please answer the questions in the screenshot based on the pdf article in memo format. you can find an example of a memo in the attached two files, it should not be more than 3 pages but you can add as much appendices and references as you want. thank you
Starbucks Brief e Address as a memo to the CEO Evaluate “New Occasions” Strategy (what kind of strategy is it?) * Opportunity * Risks & Concerns * Adjustment/Changes * How to proceed — recommendation on how to proceed with “New Occasions” Strategy Starbucks: Driving Growth Through New Dining Occasions KE1079 August 10, 2018 ©2018 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Mohanbir Sawhney. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Some details may have been fictionalized for pedagogical purposes. To order copies or request permission to reproduce materials, call 800-545- 7685 (or 617-783-7600 outside the United States or Canada) or e-mail
[email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Kellogg Case Publishing. M O H A N B I R S AW H N E Y Starbucks: Driving Growth Through New Dining Occasions When Howard Schultz returned to Starbucks as CEO in early 2008 after eight years, he concluded that Starbucks had lost its way in its quest for growth. In an interview in 2011, he commented that growth at Starbucks had become a “carcinogen” and that the company needed to pursue a strategy of healthy growth.1 According to Schultz, when growth is seen as a strategy it becomes seductive and addictive. He set about returning Starbucks to a more disciplined approach to growth. In the first few years, Schultz focused on the fundamentals—returning Starbucks to its roots of creating a national brand around coffee and offering a unique experience in the Starbucks stores. The growth strategy from 2008 to 2013 sharpened focus on the core business of coffee and pursued growth in both emerging markets and new products and brands like VIA instant coffee to leverage the Starbucks retail store footprint. The Five-Year Growth Plan—2014 to 2019 In December 2014, Starbucks announced the next phase of its growth strategy. It laid out ambitious five-year goals that included nearly doubling revenues (from $16 billion to almost $30 billion), doubling operating income, and operating more than 30,000 stores globally by 2019. 1 Allen Webb, “Starbucks’ Quest for Healthy Growth: An Interview with Howard Schultz,” McKinsey Quarterly, March 2011, http://www.mckinsey.com/global-themes/employment-and-growth/starbucks-quest-for-healthy- growth-an-interview-with-howard-schultz. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 2 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n S KE1079 k e l l O g g S c h O O l O f M a n a g e M e n t The sources of growth included new stores, new channels, new products, and new occasions (see Figure 1). Figure 1: Growth for Starbucks, 2015–2019 CHANNEL DEVELOPMENT AND OTHER BRANDS U.S. STORE COMPS (NON-FOOD) U.S. FOOD COMPSNEW U.S. STORES INTERNATIONAL COMP NEW INTERNATIONAL STORES Growth goals for 2019 $30B in annual revenue 30k+ stores globally 20X annual operating income Source: Starbucks 2014 Investor Day Presentation. To achieve these ambitious growth goals, Starbucks outlined seven strategies, including growing its core business of coffee, building a new business in tea, expanding the global footprint of stores, growing its portfolio of consumer packaged products, and creating more occasions for sales later in the day (see Figure 2). Figure 2: Seven Growth Strategies for Starbucks Be the Employer of Choice Invest in partners capable of delivering a superior customer experience 1 Lead in Coffee Build our leadership position around coffee 2 Grow the Store Portfolio Increase the scale of the Starbucks store footprint with disciplined expansion 3 Create New Occasions Grow store usage across dayparts with new product offers 4 CPG Brand Growth Focus on the Starbucks brand to unlock profitable growth rarely seen in CPG 5 Build Teavana Create a second major business in tea 6 Extend Digital Engagement Drive convenience and brand engagement through mobile commerce platforms 7 Source: Starbucks 2014 Investor Day Presentation. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 3 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n SKE1079 k e l l O g g S c h O O l O f M a n a g e M e n t Creating New Occasions A key growth strategy for Starbucks involved diversifying its revenues beyond mornings. As Figure 3 shows, the morning daypart contributed 46% of its total 2014 revenues. This was far higher than the 15% of revenues that other quick service restaurants (QSRs) got from the morning. To make things worse, competition for the morning daypart was becoming more intense, with Taco Bell, Panera Bread, Subway, and McDonald’s now competing fiercely for the breakfast and morning coffee occasion. Starbucks urgently needed to increase its relevance for the other dayparts. Figure 3: Revenues by Daypart for the U.S. QSR Market and for Starbucks 15% 46% 85% 54% TOTAL U.S. QSR BUSINESS Morning Lunch Afternoon Evening Source: Starbucks 2014 Investor Day Presentation. Starbucks aimed to generate at least $1 billion in incremental revenues from the other dayparts by 2019. The company’s vision was to be relevant to customers across the entire day. Customers could begin the day by brewing Starbucks coffee at home with K-Cups in their Keurig brewing machines. They could then order a mid-morning delivery of coffee to their desk or grab a coffee beverage from the Starbucks machine at the office. At lunchtime they could use their smartphones to order a sandwich ahead of