Introduction
Retail companies sell products and services directly to the end-user or individual consumer, which are acquired in bulk from manufacturers. Starbucks is an American coffee retailer with a global presence owing to its coffee and tea products. Headquartered in Seattle, the corporation is currently headed by Laxman Narasimhan and has employed a strong and innovative branding strategy to establish its market presence. In the digital age, Starbucks utilizes social media accounts for customer engagement, brand awareness, and feedback collection and to launch campaigns to increase its consumer base.
Market/ Environmental Analysis
Current Market Position
Market growth defines an increase in consumers buying goods and services from a retail brand. Starbucks has recently experienced an era of growth owing to its marketing strategy moving from $23.518 billion in 2020 to $29.061 billion in 2021 (Macrotrends, 2022). Notably, this was a 23.57% increase in the money the company received from its customers (Macrotrends, 2022).
Furthermore, annual revenue for 2022 was recorded at $32.25, a 10.98% growth from the previous year, creating a strong market position for the coffee retailer (Macrotrends, 2022). Furthermore, for the quarter that ended in September, the company spent $8.41 billion, well ahead of its previous recordings (Macrotrends, 2022). These statistics accurately depict their market growth in the digital age.
Sales trends are the patterns formulated over time that are essential in boosting revenue and predicting future opportunities. An analysis of Starbucks’ sales results reveals that most purchases emanate from beverage products despite having other items such as food or packaged coffees and teas. These product sales amounted to $19.56 billion in the 2022 financial year compared to the $5.8 billion sourced from food products (Macrotrends, 2022).
According to Statista Research Department (2022), the pattern owes to the pandemic both globally and within America as sales from rural and urban areas remained consistent. Same-store sales had crumpled to 40% globally, but these statistics jumped to 73% in 2021 (Macrotrends, 2022). Higher demand for food items also contributed to the company’s sales trend.
Another aspect to gauge market position is profitability or the business’s financial gain by comparing expenses to profits. Starbucks’ profitability is improving, clocking in at $20.322 billion for 2021 and an annual profit of $21.933 billion in 2022 (Macrotrends, 2022). Furthermore, Lucas (2022) insists that earnings will increase from 15 to 20% over the next three years as more consumers buy into the brand.
Same-store sales are expected to move from 7 to 9%, generating a positive outlook for the company’s profit margin (Lucas, 2022). By 2022, the company will have over 30,000 stores in the country and expects to increase to 45,000 by 2025 (Lucas, 2022). Collating this data depicts a strong performance for the company and an even better market position due to performance over the years.
Sector/Industry Data
Customer Trends
Starbucks is a popular coffee brand that attracts upper-class customers. Their rich-brewed coffee, complimentary food items, and signature brands are distributed to consumers via same-store sales and other retail stores. There is an increased demand for cold beverages, marking a notable trend from hot ones over the years. New cold coffee experiences such as the Nitro Cold Brew and Vanilla Sweet Cream are attracting customers in cities across the United States (Durbin, 2021). The organization’s target age group is between 22 and 50 years old, explaining the unusual new trend of combining ice cream and coffee that is unique to the Starbucks Reserve Roastery in Seattle (Durbin, 2021). These customer trends have defined the company’s branding strategy.
Competitor Trends
Competitors are a vital part of the business since they help decrease monopolization and add variety to the products consumers receive. Dunkin’ Donuts is one of Starbucks’ largest competitors, with a strong national and global presence of over 12,000 stores (David, 2020). Other competitors include McDonald’s, Tim Hortons, and Costa Coffee, all of which create a highly competitive arena to establish a differentiated product and maintain a consistent customer base. Dunkin’ Donuts chose to franchise its stores and reduce administrative fees, directly lowering its product cost (David, 2020). Their focus is mainly on the middle class, which shares a demographic similar to Starbucks and presents a competitive challenge in the future.
Customer Analysis
Brands and Branding
Brand identity influences consumers’ minds by attracting and retaining a strong market base. The Starbucks brand identity is circular and utilizes green to associate the company’s products with tranquility and health (Jiang, 2020). Through marketing, the retail corporation has shaped its identity using the mermaid logo as a stepping point. Whereas earlier, the company had an outer ring on the brand image with the Starbucks name, they removed it in 2011, and market sales held steadily. This response showed the brand’s popularity without necessitating a name but rather relying purely on the color and logo imagery.
Regarding personality, it is important to note that the corporation has revolutionized coffee drinks and how consumers partake in them. Consumers expect excellent beverages and have shifted from taking them while sitting down to a general standing format. This unique aspect creates a defining personality trait further solidified by the names assigned to drinks. Terms such as ‘venti’ and ‘Grande’ are now consistent coffee shop lingo despite having easier alternatives to communicate the same. Furthermore, the company’s apt marketing and branding strategies have become synonymous with the smell of dark-roasted coffee or tea.
