Marketing In The News - Starbucks

In the beginning, I was having a little bit of hard time trying to find an interesting article to write this blog on. That was until I came across this article on Adweek talking about Starbucks. This article got my attention because Starbucks is celebrating in a new campaign for their 50th anniversary under the tagline "Possible is just the beginning".

The main points of this article and another directly linked to this article are: Sales plummeted for Starbucks once the pandemic hit and society shut down. Their total revenue dropped about 11%, about $23.5 billion, and they were unsure if people would ever return to their pre-covid-19 routines. Their China stores helped them adapt to the pandemic because the China stores were shutdown before any of the stores in the United States. This helped them find new ways to sell their products when it hit the U.S.

The value proposition of Starbucks has always been human interaction. People go to Starbucks for a little bit of conversation, to work, or meet up with family or friends to hangout and talk. Ever since covid started, some people's only face to face interactions of the day are from going to coffee shops. It shows you how much power coffee has to bring people together. 

In the article, Brady Brewer, Chief Marketing Officer for Starbucks, confirms this value proposition by saying, “These little human interactions that people get every day that just prove they exist in the world and give their day meaning had been edged out over time, but really accelerated during the pandemic with social isolation, social distancing, and so as a company whose mission has been built on the concept of human connection and nurturing the human spirit—as a company whose lifeblood is coffee, which has just naturally brought people together for centuries—it was like the stars aligned.”

Starbucks faced many challenges at the start of the pandemic. Like I said earlier, their revenue dropped 11%. This is because people began to go to work and school at home, which led people to brew their own coffee since they did not need to leave their house for anything.

Starbucks approached this challenge by creating new ready to drink (RTD) products, and promoting them with actors and rappers. Starbucks has sold the RTD Frappuccino for a pretty long time now, but it never tasted like actual Starbucks drink to me. However, their new RTD products actually taste like something you would get from Starbucks. They sell them in 40 ounce bottles and they cost $5. That is a pretty good deal considering their grande drinks (16 ounces) cost up to $4.55, and their venti drinks (20 ounces) cost up to $5.25. People must think the new products are a good deal as well because they are always sold out. Also, these new products increased sales by 23% in one quarter.

 I feel like this new marketing approach is a good temporary solution. I say temporary because Starbucks is supposed to be about going into their shops and buying coffee and interacting with people, not buying the coffee at a store and taking it home. That defeats their value proposition, and I know they recognize that too with this campaign. This campaign is meant to bring people back into their shops, as the RTD products happened before the campaign and were meant to boost sales, which they accomplished.

If I was the brand manager I might look to increase the price of the RTD products or end the production of them once the pandemic is over to try to get people back into the shops. Another way might be to exclusively sell the RTD products in the shops and not sell them anywhere else so people come in and interact.

I learned a lot from reading these articles. I never knew Starbucks sales went down 11%, but it makes sense because most shops only have the drive thru open. It will be interesting to see what happens in the future for Starbucks and if they change anything once the pandemic is over.