Starbucks in Brazil

Group 3Lauren Fanuzzi, Sarah Greer,

Edward Haddock, Jaime Lopez, Clarice Ma, Amer Syed, Saquiba Syed, Raymond Tenorio

Overview• Premier roaster, marketer and retailer of specialty

coffee in the world.• Based in Seattle, Washington, Starbucks is the largest

coffeehouse company in the world, with 19,435 stores in 58 countries.

Overview• Starbucks purchases, roasts and sells high-quality

whole bean coffees, along with handcrafted coffee and tea beverages and a variety of fresh food items, through company-operated stores. – sells retail, wholesale and licensees their trademarks

through other channels– licensed stores, grocery and national foodservice accounts.

• Starbucks brand includes Tazo Tea, Seattle’s Best Coffee , and Starbucks VIA Ready Brew.

Industry Competitors

Specialty Eateries Industry

Market share

Global yet local

• Starbucks’ objective is to maintain them selves as one of the most recognized and respected brands in the world. • To achieve this goal:

– Disciplined in the expansion of the retail store base, primarily focused on growth in countries outside of the US.

– Transnational Strategy - Leverage Local knowledge and resources focused on local needs and preference, global demands, and cross-border learning in overseas operation

Global yet local

• First introduced internationally via Canada – 1996 first retail store in Toyko, Japan. – 1998 Starbucks entered the U.K. market with an $83 million acquired

UK-based Seattle Coffee Company, re-branding all 60 stores as Starbucks.

– 2003, Starbucks completed the purchase Torrefazione Italia 6,400 locations worldwide store in Peru and Guatemala

– 2006, Starbucks enters Brazil

Why Brazil• Strong coffee culture

– Coffee has been harvested since the early 1700’s

– “Café Mana” – Morning Coffee

– Largest producer of coffee beans; twice as much as the 2nd runner up Vietnam

– Soon to be the 2nd largest consumer – behind the U.S. 93% of the Brazilian population is regular coffee consumers

• Favorable political climate– Democratically elected President, Strong diplomatic ties with the U.S.

– Current president’s focuses on economic expansion and encourages foreign investment

• Large Economy- Largest economy in South America– 2006 GDP (official exchange rate) was $943 billion– 2011 est. GDP (official exchange rate): $2.518 trillion

– 5th most populated country in the world Over 186 million people

Why Brazil

Why Brazil

Other American corporations’ successCoca Cola – 1940’s McDonald’s – 1960’s

Weaknesses

• Most obvious weaknesses for Starbucks market in Brazil would be that they do not exist

• No current research from the Specialty Coffee Association of America, or other coffee companies doing business in Brazil

• Starbucks is dealing with a country that is very traditional

Opportunities

• Building brand loyalty and adjusting the pricing structure to align with the culture

• Coffee is not the most popular beverage of the people, Guarana, a beverage produced from dried berries, water, and sugar is.

• Brazil manufactures one-third of the world’s coffee beans, shortened supply chain

• Brand/Customer loyalty will ultimately drive long-term, profitable customer relationships.

Threats

• Starbucks must identify a pricing structure that is profitable, differentiates Starbucks from any other cup of coffee, and is still economical in the Brazilian marketplace.

• Finding the right unique product offering that is just similar enough to Guarana, is another task at hand to ward off potential threats.

• One of the last threats to anticipate is competition.

Major Competitors

• Cafe do Ponto-sells 92 cups of coffee a minute at its 86 cafeterias

• Fran's Café - 80 outlets, serves a wide range of snacks plus premium beers at happy hour

• Santo Grao – sophisticated concept coffee cafe & bistro at standards set by Parisian and Buenos Aires establishments.

• Each has created their own coffee blends from the country's finest grains.

Decision

• Starbucks creating a presence in the Brazilian market place is ideal.

• The financial perspective, Starbucks coffee shops are sprouting on every street corner in our part of the world, it is inevitable that it will do the same around the world and especially, in Brazil. These benefits financially outweigh the risks.

