Starbuck Verismo

© 2011 Starbucks Coffee Company. All Rights Reserved. Company Confidential.


Starbucks Mission Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Here are the principles of how we live that every day:

Our CoffeeIt has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done.

Our CustomersWhen we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection.


Coffee Timeline

1971: The first Starbucks opens in Seattle’s historic Pike Place Market. 1982 Howard Schultz joins Starbucks Corp.

1998: Keurig’s first brewer, the B2000 made for office use launched. By 2003, there were more than 40,000 commercial brewers in American offices.

2004: Keurig’s B100 home brewer was introduced. 2011: Starbucks introduces k-cups 2012: the Keurig Vue brewer was offered, which allows choice of

temperature, cup size, and brew strength. This was released to in order to increase the choices users have in brewing beverages.[

September 2012, Starbucks announced the Verismo, a consumer-grade single-serve coffee machine that uses sealed plastic cups of coffee grounds, and a "milk pod" for lattes.


One touch brewers such as the Keurig system created a new market segment based on the convenience of home brewing

Single-cup category is growing 9 times faster than the overall coffee category.

The rapid growth of this market caused Starbucks to introduce a

line of coffees compatible with the Keurig

Starbucks later creation of their own home brewer the Verismo poses an interesting question:◦ How does Starbucks compete in a segment counter to their

position as “the third place”, and in which they have already manufactured a product for their competition?

The Dilemma for Starbucks


The Current Big Picture


Current Big Picture Commercial


Current


Business Objective

Marketing Objective

Source of Volume

Segmentation

Targeting

Positioning

Product

Price

Place

Promotion

STPExecution

FE: Starbucks FE: Starbucks

Category: Luxury Brewing

Category: Luxury Brewing

Benefit:Need for Quality

Benefit:Need for Quality

Core Competence:Skill @ Coffee

BeaningSkill @ Marketing

Core Competence:Skill @ Coffee

BeaningSkill @ Marketing

RetentionRetention Stimulate Demand

Stimulate Demand

Quadrant 2Quadrant 2

Main: Need for Convenience


Dynamic: Need for Quality

Dynamic: Need for Quality

Enjoys convenience,

but still desires high quality

Enjoys convenience,

but still desires high quality

CredenceCredence

ValueValue

Product Time (Speed)

Product Time (Speed)

ImageImage

Verismo: Current


The Verismo: What Went Wrong?

Current strategy is attempting to retain the Starbucks loyal customers by adding value and expanding their experience creation to the home.

By producing Starbucks branded K-cups they raised the importance of the Keurig and single-cup brewing at home.

This strategy abandons the successful positioning of Starbucks as the “third place”

Has the potential of cannibalizing in-store sales.


The Proposed Big Picture

Verismo


Business Objective

Marketing Objective

Source of Volume

Segmentation

Targeting

Positioning

STP

FE: Starbucks Verismo

FE: Starbucks Verismo

Category: Luxury

Home Brewing

Category: Luxury

Home Brewing

Benefit:Need for

Convenience

Benefit:Need for

Convenience

Core Competence:Skill at Real

EstateSkill at Logistics

Skill at Coffee Beaning

Core Competence:Skill at Real

EstateSkill at Logistics

Skill at Coffee Beaning

AcquisitionAcquisition Stimulate Demand

Stimulate Demand

Quadrant 1Quadrant 1



Dynamic: Need for affordable

luxury

Dynamic: Need for affordable

luxury

Requires convenience,

but doesn’t want to be limited in

choice

Requires convenience,

but doesn’t want to be limited in

choice

See 5 BoxSee 5 Box

Product

Price

Place

Promotion

Execution

Emphasize Search

Emphasize Search

Trial/ValueTrial/Value

Product Expertise

Product Expertise

Awareness/ Information

Awareness/ Information

Verismo: Proposed


Business Objective

Convenience, without sacrificing quality

Stores, Distribution Channels

Skills @ Real EstateSkills @ Logistics

Benefit

Strategic Asset

Core Competencies


While Starbucks has a solid, heart loyal customer base, this is a

relatively new category, so their focus should be on acquiring

customers into the luxury home brewing category.

