During the course, we will have a ‘live’ client engagement situation (offering Starbucks a Growth Strategy). You will work on this in groups and you will submit the outcomes at the end of the Course. As with the previous assignment, the success in delivering these assignments will depend on: · The amount of research and preparation you do before you join the course, and during the course (see specific reading/assignment section in the modules) · Your engagement in the class and asking the right questions · Your ‘firepower’ – ability to think creatively, apply what you learnt in your program, and the ability to connect the dots The whole course is designed to give you the right tools, techniques, tips, and examples to help you succeed in these engagements. The main advice – again - is: ask questions! The day you stop asking, you stop learning.

1. STARBUCKS
BUSINESS PROPOSAL
Team 9: Jessica Kalsakau, Tommy Steensnaes, Bisher Yousfi, Yakup Sari, Alexander Urquhart, Heshan Aly Ahmed

2. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
THE CHALLENGE
Current Lens:
• “Starbucks is still the core business and the growth vehicle for the
company …if we were competing with Starbucks, what would we do?”
• “We’ll do for tea what we did for coffee”
How can Starbucks add $7 billion in
revenue by 2020 with initiatives outside
of its current strategy?

3. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
STREAMS OF REVENUE INCREASE
The increase in revenue can be achieved with four new
initiatives:
• “Doing for tea what Starbucks did for coffee” + $1.8 to +$3.4 billion
• Increased sales during off-peak times
Attracting stay-at-home mothers (1.0 to 2.3 billion)
Offering rent-by-the-day office space (1.2 billion)
+ $2.2 to +$3.5 billion
• Breakfast deals in partnership with AirBnB +$1 billion
• Exploiting supply chain expertise + $1 billion
Total Est. Revenue +$6.0 to +$8.9 billion

4. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Development of Tea Segment
• 67 billion servings of tea consumed in USA
(conservatively)
• 85% iced and/or ready-to-drink
• (Average price: $2.30/serving)
• 15% brewed
• (Average price: $3.35/serving)

5. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Development of Tea Segment
Starbucks aims to “do for tea what it did for coffee”
• If Starbucks achieves 1 tea sale for every 5 coffee sales
• Revenue of $1.79 billion by 2020
• If Starbucks achieves 2% of all USA tea consumption
• Revenue of $3.36 billion by 2020
• Assumes no growth in tea market
Estimated revenue of $1.8 to 3.4 billion by 2020

6. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Off-peak Hours: Attract stay-at-home
mothers to Starbucks
üChoice of healthy meal (salad, sandwich) and coffee for $8
üKid’s meal with toy for $4
5.2 million stay-at-home mothers in the US
• If only 10% visit Starbucks 3 times per week with 1 child
Generates $1 billion in revenue
• If program is popular and 20% visit with more than 1 child on
average
As much as $2.3 billion in revenue

7. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Off-peak Hours: Let independent
workers reserve office space
üGuaranteed seat during off-peak hours, free coffee
30 million independent workers in the US
• 12,000 stores in the US
• 20 spaces per store / $20 per seat
Generates $1.2 billion in revenue
• Not including additional revenue from food and other purchases

8. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Starbucks’ partnership with AirBnB
üOffer breakfast deals to AirBnB customers
Opt-in $10 breakfast voucher when purchasing room
• Includes free coffee during the day (if used for breakfast)
AirBnb estimates 200 million nights sold in 2020
• At 50% opt-in rate
• Assumes one occupant per night (on average this is higher)
• On average 10% to 20% of coupons are never redeemed
Generates $1 billion in revenue

9. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Exploiting supply chain expertise
üLeveraging on its efficient supply chain, Starbucks retails coffee
beans to other coffee providers.
3.4 billion lbs of coffee consumed in the USA in 2013
$1.4105/lb for coffee in USA in 2013
$4.9 billion market value of coffee in USA in 2013
$4.2 billion coffee bean customers other than Starbucks
• If 25% of coffee market supplied by Starbucks
Generates $1 billion in revenue

10. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
COMPETITORS: Different Marketing
Strategies!
McDonald's came into direct competition with Starbucks when it upgraded its coffee in
2006
§ The average number of customers visiting a Starbucks store declined from an
estimated 460 in 2005 to just above 400 in 2007
As a result of the Dunkin’ Donuts’ “taste-test” advertising campaign
§ Within a week of the ad’s launch 50,000 people visited DunkinBeatsStarbucks.com
§ Weekly traffic to DunkinDonuts.com jumped 61%
Caribou Coffee spent $2 million on US advertising in 2008, compared to $300,000 in 2007
Starbucks spent $94 million in media spending; McDonald’s spent $888 million in the
United States only in 2010

11. CHALLENGE PROPOSAL TEA SEGMENT OFF-PEAK HRS AirBNB PARTN. SUPPY CHAIN COMPETITORS
Opportunities in the Retail coffee U.S.
Market
• If Starbucks were to change its advertising policy, there would
be a big room for improvement.

12. BUSINESS PROPOSAL
Team 9: Jessica Kalsakau, Tommy Steensnaes, Bisher Yousfi, Yakup Sari, Alexander Urquhart, Hesham Aly Ahmed