Evaluate the nature and severity of store brand/ private label threat against Startbucks within premium package coffee category in four major retailers - Kroger, Target, Safeway and Publix, and uncover the reason for customers to switch from Starbucks to Store Brand.

1. Starbucks: Store Brands Threat Analysis

2. Framing
Framing
Overview of store brands threat
Consumer insights analysis
Retailer pricing strategy analysis
Summary and recommendation
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 2

3. Overview of Store Brands
Private Label represents $155M sales vs. Starbucks’ $400M
• Volume share decreased by 0.7% vs. Starbucks’ increase by 1.7% vs. Year Ago
Kroger • Not likely to be a threat
• Volume share decreased by -2.42% mainly due to price increase
Publix • Lowest price at $4.59 among the major store brands
• Not likely to be a threat
• Similar price position: $7.44 vs. Starbucks’ $8.36
Safeway • Base volume increase 22.5% vs. Starbucks’ 3.2%
• Likely to be a threat
• Similar price position: $7.68 vs Starbucks’ $6.60
Target • Base volume increase by only 11.4% vs Starbucks’ 1.6%
• Likely to be a threat
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 3

4. Demographic Segmentation
Area Type
Suburban area
Education
High school graduate, some college but no degree, bachelor degree
Ethnicity
Caucasian
Income
$15,000-$99,999
Gender
Female
Age
35-64

5. Analysis 1 Perception comparison across brands
Attribute Performance Starbucks Store Brands Differences
Scale 1-7 Mean Mean (Significance)
Taste 6.31 5.02 1.29**
Price 4.84 5.62 -.78**
Variety of flavors 6.07 5.04 1.02**
Is all natural 5.64 4.42 1.22**
Brand reputation 6.29 4.80 1.48**
Ingredient quality 6.16 4.84 1.31**
Packaging 5.84 5.27 .58**
Availability in store 5.93 5.62 .31
Size of packages 5.78 5.47 .31
Is fair traded 5.67 4.71 .96**
Ease of preparation 6.24 5.56 .69**
Item is on promotion 5.04 5.38 -.33
Is organic 5.42 4.35 1.07**
T-test of Significance for the Product Attributes ** is p value < .05 and * is p value <. 1

6. ANALYSIS 2: FREE TEXT
Analysis 2 Free Text
Analysis 3 Why do people who prefer Starbucks buy Store Brands as well
Reason Frequency %
Like variety 18 72
Price leads me to switch 12 48
Attracted to new brand 11 44
Multiple tastes in household 10 40
Switch because dissatisfied 2 8
See little difference in brands 2 8

7. Analysis 4 COMPARISONS OF ATTRIBUTE IMPORTANCE ACROSS SEGMENTS
Multi-attribute Items by level of
Starbucks Store Brands Differences
importance (1, not at all important - 7,
very important) (Significance)
Taste 6.7 6.4 0.3*
Price 5.8 6.3 -0.5**
Variety of flavors 5.4 3.8 1.6**
Is all natural 5.4 4.3 1.1**
Brand reputation 5.7 4.1 1.6**
Ingredient quality 6.3 5.6 0.7**
Packaging 4.8 3.6 1.2**
Availability in store 6.0 5.8 0.2
Size of packages 5.5 4.9 0.6
Is fair traded 5.2 4.4 0.8*
Ease of preparation 5.8 5.8 0
Item is on promotion 5.4 4.5 0.9**
Is organic 4.6 3.4 1.2**
T-test of Significance for the Product Attributes ** is p value < .05 and * is p value <. 1

8. Strategies by Retailers
Consumer Price Expectation
Optimal Competitive Optimal Competitive
Price for 12 Price for 12 oz Price for 20 Price for 20 oz
oz Bag bag oz Bag Bag
Overall Brand $6.99 [$5.99,$7.49] $8.19 [$7.49.$9.99]
Starbucks $7.69 [$6.09,$7.99] $9.99 [$8.99,$10.99]
Current Price Setting by Retailer
Starbucks Store
% Change % Change
52wks- vs. Prior 52wks- vs. Prior
Store Current Year Current Year
Kroger $8.10 5.60% $5.83 13.10%
Publix $8.53 7.80% $4.59 24.30% Not much threat
Safeway $8.36 7.00% $7.44 4.50%
Target $7.68 8.60% $6.60 5.70% More premium position and
potentially more threat
1Data Source: Starbucks Packaged Coffee Pricing Threshold Survey conducted by Acosta in 2011
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 8

9. Strategies by Retailers
Kroger:
Kroger
• Price more important to Kroger brand purchaser
• Price not as important to Starbucks and Kroger purchasers
Purchased Kroger only Purchased SBUX &
at least once N Mean Kroger only at least once N Mean
Price 21 6.62 Price 15 6.13
Pub
Publix
• Price not as important
• Availability is more important
Purchased Publix only Purchased SBUX &
at least once N Mean Publix only at least once N Mean
Price 5 5.60 Price 3 5.33
• Starbucks should maintain its Premium Pricing Strategy in these
retailers while continue providing high availability and variety of
products.
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 9

10. Strategies by Retailers
Safeway
Safeway
• Price not as important to Safeway brand purchaser
• Price is more important to Starbucks and Safeway purchasers
Purchased Safeway Purchased SBUX &
only at least once N Mean Safeway only at least once N Mean
Price 6 5.17 Price 10 6.20
• Placed highest importance on taste and aroma (“Drinking coffee is
mostly about enjoying the taste and aroma”)
• Flavor is important
Strategy
s
• Reduce price little by little to further gauge consumer’s price
expectation
• Increase flavor variety of products carried in Safeway
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 10

11. Strategies by Retailers
Target
Target:
• Price is not as important to Target brand purchaser
• Price is more important to Starbucks and Target purchasers
Purchased Target only Purchased SBUX &
at least once N Mean Target only at least once N Mean
Price 5 5.80 Price 10 6.50
Item is on promotion 5 6.40 Item is on promotion 10 6.50
• Buying item on promotion also comes up as an important attribute
• Starbucks and Target purchasers also place importance on promotion (“I
tend to buy coffee on promotion or discount” is second highest sentiment
at average score of 6.2)
Strategy
:
• Starbucks already priced lowest in Target (amongst the four retailers)
• Keep pricing strategy to keep premium position
• Increase promotions (especially Display and Feat & Disp)
• Improve product variety on shelves
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 11

12. Executive Summary
 Starbucks and Store Brand consumers are very similar:
 Describe…
 Possible reasons of switching
 Safeway is positioned closest to Starbucks and represents
the biggest threat
 Reduce price little by little to further gauge consumer’s price
expectation
 Increase flavor variety of products carried in Safeway
 Target may be some threat due to price position
 Keep pricing strategy to keep premium position
 Increase promotions (especially Display and Feat & Disp)
 Improve product variety on shelves
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 12

13. Thank you
Q&A
2/3/2013 MKT 412: Market Research | Starbucks Packaged Coffee Analysis 13