From Bean to Cup

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From Bean to Cup Starbucks Channel Strategy
Jennifer Brinkman Donnych Diaz Rian
Miller Yelena Tupitsyna Greg Welch
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Bean

• Arabica Beans
• C.A.F.E. certified growers

http//www.starbucks.com/whatmakescoffeegood/good_
coffee.html
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Roasting

• Roasts beans in 3 domestic roasting plants and 1
  in Amsterdam

http//www.starbucks.com/whatmakescoffeegood/good_
coffee.html
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Tasters

• Starbucks professional coffee tasters may taste
  up to 800 cups of coffee a day.

http//www.starbucks.com/whatmakescoffeegood/good_
coffee.html
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Distribution

• Packaged Coffee is then stored in Distribution
  Centers
• Then picked up by Partners filling store orders

http//www.starbucks.com/whatmakescoffeegood/good_
coffee.html
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Stores

• Starbucks Partner or Barista is the companys
  contact with the customer
• The process ends at the store where customers
  enjoy freshly prepared coffee drinks

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Intermediate Functions
INTERMEDIARIES

• Starbucks depends upon both outside brokers and
  its direct contact with exporters for the supply
  of green coffee
• Channel Members are part of a Dependent channel
  arrangement
• Starbucks operates its own distribution system
• Coffee is traded on a negotiated basis, usually
  quite a bit higher in price
• Reduce risk of unpredictability of coffee price
  and supply, Starbucks enters into long-term fixed
  price contracts with its suppliers

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Intermediate Functions
INTERMEDIARIES

• Starbucks sells a wide variety of whole and
  ground bean coffees in grocery and warehouse club
  stores as well as Frappucinos and coffee-flavored
  ice creams
• Other channel of delivering coffee is through
  direct distribution, the selling and distributing
  product to account members in airports, hotels,
  schools, restaurants and hospitals

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Channel Strategy Factors
Customer/Market Served

• Focus Market Region United States
• In the United States, some 78 of consumers
  drink coffee7
• Of that percentage, females are more likely to
  be the consumers rather than males
• The higher frequency of consumption tends to be
  older people

• Focus Market Region China
• Coffee consumption in China is highly
  concentrated in large cities
• Coffee appeals to adventurous, open-minded,
  young, affluent, urban consumers
• Many of these returnees have lived in Western
  countries for a decade and they have become
  accustomed to the coffee culture

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Channel Strategy Factors
Product Service Characteristics

• Starbucks whole business is driven by their
  strong brand image
• They strive to have a knowledgeable staff and
  unique, recognizable packaging
• Starbucks also has the image of being known for
  5 cups of coffee but youre also getting some
  image for your 5, too
• Starbucks also uses an intensive distribution
  strategy to make their logo and coffee ubiquitous
  around the world

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Channel Strategy Factors
Product Life Cycle

• Most items Starbucks sells are consumables,
  representing their core business (77) Coffees,
  teas, Frappacinos, etc.
• They also distribute at-home coffee in-store as
  well as through convenience and grocery stores
• Starbucks strives to keep its coffee drinks fresh
  by changing menu
• Many drinks are cash cows, while others are
  seasonal with limited life

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Channel Strategy Factors
Competition

• Biggest threat MacDonalds threat to market share
• Dunkin Donuts
• Competes with both direct channel and retailer
  channel through website, their stores and grocery
  stores
• Multiple distribution gives competitive advantage
  over smaller coffee chains and at-home coffee
  companies

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Channel Strategy Factors
Environmental Factors

• Eliminates competition via Cluster bombing
  tactics, buyouts and cannibalization
• Open several stores next to competition
• Aggressive advances increased revenue by 24 in
  one year alone

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Channel Strategy Factors
Human Resource Considerations

• Employees offered stock
• Health Benefit (including part time)
• 1 LB free coffee per week
• Special/Continuous Training
• Turnover Rate
• 50 Starbucks vs 400 Coffee Industry
• 401k

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Distribution Strategy

• Starbucks level of distribution is intensive via
  retail stores
• Starbucks has Direct Retail System through
  operation of its own Retail outlets
• Accomplishes direct marketing of product while
  maintaining marketing strategy and mission
  statement
• Maintains high level of customer service via
  product offerings and vast number of locations

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Distribution Strategy

• S.B. has control/power over channels of
  distribution
• S.B. imports high quality coffee beans
• S.B. developed socially responsible coffee
  buying guidelines called C.A.F.E.
• Exclusive contracts from growers usually 5 years
  out

• High level of cooperation amongst
  growers/suppliers leads to rapid inventory
  replenishment
• Reduces total costs of marketing channel and
  improves customer service
• Roasts beans in its roasting plants
• Stores beans in warehouse for distribution to
  retail outlets.

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Distribution Strategy

• S.B. has Corporate Dependent Channel Arrangement
• Operates its own distribution system in a manor
  that produces an integrated channel
• S.B. imports and processes coffee then sells it
  under their own brand name in their own stores
• Has other ways to distribute products via
  groceries stores and mail order using a
  multi-channel structure to market products
• Channel relationships are increasingly important
  in creating market value maintain brand image
  and a sustainable competitive advantage

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Distribution Strategy
Channel Strategy Assessment

• Are the distribution decisions in order to
  facilitate an effective and efficient
  distribution system accomplishing this and are
  the results in line with the marketing strategy?

• At the direct retail system level yes, the
  current channel strategy and decisions are
  facilitating the marketing at the retail level
  delivering a high quality product to the
  customers.
• S.B. also accomplishes integration of marketing
  and distribution via mail order as well as
  grocery stores.
• Other partner relationship dependent on a
  multi-channel strategy have been successful i.e.
  PepsiCo Frappucino product.

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Distribution Strategy

• Is marketing strategy supported by the channel
  strategy?

• The marketing strategy of offering a
  differentiated product is supported by the
  purchase of high quality coffee along with high
  quality controls/standards applied to
  growers/suppliers.
• Expansion of retail outlets promotes further
  marketing and brand image
• S.B. has seen extensive growth in the
  international markets. Developing retail units
  as well as licensed units abroad. This again
  strengthens the companys position as a global
  purveyor of quality coffee drinks.

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Distribution Strategy
RECOMMENDATIONS

• Specialty Coffee Segment

• Expand and re-strategize how it markets and
  brands specialty coffees.

• Expand Multi-channel Relationships

• Expand and develop new domestic channels focus on
  Specialty soft drinks, energy drinks, and
  ready-to-drink products
• Nutritional and Health drink segment. Acquire
  company whose product lines offer
  nutritional/health drinks and ascribe to
  principles of sustainability and environmental
  stewardships re-enforcing the companys mission
  statement, brand image and positioning.

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THANK YOU!