Brand Health Check - Feb08

Bucking the trend

How does Starbucks win back appeal and get consumers spending again.

To some, Starbucks may represent Americanisation, but despite the negative connotations the terms may have in the East, the brand was managed to deliver on the promise of an ‘experience' and has to a large degree, successfully expanded throughout the region.

However, recent times have proven to be a little trickier for the brand than before and 2008 began with chairman, Howard Schultz, reclaiming the chief executive chair - booting out former CEO Jim Donald in the process.

The company, which has more than 15,000 stores worldwide, appears to be losing the brand essence that Starbucks was supposed to represent - it's no longer a cosy coffeehouse. A point not lost on Schultz who, in a leaked memo last year, said that the company's aggressive growth had led to a watering down of the Starbucks experience.

Closer to Asia, the brand faced an internet-created campaign of hostilities towards the Starbucks chain at the Forbidden City. Perhaps the target of unfair criticisms for its outlet at the historical / tourist attraction, and with China to undoubtedly play a big part in the brand's future plans, the company wisely gave in to the wave of pressure and shut its store on 13 July 2007.

Named after the first mate in the novel Moby-Dick, Starbucks is the largest coffeehouse company in the world and has expanded into areas far beyond latte brewing. Through its Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film.

How does the largest coffeehouse brand in the world get consumers to continue to think of Starbucks not as another coffee chain but as a coffee ‘experience'? Our branding experts have their say.

Diagnosis

I'm from Melbourne where independent cafés rule. When I moved to Singapore with chains being pretty much the only choice, I was bitterly depressed over where to get my café fix. Sessions of therapy later, I settled upon accepting Starbucks as the best option and a fairly good compromise. Chain stores' homogeneous offering isn't really my cup-of-tea, however as I sit in Starbucks writing, I'm actually enjoying my tall latte ‘experience'.

So what changed for Starbucks? Operational streamlining has made the ‘experience' less charming. Over exposure further adds to brand dilution. But really not a lot has changed for the worse. A 50% drop in the stock price is no doubt a serious concern but this is a financial analysis issue rather than criticism on brand provisions. One could argue that the stock was overvalued and a correction took place with the slide continued due to insufficient remedies.

Starbucks' mantra of selling an ‘experience' (coupled with premium product) remains relevant. Experiential branding introductions are necessary to create the attractive warmth the brand always aimed for, which will undoubtedly reinvigorate consumer interest and set Starbucks back on track.

Cure

• Eradicate unprofitable stores; maximise customer expenditure; and soundly restructure expansion plans to produce better stock valuations.
• Reduce brand dilution with inappropriate partnerships to consolidate the brand's key ‘experience' offering.
• More individuality. Develop a palette of theme variations enabling each store to be unique. Coupled with barista training to increase customer engagement and refinement of core offerings, deliver real individual experiences to reignite that shining star and make more bucks.

Zachary Lai

Creative and Brand Director

Zzo Creative

Diagnosis

The recent media buzz about Starbucks decline isn't new news. Its announcement of founder Howard Schultz being back at helm to manage the turnaround generated mostly negative reactions from industry observers.

Not everyone is convinced Howard can turnaround what is now a commoditised brand on a maturity downtrend of the life cycle curve. Its business model is post-peak and its stock's too expensive for a slow-growth, commodity pricing play. Worse still, it doesn't understand the problems confronting it - its phenomenal growth was fuelled by its ability to sell high-margin caffeine related beverages and an appealing brand offer in what was then a sexy ‘third place'. Now that place is everywhere - McDonald's, Dunkin Donuts or just any retailer who can brew coffee. The company's revival plan? TV commercials touting its holiday beverage and gift lines, slow opening of new US stores and a promise to introduce fewer new beverages.

My prognosis? Starbucks is missing the whole point. It is adopting the classic short-term, tactical advertising and cross - merchandising solutions - at best a temporary pain relief without curing the root of its problems.

Starbucks needs to uncover its unique and compelling appeal as a brand again.

Cure

• Reinvent the brand experience - forget the ‘more stores' growth plans and useless cross-merchandising such as music CDs, focus instead on being a premium brand with innovative products and a fresh, unique brand experience that constantly evolve.

• Focus on customer needs - the options are out there: healthier lifestyle trend, concern for the environment, working mums in Asia and emerging markets, and more.
• Global yet local - Focus on Asia and other emerging markets. Also, think tea culture in Asia, explore the melting pot of culture diversity in SE Asia and Latin America.

Jacqueline Thng

Managing Director

The Brand Union