Written by Ivy Kolpon
Edited By Polonius
The world renowned brand known for coffee, Starbucks Inc. is planning to branch out to a new market of coffee related products: juice. In 2012, Starbucks plans to open juice bars in a number of stores along the West Coast. Last January, the company introduced a new logo dropping the words “Starbucks Coffee.” Perhaps, the corporation is preparing its audience for their introduction into the juice market. Restaurants that currently compete with Starbucks are Dunkin Donuts, Caribou Coffee, McDonalds and other local, independent coffee shops. Starbucks will face new competition by expanding their market from coffee and snacks into the juice market. Jamba Juice Inc. serves as fierce competition for Starbucks in this industry. Currently, Jamba Juice is a leading seller of juice with 752 locations in the United States with over 30% of the industry’s market share.
However, Starbucks is not very concerned with their competition. CEO Howard Schultz is certain their business model will make their juice bars successful. Unlike their competition, Starbucks can use their stores as way to test and market their new product, Evolution Fresh juice. Starbucks sparingly spends money on advertisements for their coffee. They are popular and well-known enough that they can mostly rely on their store, cups, and word-of-mouth. They believe the same techniques will work for them as they begin to sell pre-packaged Evolution Juice and open juice bars in their cafes.
Additionally, their stores will test Evolution Fresh’s likability before introducing the product into supermarkets. CFO Troy Alstead continues to explain and defend the Starbucks brand – “we never defined ourselves as anything but retail stores.” By expanding its market into the juice industry, Starbucks is likely to attract new customers who may not be “coffee-drinkers.” However, it is important that Starbucks is careful in introducing their products. They have not introduced a new consumer packaged beverage or food product in over a year and a half. Moving too quickly can be fatal mistake to the company. Netflix lost many customers because they moved too quickly. They increased their prices and attempted to split their online streaming service from their DVD mail service. Although, they revoked the split after only three weeks, the damage had already been done. CEO Reed Hastings blamed their loss on “moving too fast” for the customers. Starbucks needs to take precautions not to make the same mistakes. CEO, Howard Schultz says “never to repeat the mistakes of the past.” To avoid moving too fast, Starbucks needs to make sure their business model is the right one. They need to be certain they are serving all of their stakeholders. Because they are removing Naked Juice from their stores and replacing it with Evolution Fresh juices, there is a potential that not all customers will be happy with the switch. What these customers may not know, is that Evolution Fresh was started by the founder of Naked Juice. Evolution Fresh is simply a more upscale version of Naked Juice. Still, some customers may not be happy with the switch. In order to ensure happy customers, Starbucks may want to consider offering a reward card of some sort (Ex. Buy 9 juice drinks, get the 10th one free).
As long as Starbucks believes the benefits of selling Evolution Fresh outweighs the costs, they should continue with their business plan. So, how does Starbucks plan to smoothly transition its way into the juice industry? Recently, Starbucks has performed some philanthropic services including creating community organizations that work to improve education and job training for young adults in Manhattan and Los Angeles. They are providing barista training at stores in these locations to high school students. Starbucks is looking to expand this program into other lower-income areas in the future. I do not think it’s a consequence that Starbucks is performing good deeds right before they make a drastic change in their company. Not only do they want to get their name and brand out there, but they want people to think of Starbucks in a positive light. Starbucks is trying to leave a good impression on the community before they introduce their new juice bars. Just in case customers do not like the change, Starbucks is trying to cover all their bases.
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Jargon, Julie. “Latest Starbucks Concoction: Juice.” Wall Street Journal. 11. Nov. 2011.
Jargon, Julie. “Starbucks Pushes To Create Jobs.” Wall Street Journal. 5 Oct. 2011.
“Starbucks Buys Juice Company Evolution Fresh For $30 Million.” Huffington Post. 11 Nov. 2011. Web. 17 Nov. 2011