in Nashville. Starbucks compiles local songs into playlists.

Community Partnerships

Stores partner with local non-profits for community service projects and fundraising drives. For instance, Austin stores work with Keep Austin Beautiful on neighbourhood cleanups.

Special Events

From art shows to open mics to partnering with local race events, stores integrate into local happenings. During holidays, Starbucks hosts family activities. These connections make stores gathering hubs.

This hyper-local immersion helps Starbucks blend organically into communities worldwide, becoming part of neighbourhoods.

While known for cafes, Starbucks innovates across retail environments. Specialty concepts help reach diverse audiences:

Pickup Stores

Compact Starbucks Pickup locations focus exclusively on mobile order pickup and to-go service. Customers pre-order via the app and grab drinks without waiting in line. Over 2,500 exist in the U.S. alone.

Drive-Thru Stores

In suburban and rural markets, Starbucks Drive-Thru locations offer convenience and speed for commuters. They account for over 60% of U.S. store growth. Starbucks plans to have 9,000 North American drive-thrus by 2025.

Reserve® Roasteries

These stunning flagship locations in Seattle, New York, Tokyo and Milan double as coffee-tasting rooms and entertainment venues. On-site roasting demonstrations, experiential bars and premium Princi food make them creative lab destinations.

Airport Stores

With over 400 airport locations, Starbucks provides travellers with a familiar oasis. New enhancements like mobile ordering improve convenience during layovers.

Testing retail concepts tailored to neighbourhood needs and lifestyles keeps Starbucks accessible everywhere customers need their coffee fix.

Aligning with like-minded brands on creative campaigns and in-store pilots generates buzz while positioning Starbucks as culturally plugged-in:

Blending Spotify’s curated playlists into Starbucks drinks like the Cold Brew Vibes creates engaging crossover moments for youth culture. Over 177,000 Spotify users participated.

Chase Credit Cards

Giving Chase cardholders automatic Starbucks Rewards status and purchase points incentivizes choosing that card. It deepens collaboration between brands.

Ridesharing and coffee go hand-in-hand. Giving drivers Starbucks Rewards for ride referrals and offering coffee giveaways on the Lyft app integrate both brands into daily routines.

Pop-up “Airbnb cafes” in select cities promoted nearby private Airbnb rentals and allowed booking via Starbucks iPads. The partnership united both lifestyle brands.

These co-branding campaigns generate positive press and social engagement while reinforcing Starbucks’ cultural relevance.

Starbucks’ extensive menu evolves constantly to drive sales and attract new customers. Key menu strategies include:

Broad Variety

From traditional espresso beverages to Frappuccinos® to tea infusions, the wide range pleases diverse tastes under one roof. No competitor offers Starbucks a depth of options.

New Products

Starbucks continually rolls out beverages, snacks and accessories, testing consumer response. Successful launches like the Pumpkin Spice Latte or Cold Foam become permanent additions. This innovation keeps the menu fresh.

Regional Flavors

Limited-time beverages incorporate region-inspired ingredients to delight local markets. Examples include coconut milk in Thai drinks or ube flavouring in the Philippines. These specialties excite customers.

Health-Focused

Increasing wellness offerings like plant-based drinks, reduced sugar baked goods and high-protein boxes cater to health-conscious patrons. Even small enhancements like swapping milk for almond milk modernize the menu.

Lifestyle Bundling

Merchandise bundles pairing drinks with items like reusable tumblers, mugs or Spotify gift cards provide gifting occasions and cross-selling opportunities.

Premium Pricing

Starbucks prices most offerings 10-20% higher than competitors. Yet customers readily pay premium prices for the quality and experience. Surge pricing during peak times maximizes revenue.

Through constant innovation and locally tailored options, Starbucks sustains menu excitement globally.

• 1,100+ limited-time/regional drinks per year
• 300+ food items
• 25-35% of sales from seasonal/limited-run drinks

Mobile and digital initiatives help Starbucks build direct connections with customers:

Industry-Leading App

The Starbucks app provides an unmatched mobile experience, letting customers order ahead, collect rewards and pay contactless. Starbucks processed 25% of all U.S. restaurant mobile transactions in 2021.

Personalization

Customers can save favourite locations, customize orders and receive personalized offers through the app. Digital allows 1:1 relationships despite Starbucks’ size.

Rewards Integration

The app houses users’ Rewards program Dashboard. Customers can collect Stars and track benefits in one place. Gamification features like collecting badges keep engagement high.

Order Ahead Functionality

With pre-order pickup, locations have drinks ready right when customers walk in. For commuters, this eliminates waiting in line. Stores see increased visits and ticket sizes from pre-orders.

Seamless Payment

Customers load gift cards and payment methods into the app for tap-to-pay convenience. Starbucks recorded over 9 million mobile transactions per week in 2021. Frictionless payment improves customer lifetime value.

