Starbucks Coffee Company has evolved tremendously since it opened its flagship store in Seattle back in 1971. The company still sells coffee, certainly, but both the business model Starbucks arguably originated and the overall coffee retail landscape have seen dramatic transformations over the past 41 years.
CEO Howard Schultz— already a coffee shop owner—purchased Starbucks in 1988 and then took it public in 1992, after expanding to 165 outlets across North America. Even in the midst of this hyper-growth, however, Schultz’s goal was to operate the company like a much smaller enterprise and ensure that each store delivered the “Third Place” experience that continues to be part of the company lore.
Remember, back in the late ‘80s, a cup of coffee was no more complicated than the “Mr. Coffee” machine parked on your kitchen counter—and that’s undeniably part of the reason Starbucks became an addiction for many consumers. The company’s signature espresso confections and whole bean brews were new to many American palates, and customers streamed into stores, preferring the convenience/novelty of having baristas blend their favorite drink.
But recently, the at-home coffee experience has changed radically. Now, caffeine addicts can whip up java in a French press, a vacuum coffee maker, a stovetop espresso pot, a single cup pod system . . . or some other gadget sure to hit the retail shelves this holiday season.
With well-timed additions to its product range—from high-end espresso makers to Zia instant coffee packets –Starbucks has stayed at the forefront of the home brewing push. Although with each new item, many critics have decried that the company is undermining its core draw: the in-store beverage.
Now, that buzz is getting louder with Starbucks’ latest rollout: a Starbucks-branded single cup system. Three out of four Starbucks customers don’t yet own one any kind of single-serve coffee system, and sales in this category have skyrocketed 168% in the last year alone. With the expiration of the patent on the popular “K-Cups” for Keurig machines, the space is ripe for invasion—and there’s no question Starbucks knows an opportunity when it sees one.
But isn’t this new Verismo System just the tip of the Starbucks product iceberg? The company also sells (depending on the neighborhood) packaged treats, boxed lunches, home décor items, CDs of the music played in-store, a huge selection of mugs (travel and otherwise), coffee table books, toys . . . you name it. Starbucks also licenses product lines to grocery stores (primarily beans, instant coffee, prepared cold coffee drinks and cookies.) Whew!
Of course, it’s this iceberg-sized list that puts Starbucks squarely in the sights of brand strategy mavens, who complain that the original Starbucks brand is slowly being eroded by an ever-expanding product range. What does “Starbucks” mean to today’s consumers? If it’s not about beans and lattes, what does the brand stand for?
According to Schultz, it’s all about the experience. While the “third place” concept has always been core to the company’s efforts, his current expansion plans are more about extending the Starbucks experience to every area of customers’ lives, i.e., more home brewing options and more non-coffee products marked with the “Siren” logo.
Will the Starbucks brand continue to mean “coffee” to most of us? Will the company’s foray into another brewing technology slow the flow of customers into its stores? Is it possible for an iconic company to change what its known for, without impacting its popularity . . . or perhaps contributing to a downward spiral?
The market will ultimately decide, and analysts will be watching . . . undoubtedly with a strong cup-of-joe close at hand.