Starbucks uses an intensive distribution strategy to distribute its products through company-owned retail stores and other channels. It controls the supply chain from importing high quality coffee beans and roasting them in domestic plants. The beans are then stored in warehouses and distributed to retail stores. Starbucks maintains a high level of control over its distribution channels and uses direct contracts with suppliers to ensure quality and supply of coffee beans. Its distribution strategy facilitates an effective system that delivers fresh products to customers and supports the company's marketing strategy of providing a premium coffee experience.

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

2. Bean
http://www.starbucks.com/whatmakescoffeegood/good_coffee.html
• Arabica Beans
• C.A.F.E. certified growers

3. Roasting
http://www.starbucks.com/whatmakescoffeegood/good_coffee.html
• Roasts beans in 3 domestic
roasting plants and 1 in
Amsterdam

4. Tasters
http://www.starbucks.com/whatmakescoffeegood/good_coffee.html
• Starbucks’ professional coffee tasters may
taste up to 800 cups of coffee a day.

5. Distribution
http://www.starbucks.com/whatmakescoffeegood/good_coffee.html
• Packaged Coffee is then stored in Distribution Centers
• Then picked up by Partners filling store orders

6. Stores
• Starbucks Partner or Barista is the company’s contact
with the customer
• The process ends at the store where customers enjoy
freshly prepared coffee drinks

7. 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

8. 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

9. 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

10. 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 you’re 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

11. Channel Strategy Factors
Product Life Cycle
• Most items Starbucks sells are consumables, representing
their core business (77%) Coffees, teas, Frappacino’s, 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

12. Competition
Channel Strategy Factors
• 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

13. 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

14. Human Resource Considerations
Channel Strategy Factors
• 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

15. 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

16. 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.

17. • 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
Distribution Strategy

18. • 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?
Channel Strategy Assessment
Distribution 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.

19.  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 company’s
position as a global purveyor of quality coffee drinks.
• Is marketing strategy supported by the channel strategy?
Distribution Strategy

20. • Specialty Coffee Segment
RECOMMENDATIONS
• Expand Multi-channel Relationships
 Expand and re-strategize how it markets and brands
specialty coffees.
 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 company’s mission statement, brand image and
positioning.
Distribution Strategy

21. THANK YOU!