The app offers blind and deaf customers full digital access through voice control and ASL clips. Everyone can independently manage their account.

Digital convenience without dehumanizing service makes Starbucks a gold standard for mobile experience and loyalty.

Although leaner than other QSR brands, Starbucks does advertise across media:

TV Commercials

Cinematic ads illustrate the Starbucks experience. Recent spots spotlight mobile ordering and seasonal beverages. TV builds broad awareness, especially for new menu launches.

Radio Spots

Regional radio ads drive trials of limited-time offerings and cold beverages in warm weather. Frequency can be customized locally.

Out-of-Home Billboard Ads

Billboards in major metro areas promote seasonal drinks and cold coffee in summer. As commuting returns, outdoor ads gain importance.

Direct Mail

Mailing free drink/food vouchers encourages customers to revisit stores and promotes signups. For loyalty members, birthday freebies and member-only coupons increase retention.

Email Marketing

Regular email campaigns highlight new products, local events or member-only perks. Timely, relevant offers keep Starbucks top of mind and drive repeat visits.

Social Media

Organic social content, influencer partnerships and paid social ads build hype for product launches and drive traffic to locations. User-generated content shows real customer moments.

As an established brand, Starbucks focuses media dollars on driving traffic and conversions rather than pure awareness. The combination of national scale and hyper-local personalization makes its advertising relevant.

Read More – Pepsi Marketing Strategy | Refreshing Success Story

Despite its size, Starbucks maintains locally connected social media feeds:

Responsive Engagement

Comments receive prompt responses rather than being ignored. Customer issues get resolved via direct messaging. This fosters positive relationships.

User-Generated Content

User photos and stories showing local Starbucks traditions become featured social content. This highlights community connections.

Localized Content

Regional social channels celebrate local moments like city pride, sports team victories, or landmarks. Localized content fits with each area.

Contests and Polls

Photo contests, coffee preference polls and sweepstakes encourage social sharing, tagging and engagement. User-generated content expands reach.

FOMO Marketing

Limited-time drinks and menu items get introduced on social first to generate buzz. Tempting food and drink photos spark FOMO.

Crowdsourcing Ideas

Polls ask followers for new flavours and food suggestions. Customer ideas becoming reality, like Guava Black Tea Lemonade, get promoted.

Rather than overt sales pitches, Starbucks’s social channels aim for authentic local storytelling and engagement. This community building earns brand love, translating into visits.

While adapting locally, Starbucks ensures brand consistency everywhere:

Product Design

Clean, streamlined cups, mugs, bags, drinks packaging and merchandise, create instant recognition globally. Iconic green and white logo palettes unite locations.

In-Store Signage and Displays

Familiar menu board layouts, ordering flow and digital UI make purchasing seamless across regions. Signage utilizes consistent branding and photography.

Store Aesthetics

Despite unique decor touches, core store elements like materials, seating and lighting create a familiar ambience worldwide. You know you’re in a Starbucks immediately.

Training Consistency

Standardized training programs ensure baristas worldwide share expertise about coffee sourcing, drink preparation and service essentials. Customers expect this mastery.

Technology Systems

Mobile apps, point-of-sale systems and inventory management unify operations for smooth customer experiences globally. Shared infrastructure enables flexibility.

Maintaining brand familiarity attracts global travellers while allowing customization. This glocal strategy powers Starbucks’ worldwide expansion.

Starbucks optimizes pricing through data-driven strategies:

Price Elasticity Analysis

As a premium brand, Starbucks has relative flexibility in pricing. But teams still analyze elasticities, raising prices gradually to avoid volume decline. Premium charges expand as costs rise.

Competitive Benchmarking

While priced above competitors, Starbucks monitors pricing gaps to align with positioning. Cafe-only players get more premium freedom versus QSR chains.

Regional Pricing

Starbucks customizes pricing based on local income levels, competition and labour costs in each market. Low-income regions get discounted value offerings.

Customer Segment Pricing

Rewards members get discounted offers or member prices below general public pricing as an entitlement. Different tiers get tailored pricing incentives.

Time-Based Pricing

Happy hours with half-off discounts drive afternoon traffic when the volume is lower. Surge pricing applies during peak commute times based on demand algorithms.

Bundling Offers

Combining food, accessory and drink items into packages at an inclusive rate provides cost savings over individual purchases. Bundling encourages bigger average orders.

Customers readily accept Starbucks’ premium pricing because it signals the uplifting experience they came for. Value-driven tactics keep options accessible. This strategic balance maximizes profitability.

Starbucks’ strong internal culture empowers passionate employees who deliver outstanding service:

Investing in Barista Training

Extensive training teaches baristas coffee expertise and real hospitality. Training is seen as an investment rather than a cost center. Knowledge programs enhance careers.

