Starbucks Marketing Assignment

ABSTRACT

This report analyses the communication mix of Starbucks UK, based on the analysis recommendations have been made to improve the mix.

Introduction

Market Overview

The hot drink market in UK consists of coffee, tea and other hot drinks. The total revenue generated by UK till 2009 is $2.4 billion with compound annual growth rate (CAGR) of 2% from the period 2005-2009.In the hot drink market coffee sales proved to be the most lucrative in UK, generating the total revenue of $1.1 billion which is equivalent to 47.8% of market overall value. From the year 2009-2014 the performance of market is expected to accelerate with 2.8% of CAGR. Coffee is largest segment of the hot drinks market in the United Kingdom. (Datamonitor,2009)

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Starbucks UK

Starbucks, The US coffee shop chain entered the UK coffee market in 1998. This company has operated around 703 coffee shops in UK until 2009.Starbucks also offers packaged coffee, instant coffee and ready to drink beverages in the retail market.(Mintel,2009). During 2009 recession, the branded coffee chain remained resilient but the rate of growth was slow. Starbucks remained the UK’s one of the leading branded coffee house by turnover of around 33 percent of market. Starbucks offer high quality whole bean coffees, fresh brewed Italian style espresso drinks and variety of pastries and confectionaries. Moreover Starbucks also started to sell their coffee bean through selected UK supermarket and retail stores and has been successful in establishing a business with UK food service sector. Starbucks also sell their instant coffee in all easy Jet flights. (Superbrands,2011)

Brand

Starbucks as compared to other coffee brand in United Kingdom is more of a young brand as it is launched in UK in 1998.As a brand Starbucks has three main elements: coffee, people and store. Stringent control over quality and processing of the beans assures that coffee is of good quality. Experienced store personnel were recruited and trained more in coffee knowledge to provide better customer service. Store design, atmosphere and aroma all helped in enhancing the “Starbucks experience.”(Mintel,2011)

Market Share

At the end of the year 2010 Starbucks became second largest in market share of 23% just after Costa Coffee 37%.Starbucks returned to growth successfully after their two years of declining in United Kingdom. Although they lost their market turnover by 2.1% but still they have second largest market share turnover of 32.4%.(Allegra STRATEGIES,2010)

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Target Market

The target market in United Kingdom for Starbucks is middle to upper income class consumer and working professional. The reason for targeting middle to upper income class consumer is that the bean from which Starbucks coffee is made is expensive.

Positioning

 Starbuck does not want to compromise on their quality and target the upper middle to lower income people only. Most of their customers are young adults, middle age people and psychographic coffee lovers.

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Macro environment analysis

Political factors

Fair trade coffee was founded in 1992.Fair trade coffee provide healthier working conditions and incentives for coffee produces as big coffee companies purchase coffee beans directly from growers for a higher price. In UK coffee became fair trade in 2003 and leading coffee producer NESTLE of UK joined the fair trade coffee followed by Kraft and Lavazza coffee (keynote).Since Starbucks entered late in the UK market they became 100% fair trade coffee on 2nd September 2009.Now every visitor in Starbucks can walk away with fair trade certified cappuccino, Late or Mocha and help poor farmers in developing countries. (Fairtrade foundation, 2011)

Economic Factor

One of the major economic factors affecting coffee business in UK is recession. Due to recession Starbucks announced closure of some of the outlets in UK from February 2009.Reccesion also affected consumer as they became cautious in their spending due to unemployment and personnel debt. There was also increase in the competition between Starbucks and other major coffee chains and retailers as they provide similar products and services to consumers.(Keynote)

Social factor

These days people are spending more money in coffee then tea and most of the people aged 35 or over to visit coffee shop (Mintel). The young generation wants to enjoy not only coffee but the environment as well. Starbucks provide relaxing environment to the teenagers where they can drink coffee and chat as well. (Brand)