Brand Equity and Value
Starbucks consumers perceive the brand as a self-indulgent treat that can be undertaken at any hour of the day. The company’s logo is often on a brown burlap sleeve, which projects an eco-friendly brand, and its customers believe so (Jiang, 2020). The slender shape of the cup, in addition to the use of white as an establishing color, communicates cleanliness and sets it apart from competitors. Loyal buyers are assured of a temperature-consistent beverage with integrity and value. It is a reliable company whose products are essential to start the day positively. The air of business and professionalism only aids in reinforcing the notion of hard work and success.
The corporation creates brand equity through its customer service sector and by collecting customer suggestions. The Keller model fittingly describes its customer-based brand equity since it focuses on identity, meaning, response, and resonance (Qualtrics, 2023). Through the model, the corporation could identify its unique qualities and what interests its customers.
Buyers are invested in the company and influence its success by communicating its products to friends and family. Starbucks elicits positive feelings of dependability, and online customer feedback reflects immense trust in the company. Their brand occasionally changes to reflect the products the company sells and its future direction. Introducing new food items and drinks during holidays and differentiating them according to different locations keep consumers interested and loyal.
Branding Strategies
Brand management is a multi-faceted aspect of marketing that focuses on creating and maintaining a positive perception over time. Products prices can increase under good brand management with the additional advantage of loyal customers (Grant, 2022). Despite Starbucks being an already established company, it must constantly think of innovative and creative ways to control its perception.
A strong market position helps reduce risk in emergencies such as the COVID-19 pandemic. Due to techniques such as influential advertisements, a unique brand image, and excellent internal policy, the coffee retailer has shaped Starbucks into a successful corporation. Greater sales and strong engagement with employees additionally establish brand consistency.
The company’s main product is a coffee beverage, which was its initial sale item. Over the years, an organic line of drinks was introduced in addition to inorganic products such as cups, coffee beans, pressers, and teddy bears. The Caramel Macchiato, Mocha Frappuccino, and Coffee Ice Cream are new brand extensions of the original product (Jiang, 2020).
Internationally, the brand has introduced Red Bean Green Tea for its Chinese consumers, a Red Bean Cream Frappuccino for South Korean customers, and the Maple Macchiato in Canada. Furthermore, buyers in Argentina can now enjoy the Algarrobina, which is unique to the area and depicts the company’s effort to extend its international brand (Jiang, 2020). Finally, buyers can experience music at Starbucks joints, and they brand into creating bars that sell alcoholic beverages.
Competitor Analysis
Brand Positioning
A company’s products’ defining characteristics and personality traits are used in creating a brand position. Starbucks’s autonomy is embodied by its logo, which uses color theory and efficient imagery to capture its customers. Their heritage, domain, and values are obtained from their buyers since they are direct beneficiaries of their personality and assets. The brand image is iconic and unique to the company, which minimizes confusion in its market base. Surveys and customer feedback have identified the environment as an integral value to its consumers, and accordingly, the company’s coffee packaging has evolved to reflect these values.
A positioning strategy can range from price-based to convenience-based, depending on the market. Starbucks has opted for a customer-based strategy that relies heavily on delivering more than the customer wants. Its excellent coffee and reputation throughout its target market generate a hardcore and loyal customer base.
Furthermore, the corporation’s competitive positioning engenders its products with social commitment and environmental protection. Initiatives such as greener cups and supporting coffee farmers resonate with their base and ensure high revenues (Denman, 2019). At Arizona State University, employees are offered higher learning, setting the company apart in worker improvement and retention.
The unique characteristic that gives Starbucks a competitive advantage is its consistent commitment to innovation and growth. Unlike other brands, the company connects and communicates with its audience via technology and heavily invests in its employees. Stores are strategically located to cater to a broad audience, and its products are top-tier. Their objectives, marketing plan, and key performance indicators show a company dedicated to delivering the best products for its consumers.
Branding Strategies
Social media expansion is one route that the company has utilized to maintain brand loyalty. Their social media strategy is primarily through their official accounts, which post content relevant to the products they sell (Inbrands, 2019). In addition, the content is visually stimulating through eye-catching recipes and photography that keeps followers invested. The company’s digital branding is through a series of campaigns that are either product-based, focused on corporate social responsibility, or community-based. Some videos showcase stories of kindness or inclusion related to values commonly held by consumers.
Brand diversification relates to launching new products or services to increase the market base that is addressed. Some of the products the coffee corporation has introduced include Frappuccino or Pumpkin spice lattes, whose awareness it creates through social media postings (Simplilearn, 2022). Moreover, they have acquired the tea market, branching out from the original coffee products they initially sold. Starbucks purchased Teavana, a retail company based in Atlanta, to target that market and even opened a new branch in New York (Jones, 2020). Other ventures include beer and wine offerings and fresh juices and smoothies.
Notably, the corporation employs a multi-channel approach to market programs. They utilize websites, social media posts, and in-store advertisements to attract and retain consumers. Print media, sales promotions, events, and direct marketing ventures fill out some of the strategies used over time. The marketing programs and strategies ensure they communicate the brand’s image and target specific demographic consumers.
Brand Management
The digital age has presented new opportunities to reach new customers since the internet is a global tool. Creating a social media profile is essential to communicate brand attributes and unique characteristics from competitors. Connecting on digital platforms requires reading trends and patterns to understand where to capitalize.