Providing Quality Benefits

Uncommon for food service, Starbucks offers benefits like healthcare, stock options, tuition coverage, paid time off, mental health support and rehabilitation assistance even for part-timers.

Fostering Diversity, Equity and Inclusion

From diverse hiring practices to accommodations for disabilities, Starbucks strives for equity and accessibility for all employees to feel welcome and supported.

Enabling Career Growth

About 80% of store managers started as baristas. Internal mobility is encouraged through management apprenticeships and tuition reimbursement for advancing skills.

Rewarding Performance

Bonus challenges reward baristas for success metrics like speed of service, waste reduction or customer connections. Peer recognition also cultivates teamwork.

This people-first foundation enables Starbucks to deliver on ambitious customer experience goals and growth. When employees feel invested, it drives business success.

Through integrated branding, customer experience, partnerships, menu innovation and localized marketing, Starbucks delivers consistent experiences that feel personal worldwide. They elevate coffee into an uplifting community ritual.

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What Should Investors Do With Starbucks Stock as Coffee Prices Surge?

April 08, 2024 — 09:50 am EDT

Written by Ebube Jones for Barchart  ->

Cocoa futures might be grabbing all the headlines, but coffee prices are also breaking out to new highs in the first half of 2024. Blame it on El Nino , which typically delivers heavy rains to Brazil while hitting Vietnam with drought conditions. That's been pushing prices higher for not only arabica coffee futures (KCK24) , but also May-dated robusta (RMK24) , which recently surged to a new record.

As commodity prices are heating up, none other than coffee giant Starbucks (SBUX) has been freshly named to the Q2 tactical ideas list at Wells Fargo (WFC) , with the brokerage firm throwing some conviction behind its “Overweight” rating. The analysts say the worst could be over for Starbucks, and price hikes in California could be a positive catalyst in the back half of the year.

The high-conviction bull note comes at an interesting time, since Starbucks stock hasn't exactly been keeping up with the market lately. But with Wells Fargo predicting a bottom at hand, and economic data pointing to a surprisingly robust U.S. consumer, is it time to pick up shares of SBUX? Let's take a closer look.

Starbucks Stock Takes a Dip

Valued at $98 billion by market cap, Starbucks Corporation (SBUX) is a global coffeehouse chain known for its signature roasts, light bites, and omnipresent coffee shop culture. The company has faced a challenging year so far, with its stock price experiencing a significant decline. 

On a year-to-date (YTD) basis, SBUX is down 9.5%. Over the past 52 weeks, the stock has lost 17.2%, while the broader S&P 500 Index ($SPX) has gained 26.6% - and SBUX set a new 52-week low as recently as last Friday.

Amidst the ups and downs, the company continues to reward its shareholders through consistent dividend payments . With a quarterly dividend of $0.57, Starbucks yields 2.63% at current levels. That's backed by 13 years of consistent dividend growth, and a solid payout ratio of 59%.

The pullback in SBUX has left the stock trading at a discount to its historical valuation multiples. With a forward price/sales ratio of 2.53 and forward price/earnings ratio of 21.43, Starbucks seems reasonably valued, compared to its 5-year average multiples of 3.61 and 35.87, respectively.

Starbucks Misses on Earnings

Starbucks recently reported financial results for the first quarter of fiscal year 2024 that fell short of analysts' expectations . The company posted Q1 earnings per share (EPS) of $0.90 - a figure that broke the coffee chain's string of beating Wall Street's quarterly earnings estimates . Similarly, Q1 revenue rose 7.9% to $9.4 billion, missing forecasts of $9.6 billion, as global comparable store sales rose a lighter-than-expected 5%.

On the plus side, North American operating margin expanded to 21.4% from 18.5%, driven by increased efficiencies. 

Following the tepid fiscal Q1 results, Starbucks lowered its forecast for full-year revenue and same-store sales growth. And ahead of the company's next earnings report , expected for May 7, analysts have downwardly revised their own Starbucks earnings forecasts more than 25 times - with zero upward revisions. That points to extremely low expectations for the company's next turn in the earnings spotlight. 

Overall, Wall Street is expected Starbucks to report EPS growth of 10% to $0.82 for the current quarter, with revenue projected at $9.22 billion. For the full fiscal year, estimates call for EPS growth of 14.4% to $4.05 per share on revenue growth of 7.8%.

What's Driving Growth at SBUX?

In a world where your morning cup of coffee can be as much a statement of personal taste as the shoes you wear, Starbucks is not just sitting back and watching the beans roast. With a massive rewards membership base driving most of its U.S. revenue, Starbucks and Bank of America (BAC) decided to join forces on a new cash-back program geared toward driving increased engagement and retention among this key group of coffee buyers. 

