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Starbucks competitive environment (us)


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Starbucks competitive environment (us)

  1. 1. Starbucks and the Competitive Environment 1
  2. 2. Executive Summary  Starbucks Corporation has been the most successful coffee chain in the past few decades using their aggressive expansion strategies to push out much of its competition.  Starbucks has focused on creating a dense network of stores all around America, while also opening up new locations all around the world.  They are currently leading the retail coffee market with selling their coffee for a premium price to increase their profitability. McCafee 2
  3. 3. Problem  Will the allure of gourmet Starbucks coffee be maintained or will more appealing options threaten the success of Starbuck‟s primary product?  Can advertising significantly help maintain Starbuck‟s image?  A good place to start involves evaluating the current market for coffee and do a competitive analysis to see the market performance and to determine the extent to which designer coffee appeals to current consumers. McCafee 3
  4. 4. Overview On Product Growth  Starbucks surpassed Wendy‟s and Burger King in becoming the number 3 restaurants chain posting $9.07 billion restaurant sales last year.  It is expected to gain in one of the fastest-growing day parts in restaurants for breakfast.  It‟s measured-media budget is a fraction of what come of the other top chains spend.  Starbucks only spent $94.4 million in media spending compared to McDonald‟s spent about $887.8 million in the United States only in 2010.  Starbuck‟s has worked with agencies such as Omnicom‟s Goodby Silverstein & Partners. “Breakfast is the final frontier of growth in this country and coffee is growing as well.” David Palmer UBS restaurant and packaged food analyst. AD Age 4
  5. 5. Major Competitors Dunkin' Donuts McDonald‟s Caribou Coffee 5
  6. 6. Store Locator  Has 12,500 coffee shops in the United States McDonald‟s McCafé Starbucks Dunkin‟ Donuts  Has 6,700 coffee shops in the United States Caribou Coffee  Has over 31,000 restaurants World Wide.  Has 415 coffee shops in 16 States in the United States 6
  7. 7. Starbucks vs. Dunkin‟ Donuts
  8. 8.  The taste-test advertisement directed towards Starbucks, actually naming the brand in the commercial, surveying coffee drinkers. More hardworking Americans preferred the taste of Dunkin‟ Donuts over Starbucks.  Within a week of the ad‟s launch about 50,000 people visited  It is a site that communicates the hard-hitting competitive message with clarity and humor. Entering this site you can: Learn the Truth (presenting Dunkin‟s coffee story) or Spread the Truth (sending an e-card to your friends who drink Starbucks)  Weekly traffic to jumped 61% Starbucks vs. Dunkin‟ Donuts “Small is the New Tall.” AD AGE 8
  9. 9. Starbucks vs. Dunkin‟ Donuts  In March 2009, the company unveiled an alternative slogan, “You „Kin Do It!”, and launched a $100+ million ad campaign to promote it.  The campaign slated to run through 2009, includes radio, print and outdoor advertising, in addition to in-store point of purchase, special events, and sports marketing.  Online marketing, often leveraging the Boston Red Sox and the other New England icons. Dunkin‟ Donuts Press 9
  10. 10. Starbucks vs. McDonald‟s McDonald‟s Billboard in Seattle
  11. 11. Starbucks vs. McDonalds  McDonald‟s has offered breakfast for years, and over the last couple years has been heavily marketing its McCafé.  Lines of coffee drinks all while continually rolling out new drinks of both the coffee and non-coffee variety, such as smoothies and frappes, McDonald‟s version of the Starbucks frappuccinos.  Starbucks created their frappuccino for the summer season while McDonald‟s introduced their frozen strawberry lemonade, a non-coffee beverage under McCafé. AD AGE 11
  12. 12. Starbucks vs. McDonalds  Like Dunkin‟ Donuts, McDonald‟s took a stab at Starbucks during TV ads as well. The two television ads were titled “Intellectuals” and “Hipsters.”  Along with a TV ad McDonald‟s set up a website to promote its Washington States McCafé Outlets.  To email their friends about how they feel about high priced coffee  In additional to the usual media, McDonalds makes significant use of billboards and signage, sponsors sporting events ranging from Little League to the Olympic Games. AD AGE 12
