Work sample: Starbucks Store Brand Threat Analysis

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Evaluate the nature and severity of store brand/ private label threat against Startbucks within premium package coffee category in four major retailers - Kroger, Target, Safeway and Publix, and uncover the reason for customers to switch from Starbucks to Store Brand.

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Work sample: Starbucks Store Brand Threat Analysis

  1. 1. Starbucks: Store Brands Threat Analysis
  2. 2. Framing Framing Overview of store brands threat Consumer insights analysis Retailer pricing strategy analysis Summary and recommendation2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 2
  3. 3. Overview of Store Brands Private Label represents $155M sales vs. Starbucks’ $400M • Volume share decreased by 0.7% vs. Starbucks’ increase by 1.7% vs. Year Ago Kroger • Not likely to be a threat • Volume share decreased by -2.42% mainly due to price increase Publix • Lowest price at $4.59 among the major store brands • Not likely to be a threat • Similar price position: $7.44 vs. Starbucks’ $8.36Safeway • Base volume increase 22.5% vs. Starbucks’ 3.2% • Likely to be a threat • Similar price position: $7.68 vs Starbucks’ $6.60 Target • Base volume increase by only 11.4% vs Starbucks’ 1.6% • Likely to be a threat2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 3
  4. 4. Demographic Segmentation Area Type Suburban area Education High school graduate, some college but no degree, bachelor degree Ethnicity Caucasian Income $15,000-$99,999 Gender Female Age 35-64
  5. 5. Analysis 1 Perception comparison across brands Attribute Performance Starbucks Store Brands Differences Scale 1-7 Mean Mean (Significance)Taste 6.31 5.02 1.29**Price 4.84 5.62 -.78**Variety of flavors 6.07 5.04 1.02**Is all natural 5.64 4.42 1.22**Brand reputation 6.29 4.80 1.48**Ingredient quality 6.16 4.84 1.31**Packaging 5.84 5.27 .58**Availability in store 5.93 5.62 .31Size of packages 5.78 5.47 .31Is fair traded 5.67 4.71 .96**Ease of preparation 6.24 5.56 .69**Item is on promotion 5.04 5.38 -.33Is organic 5.42 4.35 1.07**T-test of Significance for the Product Attributes ** is p value < .05 and * is p value <. 1
  6. 6. ANALYSIS 2: FREE TEXTAnalysis 2 Free TextAnalysis 3 Why do people who prefer Starbucks buy Store Brands as well Reason Frequency %Like variety 18 72Price leads me to switch 12 48Attracted to new brand 11 44Multiple tastes in household 10 40Switch because dissatisfied 2 8See little difference in brands 2 8
  7. 7. Analysis 4 COMPARISONS OF ATTRIBUTE IMPORTANCE ACROSS SEGMENTS Multi-attribute Items by level of Starbucks Store Brands Differencesimportance (1, not at all important - 7, very important) (Significance)Taste 6.7 6.4 0.3*Price 5.8 6.3 -0.5**Variety of flavors 5.4 3.8 1.6**Is all natural 5.4 4.3 1.1**Brand reputation 5.7 4.1 1.6**Ingredient quality 6.3 5.6 0.7**Packaging 4.8 3.6 1.2**Availability in store 6.0 5.8 0.2Size of packages 5.5 4.9 0.6Is fair traded 5.2 4.4 0.8*Ease of preparation 5.8 5.8 0Item is on promotion 5.4 4.5 0.9**Is organic 4.6 3.4 1.2** T-test of Significance for the Product Attributes ** is p value < .05 and * is p value <. 1
  8. 8. Strategies by Retailers Consumer Price Expectation Optimal Competitive Optimal Competitive Price for 12 Price for 12 oz Price for 20 Price for 20 oz oz Bag bag oz Bag Bag Overall Brand $6.99 [$5.99,$7.49] $8.19 [$7.49.$9.99] Starbucks $7.69 [$6.09,$7.99] $9.99 [$8.99,$10.99] Current Price Setting by Retailer Starbucks Store % Change % Change 52wks- vs. Prior 52wks- vs. Prior Store Current Year Current Year Kroger $8.10 5.60% $5.83 13.10% Publix $8.53 7.80% $4.59 24.30% Not much threat Safeway $8.36 7.00% $7.44 4.50% Target $7.68 8.60% $6.60 5.70% More premium position and potentially more threat1Data Source: Starbucks Packaged Coffee Pricing Threshold Survey conducted by Acosta in 2011 2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 8
  9. 9. Strategies by Retailers Kroger: Kroger • Price more important to Kroger brand purchaser • Price not as important to Starbucks and Kroger purchasers Purchased Kroger only Purchased SBUX & at least once N Mean Kroger only at least once N Mean Price 21 6.62 Price 15 6.13 Pub Publix • Price not as important • Availability is more important Purchased Publix only Purchased SBUX & at least once N Mean Publix only at least once N Mean Price 5 5.60 Price 3 5.33• Starbucks should maintain its Premium Pricing Strategy in these retailers while continue providing high availability and variety of products.2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 9
  10. 10. Strategies by Retailers Safeway Safeway • Price not as important to Safeway brand purchaser • Price is more important to Starbucks and Safeway purchasers Purchased Safeway Purchased SBUX & only at least once N Mean Safeway only at least once N Mean Price 6 5.17 Price 10 6.20 • Placed highest importance on taste and aroma (“Drinking coffee is mostly about enjoying the taste and aroma”) • Flavor is important Strategy s • Reduce price little by little to further gauge consumer’s price expectation • Increase flavor variety of products carried in Safeway2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 10
  11. 11. Strategies by Retailers Target Target: • Price is not as important to Target brand purchaser • Price is more important to Starbucks and Target purchasers Purchased Target only Purchased SBUX & at least once N Mean Target only at least once N Mean Price 5 5.80 Price 10 6.50 Item is on promotion 5 6.40 Item is on promotion 10 6.50 • Buying item on promotion also comes up as an important attribute • Starbucks and Target purchasers also place importance on promotion (“I tend to buy coffee on promotion or discount” is second highest sentiment at average score of 6.2) Strategy : • Starbucks already priced lowest in Target (amongst the four retailers) • Keep pricing strategy to keep premium position • Increase promotions (especially Display and Feat & Disp) • Improve product variety on shelves2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 11
  12. 12. Executive Summary Starbucks and Store Brand consumers are very similar:  Describe…  Possible reasons of switching Safeway is positioned closest to Starbucks and represents the biggest threat  Reduce price little by little to further gauge consumer’s price expectation  Increase flavor variety of products carried in Safeway Target may be some threat due to price position  Keep pricing strategy to keep premium position  Increase promotions (especially Display and Feat & Disp)  Improve product variety on shelves2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 12
  13. 13. Thank you Q&A2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 13

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