To compete in this category, Starbucks should look to be the leader and adopt a stimulate

demand approach rather than try to steal shares from smaller

competitors.

Sourc

e o

f V

olu

me

Sti

mu

late

Dem

an

dSte

al Share

Marketing Objective

Acquisition Retention

Emphasize category variable

Grow the category

Emphasize category variable

Focus on increased consumption

Emphasize dynamic variable

Try to win users over to your brand

Emphasize dynamic variable

Increase consumption of your brand


Coffee Industry Snapshot


Coffee Industry Snapshot


Starbucks Financial Performance


Segmentation

Need for convenience

Need for affordable luxury

MAIN VARIABLE

DYNAMIC VARIABLE

Emphasis on Main VariableSame great Starbucks taste, in the comfort of your

home!


Competitive Landscape KeurigSLOGAN: “Brewing excellence one cup at a time”

ADVANTAGES: Keurig was the first to market in single-cup brewing. Convenience and simplicity. Keurig systems fill the gap between lower end mass-market coffees in

a can, and true high-end specialty coffee

DISADVANTAGES: Only brews coffee and lacks variety from other coffee based drinks

AVILABILITY: Macy’s, Kmart, JCP, Sears, Bed Bath & Beyond, Target, Meijer, Wal-Mart.

$99 - $149 $229 $119 - $149 or $229 special edition


Competitive Landscape TassimoSLOGAN: “What makes a perfect cup of coffee? Tassimo knows.”

ADVANTAGES: Ease of use.

DISADVANTAGES: Lower quality and bad press from recalls

On February 9, 2012 about 835,000 coffee makers were recalled in the United States after reports of the brewers spraying hot liquid, coffee grounds or tea leaves onto people.

AVAILABILITY: HSN, Bed Bath & Beyond, Target, Macy’s, and Wal-Mart.

Tassimo MSRP $99 - $169


Competitive Landscape Nespresso

SLOGAN: “The perfect cup – every time”

ADVANTAGES: Provides the ultimate gourmet coffee experience from the use of

premium coffee to the technology that brings out the coffees flavor.

Unlike Keurig, the Nespresso machine is designed to create customized coffee drinks such as espressos and lattes

DISADVANTAGES: The priced as a high end brewer

AVIALABILITY: Crate & Barrel, Bed Bath & Beyond, Target, Macy, William Sonoma, Sur La Table. $129 -

$699


Verismo SLOGAN: “Impossible until now”

ADVANTAGES: Affordably priced Allows for customized drinks such as espresso and lattes Starbucks is known for its quality coffees

DISADVANTAGES: Competing with Starbuck’s K-cups for Keurig Competes with in-store sales

AVAILABILITY: Starbucks, Walmart, Amazon, Bed Bath and Beyond, and Williams Sonoma

$99 $159


Plot the Market

Need for Convenience

Need

fo

r A

ffo

rda

ble

Lu

xury Starbuck

s includin

gVerismo

Keurig

N

Nespresso

TTassimo


Target Audience DescriptionKristen is 35 and works from home most days as an IS Portfolio Strategy

Consultant. Because she works with customers all over the globe she

sometimes has conference calls early in the morning or late at night. She is

on call at any hour and is quite busy. She drives a Lexus CT 200 h Hybrid

and her husband drives a Toyota Avalon Hybrid; both offer luxury and gas

savings, which are important to her. Her husband travels during the week

for work so the two of them enjoy their quality time at home. They have

been married for one year. Recently they took an all-inclusive trip to a 5

Star Jamaican resort that they purchased on Groupon. She works out every

day in the gym located in her building. She frequently shops for clothes at

Target and Nordstrom Rack because she can to purchase the designer lines

for less. She also shops on Amazon quite frequently as they will deliver right

to the house. She buys her groceries at Whole Foods and Trader Joes

because the quality ingredients and social responsibility are important to

her. She frequently uses them to cater parties she hosts because it is

convenient and offers superior taste.



Proposed Big Picture Commercial


26

Questions?