Sta
ucks 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
Sta
ucks: 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
een fictionalized for pedagogical purposes. To order copies or request permission to reproduce materials, call XXXXXXXXXX-
7685 (or XXXXXXXXXXoutside the United States or Canada) or e-mail XXXXXXXXXX. 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
Sta
ucks: Driving Growth Through
New Dining Occasions
When Howard Schultz returned to Sta
ucks as CEO in early 2008 after eight years, he
concluded that Sta
ucks had lost its way in its quest for growth. In an interview in 2011, he
commented that growth at Sta
ucks 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
ecomes seductive and addictive. He set about returning Sta
ucks to a more disciplined approach
to growth.
In the first few years, Schultz focused on the fundamentals—returning Sta
ucks to its roots of
creating a national
and around coffee and offering a unique experience in the Sta
ucks 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
ands like VIA instant coffee to leverage
the Sta
ucks retail store footprint.
The Five-Year Growth Plan—2014 to 2019
In December 2014, Sta
ucks 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
illion), doubling operating income, and operating more than 30,000 stores globally by 2019.
1 Allen We
, “Sta
ucks’ Quest for Healthy Growth: An Interview with Howard Schultz,” McKinsey Quarterly,
March 2011, http:
www.mckinsey.com/global-themes/employment-and-growth/sta
ucks-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 Sta
ucks, 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: Sta
ucks 2014 Investor Day Presentation.
To achieve these ambitious growth goals, Sta
ucks 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 Sta
ucks
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
Sta
ucks
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
Sta
ucks
and to
unlock
profitable
growth
arely seen
in CPG
5
Build
Teavana
Create a
second
major
usiness in
tea
6
Extend
Digital
Engagement
Drive
convenience
and
and
engagement
through mobile
commerce
platforms
7
Source: Sta
ucks 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 Sta
ucks 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
eakfast and
morning coffee occasion. Sta
ucks urgently needed to increase its relevance for the other dayparts.
Figure 3: Revenues by Daypart for the U.S. QSR Market and for Sta
ucks
15%
46%
85%
54%
TOTAL U.S.
QSR BUSINESS
Morning
Lunch
Afternoon
Evening
Source: Sta
ucks 2014 Investor Day Presentation.
Sta
ucks aimed to generate at least $1 billion in incremental revenues from the other dayparts
y 2019. The company’s vision was to be relevant to customers across the entire day. Customers
could begin the day by
ewing Sta
ucks coffee at home with K-Cups in their Keurig
ewing
machines. They could then order a mid-morning delivery of coffee to their desk or grab a coffee
everage from the Sta
ucks 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 Sta
ucks
smoothie. After work, they could stop by Sta
ucks with co-workers to unwind with a glass of wine
and small plates. With this vision in view, Sta
ucks 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 Sta
ucks
Source: Sta
ucks 2014 Investor Day Presentation.
Growing the Afternoon and Evening Dayparts
Lunch
As part of the goal to evolve Sta
ucks into a food destination across multiple dayparts,
the company aimed to grow its lunch offerings by expanding its
eakfast sandwich platform.
Sta
ucks expanded its lunch menu with new salads and sandwiches, including a ba
ecue beef
isket sandwich on sourdough
ead and a chicken artichoke panini on ancient grain flat
ead
(see Figure 5).
Sta
ucks 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 u
an stores where people would be likely to grab a bistro box for lunch along with
their morning coffee.
To accelerate its push into food, Sta
ucks acquired the Bay Area bakery chain La Boulange in
2012 for $100 million. In September 2015, Sta
ucks 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
and would live on in the form of La Boulange food products
inside Sta
ucks 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 Sta
ucks
Source: “Sta
ucks Introduces a New Chicken Artichoke Panini,” press release, April 27, 2015, https:
news.sta
ucks.com/news
sta
ucks-introduces-new-panini-nationwide.
Evenings
In August 2015, Sta
ucks launched the Sta
ucks Evenings program in select stores in Florida
and New York after piloting the program several years earlier at a single location in Seattle. The
Sta
ucks Evenings offerings included a selection of wine and craft beer along with small plates
like truffle mac and cheese and flat
eads (see Figure 6 for a sample Sta
ucks 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. Sta
ucks 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 Sta
ucks in the evening.
Sta
ucks also redesigned stores’ seating a
angements to accommodate the Evenings program.
Stores with the Evenings offering featured lounge seating, areas for larger groups, community
tables, and exposed
ick walls. Wine and beer were carefully curated. Sta
ucks 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 Sta
ucks Evenings
Source: Jason Notte, “How a Sta
ucks with Beer and Wine Actually Works,” The Street, March 27, 2014, https:
www.thestreet.com/
story/ XXXXXXXXXX/1/how-a-sta
ucks-with-beer-and-wine-actually-works.html.
Sunset Menu
Sta
ucks also focused on the post-lunch daypart by launching a “Sunset” menu that would
e 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
ownie 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. Sta
ucks positioned the Sunset menu as a “refreshing
way to jump-start your evening and take you into a long summer night.”2
Sta
ucks was betting that the time-specific Sunset menu would persuade the morning
Sta
ucks 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 Sta
ucks Frappuccino and
Sta
ucks already offered pastries, cookies, and other desserts.
2 “Granitas and Trifles on Sta
ucks New Sunset Menu,” press release, June 14, 2016, https:
news.sta
ucks.com
news/granitas-and-trifles-on-sta
ucks-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 Sta
ucks
Source: “Granitas and Trifles on Sta
ucks New Sunset Menu,” press release, June 14, 2016, https:
news.sta
ucks.com/news
granitas-and-trifles-on-sta
ucks-new-sunset-menu.
Challenges with the New Occasions Strategy
Sta
ucks needed to be careful in pursuing the New Occasions strategy in its quest for “healthy
growth.”