But Starbucks isn't just relying on loyalty programs to stay ahead of the game. They're also coming up with new and exciting menu items that keep people talking. From limited-time offerings to fancy new drinks like the Oleato , they're making sure there's always something fresh and interesting to try.

And let's not forget about Starbucks' global takeover . While results out of China and the U.S. may not have impressed with blowout growth in the most recent quarter, the company sees the India market at “an inflection point,” and the economy is “a focus area of growth” for the chain through its 50-50 Tata Starbucks venture. 

Analysts Say SBUX Stock Is a Buy

When it comes to Starbucks stock, the analyst community seems to be stirring a moderate blend of optimism. The consensus among 24 analysts is a “moderate buy,” with the breakdown showing 10 analysts have a “strong buy” rating, one suggests a “moderate buy,” and the remaining 13 say it's a “hold.” This collective viewpoint paints a picture of cautious confidence in the coffee giant's future.

The mean target price for Starbucks stands at $106.86, which represents a potential upside of about 23%. 

As for that Wells Fargo bull note, analyst Zachary Fadem thinks the coffee chain's lowered guidance could work in its favor. With Wall Street's expectations low for the rest of this year, Fadem thinks slower growth expectations are already baked into the stock price. As such, he's eyeing the upcoming earnings report as a potential turning point that could set the stage for a clearer path ahead for Starbucks.

The Bottom Line on SBUX Stock

For investors seeking out bargain-priced dividend plays, it might be worth eyeing Starbucks here, given the market's low expectations and the stock's strong rebound potential. However, with the shares setting new 52-week lows as recently as Friday, investors may want to wait for some signs of life from the stock before starting to add shares.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Starbucks (SBUX) Stock Falls Amid Market Uptick: What Investors Need to Know

The latest trading session saw Starbucks ( SBUX Quick Quote SBUX - Free Report ) ending at $87.13, denoting a -0.07% adjustment from its last day's close. The stock trailed the S&P 500, which registered a daily gain of 0.15%. Elsewhere, the Dow saw a downswing of 0.02%, while the tech-heavy Nasdaq appreciated by 0.32%.

Coming into today, shares of the coffee chain had lost 5.3% in the past month. In that same time, the Retail-Wholesale sector gained 1.12%, while the S&P 500 gained 1.65%.

The investment community will be closely monitoring the performance of Starbucks in its forthcoming earnings report. It is anticipated that the company will report an EPS of $0.82, marking a 10.81% rise compared to the same quarter of the previous year. Meanwhile, our latest consensus estimate is calling for revenue of $9.21 billion, up 5.57% from the prior-year quarter.

For the full year, the Zacks Consensus Estimates are projecting earnings of $4.05 per share and revenue of $38.78 billion, which would represent changes of +14.41% and +7.78%, respectively, from the prior year.

It's also important for investors to be aware of any recent modifications to analyst estimates for Starbucks. These latest adjustments often mirror the shifting dynamics of short-term business patterns. Hence, positive alterations in estimates signify analyst optimism regarding the company's business and profitability.

Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.34% lower. Starbucks is currently a Zacks Rank #4 (Sell).

Valuation is also important, so investors should note that Starbucks has a Forward P/E ratio of 21.52 right now. This denotes no noticeable deviation relative to the industry's average Forward P/E of 21.52.

We can also see that SBUX currently has a PEG ratio of 1.39. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. By the end of yesterday's trading, the Retail - Restaurants industry had an average PEG ratio of 1.81.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. Currently, this industry holds a Zacks Industry Rank of 147, positioning it in the bottom 42% of all 250+ industries.

The Zacks Industry Rank evaluates the power of our distinct industry groups by determining the average Zacks Rank of the individual stocks forming the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

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• Food & Drink
• Local Business

Moscow Times applauds Starbucks’ no-smoking, -drinking policy

The Moscow Times hopes Starbucks does not bring wine and beer to its stores in Russia, as it has to three Capitol Hill shops in Seattle -- part of a growing trend among Seattle coffeehouses.

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The Moscow Times hopes Starbucks does not bring wine and beer to its stores in Russia, as it has to three Capitol Hill shops in Seattle — part of a growing trend among Seattle coffeehouses.

The Times thinks that Starbucks’ no-smoking policy, and the fact that it doesn’t sell alcohol, are part of a social responsibility strategy and said it sets a good example among Moscow cafes.

“That strategy obviously makes the cafes less attractive to the more than half of the Russian population who smokes. It also eliminates the substantial revenue from alcohol earned by its main competitors on the Russian market, many of which modeled themselves after Starbucks,” the Times says.

“Ordinarily, the social battle against smoking or drinking is not a business priority, but it is great when a private company helps solve a pressing social problem. Interestingly enough, Starbucks is currently experimenting with selling alcoholic drinks in selected U.S. cafes, but let’s hope that Starbucks will not extend this policy to Russia.”

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