Starbucks case study for nyu Spring 2015

Starbucks Goes Back to School

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Starbucks: Background

• Starbucks is one the most successful brands of our time.

• Starbucks reinvented coffee - its rise, not coincidentally, coincides with an increase in coffee drinking worldwide.

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Changing Consumer Habits

“Starbucks made coffee about more than just having a morning cup o' joe - it meant paying $4 and change for your morning coffee and having it iced, whipped, soy, shaken and nonfat with a

touch of whipped cream and sprinkles.”

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• Starbucks has 10,000 locations worldwide and serves more than 35 million customers each week.

• Company is growing again worldwide after difficult consolidation period and re-emergence of Howard Schultz as CEO.

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• Stock has been exploding to the upside in recent years.

• Analysts say stock surge looks poised to continue.

• Recently announced record earnings.

• Big growth in China and online.

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Source: YCharts

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Source: YCharts

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Recent Earnings

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Recent Earnings

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Under Pressure

• Starbucks still faces considerable pressure from:– Weak global economy– Perception on Wall Street

that its business is “mature” with limited growth opportunities.

– Uncertain nature of dairy and coffee ($2+/pound) prices

– Cost pressures– Challenges from McDonalds

and other fast food chains.

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Under Pressure

• Has not yet directly penetrated academic market.

• Academics plays well with the company’s social responsibility platform.

• Starbucks needs investor capital to finance its international expansion plans.

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Cracking Higher Education

• Academic market represents a $3 billion opportunity.

• The company will build/open its first pilot store at New York University in September, 2015.

• It will be called the “Campus Café.”

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46 West 14th Street

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46 West 14th Street

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• Campus Café will offer coffees tailored specifically for student tastes - including a selection of extra strong brews that have extra caffeine. – Music that appeals to

students. – Store will be open 24-7. – Managed by Starbucks.

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• Store will employ six students as part-time employees.

• Students must maintain a 3.5 GPA to work at the store.

• Starbucks will purchase land, air rights from NYU, and establish a scholarship fund for employees.

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• Will establish “Starbucks University” branch of Stern Business School for high potential employees who want to pursue MBAs.

• Starbucks will underwrite tuition costs and provide scholarships.

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Why Do This?

•Most coffee drinkers become hooked in college.

•Research: Students in NYC spend an average of $45 a week on beverages -- $79 during exam weeks -- $125 a week on fast food.

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Why Do This?

•Students will spend more if product is available on site.

•Schultz sees the academic market as the final untapped frontier and is driven to capitalize on it before competitors.

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Why NYU?• NYU will be a showcase

pilot … if it succeeds here it will work anywhere.

• One of the largest private schools in the U.S.

• Affluent student population. – Students have more

expendable income for impulse purchases.

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Why NYU?

• Growing graduate population – already regular Starbucks customers. – Many come from New York, a

huge Starbucks market.

• But they purchase Starbucks off-campus or buy coffee at other neighborhood coffee houses/delis.

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What’s in it for NYU?

• School looking to manage costs, utilize dead space.

• Wants the cache of being associated with Starbucks and draw for students.

• Recruiting: Students who come here want access to brands they’re familiar with.

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What Starbucks Needs from Us

• A communications plan that will help launch the new pilot, builds awareness of the Campus Café concept among:– Potential academic clients– NYU community and

employees

• While building good will with Starbucks customers and the general public.

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• External PR (local, national, trade/academic press). – Raises awareness of Campus

Café concept among key external constituents

– Paves the way through favorable press coverage for eventual expansion to college campuses nationwide

– Opens doors to Starbucks and provides them exclusive rights to build/sell products over competitors

– Ties in closely with marketing efforts and leverages both traditional and social media channels.

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• Internal campaign should tell employees everything they need to know about Campus Café concept, why it is being done, the opportunity it represents, and what it means for employees.

• The company has an employee intranet, the Starbuck Portal, newsletter, Starbucks Times, and a magazine, Starbucks.

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• Promotional campaign to encourage students to try the pilot and provide incentives that will encourage repeat purchases.

• Will coincide with an advertising campaign that is being developed separately.

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What Else You Should Know

• CEO Howard Schultz is very demanding and wants us to secure every potential external opportunity to build interest in Starbucks’ entrée into the academic market, and enhance Starbucks appeal to students.

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A Final Word …

• Sept. 20, 2015 is Grand Opening.

• Ceremony will feature school officials and Schultz.