  13. 13. Starbucks vs. Caribou Coffee
  14. 14. Starbucks vs. Caribou Coffee  Caribou Coffee spent $2 million on U.S. advertising in 2008, compared to the $300,000 it spent in 2007 according to Nielsen Monitor-Plus. (AD Week)  Analysis of visitor demographics reveals that Caribou Coffee could possibly have more online success if they pull-in some of the same types of online visitors as Starbucks does.  While Caribou Coffee attracts a respectable amount of young adults (32% between the ages of 18 and 34), this does not compare to the 42% that Starbucks attracts.  Paying for advertisements on social networking sites where educated young adults visit frequently, such as Facebook, may likely prove to be a wise strategic move for Caribou Coffee. Facebook refers 3.92% of Starbucks‟ traffic to the Starbucks Website, while Caribou coffee lacks in Facebook referrals. SEO Analysis 14
  15. 15. Television Campaigns  Dunkin‟ Donuts outspent McDonald‟s 60% on coffee- specific products in paid media $27 Million to $17 million.  Dunkin; Donuts spent 83% of its budget on TV: two-thirds of that on spot TV and a third on cable.  McDonald‟s spent 97% of its traditional media budget on spot TV to support its McCafé rollouts and on regional promotions in 74 local markets. AD AGE 15
  16. 16. Web Campaigns  Dunkin‟ Donuts spent 15% of its total media budget on paid internet. This is considered a significant amount compared to competitors in this category.  Ads were posted on a number of sites including: Yahoo, AOL, CNN, CNBC, MSNBC, Fox Sports,, Good Housekeeping, Cosmopolitan, and Digg. AD AGE 16
  17. 17. Tactical Campaigns for Dunkin‟ Donuts  In 2008, Starbucks announced it was simultaneously shutting down all 7,100 U.S. stores for a restraining effort, Dunkin‟ Donuts was quick off the mark, offering 99-cent espressos.  On Tax Day, Dunkin‟ Donuts held a special promotion to offer a free doughnut with the purchase of a cup of coffee.  May 15, Dunkin‟ Donuts holds its annual Free Iced Coffee Day, giving away 4 million cups in 2008.  In June 2008, Dunkin‟ Donuts launched its “Bases Loaded” campaign, a summer iced-beverage promotion. Iced beverages came with peel-away sticker that revealed a one-time login code for participation in an instant-win game in conjunction with Major League Baseball. AD AGE 17
  18. 18. Tactical Campaigns for McDonald‟s  McDonald‟s promoted its national coffee promotions with special prices.  In 2008, it showed its ice teas in combination with its chicken sandwich and ice coffees over the summer in the buildup to the Olympics. AD AGE 18
  19. 19. Regional Campaigns  McDonald‟s drives a lot of promotion through outdoor and print buys in a number of markets: Louisville KY, Chicago, Detroit, Kansas City, MO, San Diego, and Seattle.  In December 2008, a TV campaign highlighted “McCafé Mondays,” a promotion that offered customers a free eight- ounce coffee of their choice.  Urban radio and TV ads in the Midwest regions feature jingles for McCafé.  Caribou Coffee is offering a limited edition mug that features Chicago landmark‟s such as Lakeshore Drive, Navy Pier, and the Chicago Theatre. (Biz Journals) AD AGE 19
  20. 20. Market  Starbucks built itself on being the world‟s most powerful and recognizable brands of high quality coffee and the unique “Starbucks Experience.”  They were the first to revolutionize the coffeehouse industry by marketing expensive, high-quality coffee as well as a “third” place between work and home for customers to go and escape the chaos of daily life.  As of 2011, Starbucks has a 32.6% market share a good portion of its industry.  Starbucks currently has over 11,500 stores in the United States alone. 20
  21. 21. Competition  McDonald‟s introduced the McCafe to select stores, where customers can purchase espressos and cappuccinos priced in the $2-4 range.  In response, Starbucks teamed up with Burger King and began selling Starbucks‟ Seattle Best Coffee in about 7,250 U.S. outlets selling for $1-$2.79 replacing Burger King‟s BK Joe Brew.  Dunkin Donuts is another major competitor, with nearly 5,000 stores in the U,S. overlapping with Starbucks but their customer experience is more coffee-to-go model rather than the “third place to work and relax” model. 21