time so that they could socialize over lunch and still be back to work within the hour. In the mid-afternoon, customers could recharge themselves with a Starbucks smoothie. After work, they could stop by Starbucks with co-workers to unwind with a glass of wine and small plates. With this vision in view, Starbucks had begun to create new products and new experiences for afternoons and evenings (see Figure 4). For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 4 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n S KE1079 k e l l O g g S c h O O l O f M a n a g e M e n t Figure 4: Expanding the Occasions for Starbucks Source: Starbucks 2014 Investor Day Presentation. Growing the Afternoon and Evening Dayparts Lunch As part of the goal to evolve Starbucks into a food destination across multiple dayparts, the company aimed to grow its lunch offerings by expanding its breakfast sandwich platform. Starbucks expanded its lunch menu with new salads and sandwiches, including a barbecue beef brisket sandwich on sourdough bread and a chicken artichoke panini on ancient grain flatbread (see Figure 5). Starbucks also introduced grab-and-go offerings, including prepackaged bistro boxes containing fruits, vegetables, crackers and cheese, eggs, or hummus. The grab-and-go offerings were placed in high-volume urban stores where people would be likely to grab a bistro box for lunch along with their morning coffee. To accelerate its push into food, Starbucks acquired the Bay Area bakery chain La Boulange in 2012 for $100 million. In September 2015, Starbucks announced that it would close all twenty- three La Boulange retail locations, as well as the two manufacturing facilities that served these locations. However, the La Boulange brand would live on in the form of La Boulange food products inside Starbucks retail locations. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 5 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n SKE1079 k e l l O g g S c h O O l O f M a n a g e M e n t Figure 5: New Lunch Sandwiches at Starbucks Source: “Starbucks Introduces a New Chicken Artichoke Panini,” press release, April 27, 2015, https://news.starbucks.com/news/ starbucks-introduces-new-panini-nationwide. Evenings In August 2015, Starbucks launched the Starbucks Evenings program in select stores in Florida and New York after piloting the program several years earlier at a single location in Seattle. The Starbucks Evenings offerings included a selection of wine and craft beer along with small plates like truffle mac and cheese and flatbreads (see Figure 6 for a sample Starbucks Evenings menu). The goal of the Evenings program was to attract customers meeting up with friends after work to unwind and socialize over a glass of wine or craft beer, accompanied by snacks. Starbucks stores traditionally had very little store traffic after 4 p.m. because few people wanted caffeine that late in the day. The Evenings program offered customers a new reason to visit Starbucks in the evening. Starbucks also redesigned stores’ seating arrangements to accommodate the Evenings program. Stores with the Evenings offering featured lounge seating, areas for larger groups, community tables, and exposed brick walls. Wine and beer were carefully curated. Starbucks used a team of sensory experts to evaluate more than 500 wines and select a list of ten wines that would be served in the stores. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 6 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n S KE1079 k e l l O g g S c h O O l O f M a n a g e M e n t Figure 6: Sample Menu for Starbucks Evenings Source: Jason Notte, “How a Starbucks with Beer and Wine Actually Works,” The Street, March 27, 2014, https://www.thestreet.com/ story/12543832/1/how-a-starbucks-with-beer-and-wine-actually-works.html. Sunset Menu Starbucks also focused on the post-lunch daypart by launching a “Sunset” menu that would be offered only after 3 p.m. The new menu options included granitas (shaved ice sweetened and topped with espresso, white tea, or limeade) and trifles (scones or a brownie topped with whipped cream and flavored drizzle). See Figure 7 for examples of the new Sunset beverages. These menu items were intended to be cool and light. Starbucks positioned the Sunset menu as a “refreshing way to jump-start your evening and take you into a long summer night.”2 Starbucks was betting that the time-specific Sunset menu would persuade the morning Starbucks customers to make an afternoon visit to try out the new drinks and treats. However, this involved the difficult task of changing people’s habits. In addition, not all the new menu items were unique. For instance, the granita was not all that different from a Starbucks Frappuccino and Starbucks already offered pastries, cookies, and other desserts. 2 “Granitas and Trifles on Starbucks New Sunset Menu,” press release, June 14, 2016, https://news.starbucks.com/ news/granitas-and-trifles-on-starbucks-new-sunset-menu. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (Fall 2022) taught by Johnny Chen, Oregon State University from Sep 2022 to Dec 2022. 7 S t a r b u c k S a n d n e w d i n i n g O c c a S i O n SKE1079 k e l l O g g S c h O O l O f M a n a g e M e n t Figure 7: Sample Beverages from the Sunset Menu at Starbucks Source: “Granitas and Trifles on Starbucks New Sunset Menu,” press release, June 14, 2016, https://news.starbucks.com/news/ granitas-and-trifles-on-starbucks-new-sunset-menu. Challenges with the New Occasions Strategy Starbucks needed to be careful in pursuing the New Occasions strategy in its quest for “healthy growth.”