Mode of Entry

• Joint-venture – Cafes Sereia do Brasil Participacoes S.A., a Brazilian

holding company

• First location in Sao Paulo, Brazil at high end shopping district, Shopping Morumbi

- In Sao Paulo, the level of education tends to be much higher than in other regions of Brazil.

• Used Cafes Sereia's local leadership to control the operations – They were able to leverage their existing revenue/client base

for expanding Starbucks in the country

Mode of Entry

• Maria Luisa Rodenbek-principal– 30 yrs local experience, responsible for growing

the brand and the operations in the country.

• Peter Rodenbeck- principal– Successfully introduced McDonalds and Outback

Steakhouses to Brazilian Market

Transnational Strategies

Financial

• Average 3 year till B/E/P buyout JV partner at 5th year or when profitable – Starbucks acquired 100 % ownership of Cafés

Sereia do Brasil Participações S.A., which operated 24 stores at the time throughout Brazil.

Positioning

• Actively involved within the community even before their stores opened in Brazil– teamed up with Everybody for Education – held a fundraising event to help build a local

Brazilian school’s library – Built personal relationships with community

involvement

Local Customization

• Offers items that are popular in Brazil– “pao de queijo" (balls of bread with cheese in the

dough)– stronger, extra-roasted "Brazilian blend" coffee

made from locally sourced beans– tweaking the traditional cappuccino with a “doce

de leite” (a traditional Brazilian cream made out of milk and sugar)

Management Structure

Starbucks localized HR by hiring and training the friendliest staff from all the large coffee shop chains in Brazil. They are earning their investment in human

resources back with the Brazilians loyalty to friendly service.

Functional structure: Implement concept of a

“The Third Place” for customers to enjoy the

Starbucks Experience with emphasis on quality

products, great customer service and good music.

Social Conscience

• Human connection essential• Experience extends well beyond Starbucks

retail locations into the communities • Community contributions• Environmental contributions• Create lasting economic improvement

through job creation

New Corporate Structure (2011)

New three-region organizational leadership structure to Accelerate Global Growth :

Growth

2008 2009 2010 2011

Growth of Locations

FY 2011

Starbucks Current

 Starbucks First Quarter Fiscal 2012 Results–Consolidated net revenues reached a record $3.4 billion in Q1 FY12– 16% increase over Q1 FY11. – 9% increase in global comparable stores sales–72% growth in the CGP segment.

–Starbucks opened 241 net new stores globally, reaching 500 stores in both mainland China and Latin America.

–Global expansion of CGP --Over 100 million Starbucks- and Tazo-branded K-Cup® packs shipped in Q1 following the November 1st 2011 launch, will not be available for sale in Brazil until a later time

Future Opportunities• March 2012 - Four months after acquiring Evolution Fresh, Inc., Starbucks Coffee

Company announced the opening of the first Evolution Fresh™ store and the transformation of the brand’s look and feel to better reflect the pure, natural ingredients in each beverage and its strategic expansion and growth.

• Seattle’s Best Coffee, opens the doors of its new coffee drive-thru concept in Northlake, Ill. Designed to meet the needs of the more than 36,000 commuters in the suburban Chicago

• Starbucks Coffee Company announced the Verismo® the first at-home premium single cup machine

Take Aways• An American corporation trying to sell coffee to Brazilians? However,

Starbucks managed to win a market segment that was not facilitated by the existing coffee franchises like Fran's and Ponto Caffe.

• Brazil is well known as the land of coffee but Brazilians do not love coffee. However, The Brazilians way of drinking coffee fits well into Starbucks' highly milk and cream based product line.

• Starbucks was successful in localizing their traditional cappuccino with a "doce de leite" edition.

• Most Brazilian coffee shop chains you will find staff that couldn't care less about being friendly. Starbucks brought customer service and attention into Brazil. They are earning their investment in human resources back with the Brazilians loyalty to friendly service.