What an interesting, paradoxical time for Starbucks. Once regarded as a bullet-proof brand that engendered the fiercest form of customer loyalty, Starbucks has of late been somewhat shunned by cost-conscious consumers. Feeling the effects of the economy, Starbucks' customer base has shrunk as coffee drinkers move to McDonald's, Dunkin' Donuts, and other less expensive alternatives.
While the company watches its own retail empire contract, with 600 stores closed in the past two years, Starbucks is putting its energy into driving the sales of Seattle's Best Coffee, a former rival the company acquired in 2003. Starbucks aims to expand the brand to more than 30,000 locations, up from 3,000, by the end of its fiscal year in September.
Starbucks is pursuing an aggressive strategy to place Seattle's Best Coffee in U.S. Burger King and Subway restaurants, AMC movie theatres, and in a number of varied outlets, including Alaska Airlines, Borders bookstores, and Royal Caribbean Cruise Lines. The company also plans to sell the brand in convenience stores and supermarkets, and via all forms of on-street distribution, such as coffee carts, kiosks, mobile trucks, and vending machines.
The distribution push is accompanied by the launch of a new Seattle's Best logo and slogan. The brand will move away from its type-only treatment to a contemporary graphic that highlights a drop of coffee in what could be interpreted as a wide-open smiling mouth.
For continuity, the logo retains the color red. Its new slogan, "Great Coffee Everywhere," is a nod to mass market appeal, in contrast to Starbuck's relatively pricey exclusivity.
Clearly, there could be some risk to the Starbucks brand by mass merchandising Seatttle's Best Coffee, but the company obviously feels the marketplace is already shifting beneath its feet.
Tom Ehlers, a former Starbucks executive who is now VP of retail for Seattle's Best, tells the Wall Street Journal that there is a comparable model for the expansion: Gap and Old Navy.
Gap, a premium brand, created Old Navy in 1994 as a value brand to appeal to more price-conscious consumers. Old Navy has flourished even as Gap has had to close stores. In following that model, Starbucks claims "its risks are small because (Seattle's Best) has barely 4% of the U.S. market for brewed coffee."
Clearly, Starbucks is feeling the heat from value-priced chains who are eating into coffee sales. Starbucks has been trying a variety of strategies to increase revenue, like the introduction last year of Via, its own instant coffee brand. Interestingly, Michelle Gass, the executive who worked on Starbuck's Via instant coffee launch, is now the president of Seattle's Best Coffee.
This latest move is the boldest yet for Starbucks. It seems the firm is now banking on Seattle's Best Coffee to buoy its fortunes. Rather than dilute its own brand equity, Starbucks is throwing its weight behind a different brand that it feels can compete at the lower end. So in the near future you won't be seeing a Starbucks on every corner, but you might come face to face with the smiling Seattle's Best Coffee logo instead.
Indeed, to celebrate the Seattle's Best relaunch, Starbucks sent a team of "red-capped invaders" to scale the Starbucks headquarters building in Seattle and "stealthily replace the famous 'siren' atop the clock tower with the new Seattle's Best Coffee logo."
Starbucks' press team said the intention was simple: "To put Seattle's Best on the map as the universal symbol for great coffee." As symbolic gestures go, it doesn't get much clearer than that.