StarbucksDesign Brief

November 4, 2010

Benjamin GadbawChristopher CannonCooper SmithTina Ye

“Starbucks represents something beyond a cup of coffee.”

— HOWARD SCHULTZ

In 2009, Americans drank 146 billion cups of coffee

In 2009, Americans drank 146 billion cups of coffee

(That’s $40 billion in sales)

= 1 BILLION CUPS OF COFFEE

= 1 BILLION CUPS OF COFFEE

Home Coffee Sales: $6.3 billion

($915 million in specialty coffee sales)

VIA US Instant Coffee: 5% market share

($100M first ten months. Estimated $1B by 2015)

Competitor Revenues (in billions)

Starbucks

McDonalds

Dunkin Donuts

2005 2006 2007 2008 2009

0

5

10

15

20

25

McDonald’s Latte:(40¢ less than Starbucks)

$6.9 billion yearly sales:(servs 30 cups of coffee every second)

Starbucks’ Response: 30,000 economy coffee outlets

(supermarkets, Burger King, Subway, AMC theater)

The Third Wave: +70% specialty coffee houses in 5 years

(that’s one coffee house for every 14,000 Americans)

“The battle within the company is making sure growth

doesn’t dilute our culture.”— HOWARD SCHULTZ

Market Saturation: 900 Starbucks store closures in 2009

(within the United States alone)

Strengths · Starbucks is the market leader in the coffee industry

· Product diversification

· It has 16,635 stores in 40 countries worldwide including

11,068 stores in the United States

· Company operated retail stores, (licensees, no franchises)

· Customer service is excellent

· Customers are satisfied with the quality and taste of coffee

· High brand awareness and equity

· Approx 13,000 valued and motivated employees,

good work environment

· Financial conditions of the company are good

· Starbucks coffee shops locations are at convenient places

like library, shopping malls and etc.

· Starbucks making their business more environmental friendly

· Customer base loyalty

· Good relationships with suppliers

· Product is the last socially accepted addiction

“ Starbucks seeks to be an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work or the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.” — HOWARD SCHULTZ

Starbucks Primo

Kent, WA

Portland, OR

Minden, NV

Columbia, SC

York, PA

Starbucks Roasting Plants

Store Conversion Budget

Conversion to a Starbucks Primo will share many similarities with opening up a new store. The biggest expenses will be:

Retraining or rehiring staffRedesign & remodeling of storeAcquisition of furnishings and decorAcquisition of supplies & stock (complementary food items, coffee, liquors)Administrative and infrastructure changes

New store in 1995: $350,000x 44% inflation rate

New store in 2010: $504,000

Cost of implementing a Starbucks Primo: $400,000

Implementation time per store: 3 monthsForegone revenue: $250,000

Total cost of implementation per store is $650,000

1,000-1,500 square feet

1,000-1,500 square feet45–70 seats

1,000-1,500 square feet45–70 seatsx 5 hours

1,000-1,500 square feet45–70 seatsx 5 hours

= 225–350 people a night

1,000-1,500 square feet45–70 seatsx 5 hours

= 225–350 people a nightx $15/person

What does $15 look like?

5-cup Coffee-Tasting Flight: $18... paired with dessert offerings: $25

A single specialty coffee drink paired with a single dessert offering: $11–$20

A couple alcoholic coffee drinks: $12–$18

1,000-1,500 square feet45–70 seatsx 5 hours

= 225–350 people a nightx $15/person

= $3,375-$5,250 per dayx 365 days

= $1.3 million–$2 million a year

Projected Revenues (per store)

Average Store Revenue (2009) Projected one-year revenue

$930,000

$2M

$1.3M (1,000 Sq. Ft. Stores)

(1,500 Sq. Ft. Stores)

Starbucks Primo. . . . . . . . .

Starbucks. . . . . . . . .

Seattle’s Best. . . . . . . . .

Via

(Starbucks) Circadia

CHAININDEPENDANT

LOW-END

HIGH-END

Starbucks

Seattle’s Best

NespressoStumptown

15th Ave

Local Cafés

Peets Coffee

Dunkin DonutsNeighborhoodCorner Stores McDonalds

Positioning

CHAININDEPENDANT

LOW-END

HIGH-END

Starbucks

Starbucks

Starbucks Primo

Seattle’s Best

Nespresso

Stumptown

15th Ave

Local Cafés

Peets Coffee

Dunkin DonutsNeighborhoodCorner Stores McDonalds

Positioning

Monday–Friday

Weekend

WAKE

WAKE

GET TO WORK LUNCH

LUNCH

SLEEP

SLEEP

= 1 BILLION CUPS OF COFFEE

Long Term Benefits

Increased visibility

Increased respect among the coffee-drinking elite

Strengthened brand equity

Thank you.