To stand out, Starbucks pushes coffee know-how
Starbucks Corp. , facing stepped-up competition from rivals and slower sales growth at established stores, is making an aggressive push this fall to remind consumers who is king when it comes to coffee.
The company on Tuesday said that in addition to its usual array of seasonal drinks and coffee blends, it will be holding coffee tastings at its North American stores and will launch a series of podcasts about coffee on its Web site.
The aim is to focus its marketing on what Starbucks says is the quality of its coffee -- something the chain said is key to set itself apart from anyone else hawking a cup of joe.
"We know that because of the level of care and passion we put into it that it translates to a better experience for our customers than our competitors can do," Jim Alling, the head of Starbucks' flagship U.S. business, said in an interview.
In recent months, fast-food chain McDonald's Corp. has made a strong push to promote its new coffee blend and rival coffee shop chain Dunkin' Donuts has launched a new advertising campaign as it seeks to expand its business into the Starbucks-heavy Western United States.
William Blair analyst Sharon Zackfia said she has seen no evidence, so far, that Starbucks customers have traded down to buying their morning coffee from McDonald's or Dunkin' Donuts.
Still, she said that as Starbucks grows, it makes even greater sense to reinforce the qualities that the company says are unique to its coffees, such as its focus on sustainable growing practices.
"As the company gets larger and larger maybe it's worth reemphasizing every once in a while just how high quality the beans are," Zackfia said. "Size doesn't necessarily translate into mediocrity."
Alling said reinforcing its primary coffee business is something the company does every fall, saying without that focus on coffee, "we would struggle."
In July, Starbucks posted its weakest monthly same-store sales increase since 2001. The company said heavy demand for cold drinks like Frappuccinos slowed service during busy morning hours, prompting customers eager for their daily jolt to walk past long lines at its stores.
Those results prompted Deutsche Bank analyst Marc Greenberg to warn in a client note that "growth may come harder as the company moves further away from its core coffee business."
But Starbucks insists it is not in danger of losing sight of its coffee heritage. To prove that, the company is celebrating its 35th anniversary this fall by inviting customers to in-store events where they will learn to taste coffees in the same way they would fine wines.
In addition, a four-episode podcast series called "Coffee Conversations" will feature discussions about home brewing, Fair Trade coffee, and coffee and food pairings with Scott McMartin, the head of Starbucks' coffee education department.
For McMartin, such initiatives are critical to maintaining Starbucks' association with quality in the minds of consumers.
"We hope we're able to show that we are a destination," he said.