However, it is incredibly effective for increasing brand awareness and establishing a permanent market presence. The customer perception of Starbucks is generally positive, as reflected in the social media posts that communicate an emotional response to the company’s products. Re-sharing these posts gains brand legitimacy and is an excellent engagement tool with other buyers.
Managing brands over time requires an intricate understanding of what makes customers loyal to the company. It is important to note changes in customer trends by assessing their feedback and social media engagement. These changes expose problem areas in the supply chain, delivery, or brand imagery, which may alienate consumers. Sustainable brands communicate, engage, and constantly update their strategies but ensure their values are consistent over time.
Potential Future Opportunities
Due to its constant state of reinvention, Starbucks has continuously grown and presented the company with excellent expansion options. CEO Laxman Narasimhan posits that their plans include increasing their operating margin and long-term growth (Starbucks Stories, 2022). The biennial investor day, scheduled for September 2022, addressed over 150 investors, all assured of an increased focus on consumer needs and preferences (Starbucks Stories, 2022). Disciplined capital allocation is one avenue the coffee retailer looks to minimize costs and increase sales growth.
More stores are one strategy that will allow the corporation to communicate its values and identity to a larger audience. With over 35,000 stores globally, Starbucks plans to expand to 45,000 by 2025 and 55,000 by 2030, marking a 57% increase (Lucas, 2022). Moreover, focusing on smaller formats or stalls improves pick-up time, delivery, and drive-through options.
Smaller stores make it easier for consumers to order items online and have them delivered in a reasonable time frame. According to Jagielski (2022), smaller locations with approximately 400 square feet are a future growth opportunity since they generate 15% more customers than their regular-sized counterparts. Rapid expansion, increased profitability, and accessibility are some of the advantages of smaller stores.
China presents a potentially huge market for the company and a growth opportunity due to its population and performance trends. Notably, every 15 hours, a Starbucks is opened in the region, necessitating a closer business relationship with the country (Jagielski, 2022). Moreover, collaboration with Microsoft will improve the company’s online presence by creating applications that cater to all aspects of their consumer’s needs. Ordering and collecting will become easier as more locations are opened, and consumers will be retained by improving their loyalty program. Recently, the company revamped its rewards system and looks to invest more in its consumers in the future.
Potential Future Threats
Nonetheless, there are a few challenges the coffee retailer needs to account for to maintain a grip on the beverage market. Customer demands are a driving force for Starbucks; however, fulfilling them is gradually becoming harder. The rising costs of their products due to the pandemic and wars threaten to drive away consumers as purchasing a cup becomes increasingly difficult for middle-class buyers. Sales have reduced by 18% in America and 14% in China as the market becomes tighter and more competitive (Tatevosian, 2022). In-store sales have dropped due to laws restricting movement and sales to curb new strains of the pandemic virus.
Operating income and expenditure are also becoming exorbitantly high, directly impacting profitability. There are multiple sellers whose size and store numbers allow for the acquisition of raw materials cheaply and minimize expenditure costs regarding employee pay. However, Starbucks’s diverse and global reach threatens to upset its profit margins and reduce revenue as time passes. Furthermore, big outlets such as Dunkin’ Donuts are stealing their customer base away, which undercuts their market position (Win et al., 2022). Imitation is an additional problem since smaller businesses tend to capitalize on the iconic brand image to get customers.
Strikes from third-party suppliers destabilize the supply chain, which is crucial in catering to a global and international audience. Properly managing the chain will become increasingly difficult as the company opens new stores and seeks newer markets. 2019 saw the strike of mid-western suppliers who disrupted that year’s sales and profit margins (Win et al., 2022). Millennials tend to favor smaller coffeehouses since large corporations appear to lack a personality and brand image. These consumers support small independent businesses, which drives away a significant portion of the company’s target demographic. Furthermore, since the pandemic is a consistent public health issue, sales may decrease as socializing laws become more stringent to curb the spread of infections.
Despite the company’s dedication to social commitment, the arrest of two African-American males in the store negatively impacted the brand’s image. In 2018, employees refused them access to the restroom facilities since they had not purchased a product, leading to a controversial reaction on social media (Win et al., 2022). Such incidences are volatile and can hurt sales if not properly addressed. An apology from the company’s CEO to both men has set the brand’s popularity back on track.
Conclusion
In conclusion, Starbucks’ branding strategy is founded on fulfilling and exceeding its customers’ expectations. Current market performance identifies the company as a highly profitable organization with consistently high profit margins. Their brand equity and value are determined by their customers, who are loyal and devoted to the company.
Through the Keller model, it is possible to see the current positioning strategy based on how the brand resonates with buyers. Whereas companies such as Mcdonald’s and Dunkin’ Donuts offer stiff competition, the beverage company’s unique brand image, identity, and personality continue to set it apart. Future growth projections indicate more store openings and a commitment to the Chinese market. However, imitator brands, strikes on the suppliers’ end, and the rising cost of coffee beans threaten the company’s brand strength and revenue growth.
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