Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres


Highest imported product in world, second to
oil
U.S. Coffee Industry



20,000 stores, $11 Billion profit
Top 50 companies, 70% of profit
Secure prime locations, drive store traffic,
deliver high quality products

Business Characteristics


Expansion, franchising and licensing, store traffic
Economic Characteristics

Coffee beans, futures contracts
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Environmental concerns

Sustainable coffee

Organic coffee, fair trade, and shade grown coffee
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Customer’s desire for information
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“Green” coffee
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Threat of New Entrants
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Rivalry Among Existing Firms
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Low customer switching costs, differentiation
Bargaining Power of Customers
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Highly concentrated, highly competitive
Threat of Substitute Products

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Low startup costs, strong first mover advantage
Millions of coffee consumers worldwide, little power
Bargaining Power of Suppliers

Firms hold power, suppliers compete against eachother

Starbucks

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McDonalds

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McCafe division
Dunkin Donuts
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First mover advantage (Blue Ocean)
Differentiation
Starbucks biggest competitor
Nestle

Innovation


Contribute more capital to R&D
Expansion
Starbucks, 700 new stores in 2009
 McDonalds, 1,000 new stores in 2009
 Dunkin Donuts, 100 stores in Taiwan by 2017


Product Differentiation

Starbucks:

Continue disciplined expansion
 Product differentiation

McDonald’s:

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Nestle:


Most products for your dollar
Unmatched product and brand portfolio
Dunkin’ Donuts:

Innovation


Coffee beans are 2nd largest export
Large companies make up 70% of industry


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Must secure prime locations, manage and increase
store traffic, and sell high quality products
Companies must expand in order to succeed
Competition on price
Relationships with coffee producers is key
Overall attractive industry


Starbucks saw $1,000,000 profit per store in 2008
Typical coffee shop saw $500,000 profit per store



Recognition in Hollywood
Loyal customers
Rewards programs



My Starbucks Rewards card
Facebook
Competition

Consolidated Company revenue


$2.5 Billion in 2008
$2.4 Billion in 2009
 Due to strengthening U.S. dollar
 And fewer stores being opened in ’09
 High costs in closing 800 stores

Current stock price of $21.59

Forecasted to increase in December

First price reduction in August 2009

Due to 6% decrease in sales
 On standard drinks by 5-15 cents
 To attract non-loyal customers
 Specialty drinks increased
 Was last raised in 2007 by 5 cents
 Loyal customers won’t leave

Trying to cut down costs by being more efficient in
stores

Operational Techniques


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Extending their market to other business
channels
Joint ventures
Marketing and sales strategies

Focus on quality and experience vs. price
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Customer service

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“Develop enthusiastically satisfied customers all of
the time.”
Wireless internet
Comment cards
Management techniques
Empowerment of employees
 Every employee a “partner”


Vertically Integrated

Placement

“…to become the most recognized and respected
brand in the world”
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Lack of current new product development
 Slow to diversify into new markets
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Pricing strategies
Current marketing strategies not meeting
marketing objectives

Younger, less educated customers with lower
economic status
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Market saturation has gotten in the way of
products and services not meeting marketing
characteristics
Low customer satisfaction


Speed of service
Inconsistency

Co-branding
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International expansion
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India and Pacific
“Going green” practices

Rising costs of coffee or dairy products
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Copycat brands/Competition

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McDonalds and Dunkin Donuts
Declining coffee market

New beverage or pastime could evolve
Eliminate
Raise
Underperforming stores
Education of coffee with employees
Reduce
Create
Amount of time employees spend
making individual drinks
More loyalty rewards
Calories in specialty drinks
A better “everyday brew”



By keeping Focus on quality coffee and
excellent customer service
Easier to acquire quality suppliers
Harder for competition to keep up

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Quality coffee
Diversified menu, reaching across 3 tiers of
customers
Technology
Employees
Problem: Overexpansion
Solutions: Transformation Agenda
1) Improving U.S. state
2) Re-igniting emotional attachment
3) Build for the long term
4) Expand around globe outside U.S.