Starbucks Verismo

1. Caleb Burton
Leslie Lawson
Shellie Vornhagen
Paul Waller
Karen Wellman
December 2, 2013
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2. Starbucks Mission
Our mission: to inspire and nurture the human spirit – one person, one cup and one
neighborhood at a time.
Here are the principles of how we live that every day:
Our Coffee
It has always been, and will always be, about quality. We’re passionate about ethically
sourcing the finest coffee beans, roasting them with great care, and improving the lives
of people who grow them. We care deeply about all of this; our work is never done.
Our Customers
When we are fully engaged, we connect with, laugh with, and uplift the lives of our
customers – even if just for a few moments. Sure, it starts with the promise of a perfectly
made beverage, but our work goes far beyond that. It’s really about human connection.
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3. Coffee Timeline






1971: The first Starbucks opens in Seattle’s historic Pike Place Market. 1982
Howard Schultz joins Starbucks Corp.
1998: Keurig’s first brewer, the B2000 made for office use launched. By 2003,
there were more than 40,000 commercial brewers in American offices.
2004: Keurig’s B100 home brewer was introduced.
2011: Starbucks introduces k-cups
2012: the Keurig Vue brewer was offered, which allows choice of temperature,
cup size, and brew strength. This was released to in order to increase the
choices users have in brewing beverages.[
September 2012, Starbucks announced the Verismo, a consumer-grade singleserve coffee machine that uses sealed plastic cups of coffee grounds, and a
"milk pod" for lattes.
© 2011 Starbucks Coffee Company. All Rights Reserved. Company

4. The Dilemma for Starbucks

One touch brewers such as the Keurig system created a new market segment
based on the convenience of home brewing

Single-cup category is growing 9 times faster than the overall coffee category.

The rapid growth of this market caused Starbucks to introduce a line of coffees
compatible with the Keurig

Starbucks later creation of their own home brewer the Verismo poses an
interesting question:
◦ How does Starbucks compete in a segment counter to their position as “the
third place”, and in which they have already manufactured a product for their
competition?
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5. The Current Big Picture
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6. Current Big Picture Commercial
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7. Current
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8. Verismo: Current
STP
Execution
Segmentation
Business
Objective
FE: Starbucks
Marketing
Objective
Source of
Volume
Stimulate
Demand
Retention
Dynamic: Need
for Quality
Credence
Price
Targeting
Place
Quadrant 2
Core
Competence:
Skill @ Coffee
Beaning
Skill @ Marketing
Main: Need for
Convenience
Value
Category:
Luxury
Brewing
Benefit:
Need for Quality
Product
Enjoys
convenience,
but still desires
high quality
Product Time
(Speed)
Promotion
Positioning
Image
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9. The Verismo: What Went Wrong?

Current strategy is attempting to retain the Starbucks loyal customers by adding
value and expanding their experience creation to the home.

By producing Starbucks branded K-cups they raised the importance of the
Keurig and single-cup brewing at home.


This strategy abandons the successful positioning of Starbucks as the “third
place”
Has the potential of cannibalizing in-store sales.
© 2011 Starbucks Coffee Company. All Rights Reserved. Company

10. The Proposed Big Picture
Verismo
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11. Verismo: Proposed
STP
Execution
Segmentation
Business
Objective
Marketing
Objective
Source of
Volume
FE: Starbucks
Verismo
Acquisition
Stimulate
Demand
Product
Main: Need for
Convenience
Dynamic: Need
for affordable
luxury
Emphasize
Search
Price
Trial/Value
Category:
Luxury
Home Brewing
Targeting
Benefit:
Need for
Convenience
Requires
convenience, bu
t doesn’t want to
be limited in
choice
Quadrant 1
Place
Product
Expertise
Promotion
Core
Competence:
Skill at Real
Estate
Skill at Logistics
Skill at Coffee
Beaning
Positioning
Awareness/
Information
See 5 Box
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12. Business Objective
Benefit
Convenience, without
sacrificing quality
Strategic
Asset
Stores,
Distribution Channels
Core
Competencies
Skills @ Real Estate
Skills @ Logistics
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13. While Starbucks has a solid, heart loyal
customer base, this is a relatively new
category, so their focus should be on
acquiring customers into the luxury home
brewing category.
To compete in this category, Starbucks
should look to be the leader and adopt a
stimulate demand approach rather than
try to steal shares from smaller
competitors.
Marketing Objective
Stimulate Demand
Steal Share
Source of Volume
Acquisition
Retention
Emphasize category
variable
Emphasize category
variable
Grow the category
Focus on increased
consumption
Emphasize dynamic
variable
Emphasize dynamic
variable
Try to win users over to
your brand
Increase consumption of
your brand
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14. Coffee Industry Snapshot
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15. Coffee Industry Snapshot
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16. Starbucks Financial Performance
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17. Segmentation
MAIN VARIABLE
DYNAMIC VARIABLE
Need for convenience
Need for affordable luxury
Emphasis on Main Variable
Same great Starbucks taste, in the comfort of your home!
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18. Competitive Landscape Keurig
SLOGAN:
“Brewing excellence one cup at a time”
ADVANTAGES:



Keurig was the first to market in single-cup brewing.
Convenience and simplicity.
Keurig systems fill the gap between lower end mass-market coffees in a can,
and true high-end specialty coffee
DISADVANTAGES:

Only brews coffee and lacks variety from other coffee based drinks
AVILABILITY: Macy’s,
$99 - $149
Kmart, JCP, Sears, Bed Bath & Beyond, Target, Meijer, Wal-Mart.
$119 - $149 or $229 special edition
$229
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19. Competitive Landscape Tassimo
SLOGAN:
“What makes a perfect cup of coffee? Tassimo knows.”
ADVANTAGES:
Ease of use.
DISADVANTAGES:

Lower quality and bad press from recalls
 On February 9, 2012 about 835,000 coffee makers were recalled in the
United States after reports of the brewers spraying hot liquid, coffee
grounds or tea leaves onto people.

AVAILABILITY: HSN,
Bed Bath & Beyond, Target, Macy’s, and Wal-Mart.
Tassimo MSRP $99 - $169
© 2011 Starbucks Coffee Company. All Rights Reserved. Company Confidential.

20. Competitive Landscape Nespresso
SLOGAN:
“The perfect cup – every time”
ADVANTAGES:


Provides the ultimate gourmet coffee experience from the use of premium
coffee to the technology that brings out the coffees flavor.
Unlike Keurig, the Nespresso machine is designed to create customized coffee
drinks such as espressos and lattes
DISADVANTAGES:

The priced as a high end brewer
AVIALABILITY: Crate
La Table.
& Barrel, Bed Bath & Beyond, Target, Macy, William Sonoma, Sur
$129 - $699
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21. Verismo

SLOGAN: “Impossible until now”

ADVANTAGES:
 Affordably priced
 Allows for customized drinks such as espresso and lattes
 Starbucks is known for its quality coffees

DISADVANTAGES:
 Competing with Starbuck’s K-cups for Keurig
 Competes with in-store sales

AVAILABILITY: Starbucks, Walmart, Amazon, Bed Bath and Beyond, and Williams
Sonoma
$159
$99
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22. Need for Affordable Luxury
Plot the Market
Starbucks
including
Verismo
N
Nespresso
Tassimo
Keurig
T
Need for Convenience
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23. Target Audience Description
Kristen is 35 and works from home most days as an IS Portfolio Strategy Consultant.
Because she works with customers all over the globe she sometimes has conference
calls early in the morning or late at night. She is on call at any hour and is quite busy. She
drives a Lexus CT 200 h Hybrid and her husband drives a Toyota Avalon Hybrid; both
offer luxury and gas savings, which are important to her. Her husband travels during the
week for work so the two of them enjoy their quality time at home. They have been
married for one year. Recently they took an all-inclusive trip to a 5 Star Jamaican resort
that they purchased on Groupon. She works out every day in the gym located in her
building. She frequently shops for clothes at Target and Nordstrom Rack because she
can to purchase the designer lines for less. She also shops on Amazon quite frequently as
they will deliver right to the house. She buys her groceries at Whole Foods and Trader
Joes because the quality ingredients and social responsibility are important to her. She
frequently uses them to cater parties she hosts because it is convenient and offers
superior taste.
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24. Current Belief
Value Proposition
• I can’t make luxury coffee
at home.
• Now you can combine the
convenience of home
without compromising on
taste
Desired View
• I can enjoy high quality
coffee and espresso
beverages at home.
RTBs
Starbucks knows quality
coffee.
Specialty drinks made easy
with one touch.
Refills located conveniently
in all Starbucks shops
Convenience of home
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25. Proposed Big Picture Commercial
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26. 26
Questions?
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