Starstruck: Mall Owners Relocate others for Starbucks

Brands that are being shunted to less attractive locations to accommodate the coffee chain are not amused

A joke doing the rounds on Twitter these days is that the wait outside Mumbai’s first Starbucks coffee outlet at Horniman Circle is so long that a smart alec has started selling tea to those standing in the queue.

Starbucks Coffee Logo

Starbucks Coffee Logo

This kind of consumer frenzy is music to the ear of mall owners in India’s big cities. Sensing a huge opportunity, many of them are offering the American coffee chain preferred locations within their malls, sometimes even at the cost of relocating a brand that is already present at the location.

It’s not as if the mall owners are expecting premium charges. They just want Starbucks as an anchor tenant as such iconic brands can bring home the much desired footfalls; and also inspire other quality labels to set up shop in their malls.

Starbucks had said that it plans to open 50 stores by the end of the year in Delhi and Mumbai. That plan may or may not materialise, but the coffee retailer surely is on the fast track to sign up new spaces. “For some international iconic brands, mall developers will be willing to bend backwards as they can improve the tenant mix,” says Jaideep Wahi, director, retail agency at Cushman & Wakefield India, a property advisory firm that helps companies such as Starbucks find store space.

The Ambience group has signed up Starbucks for two of its malls in Gurgaon and Vasant Kunj in the capital. At the Gurgaon mall, a brand that was on the ground floor is being relocated to another part of the mall to accommodate the coffee house.

“I am relocating a brand for Starbucks as we wanted to give them an indoor-outdoor combination,” says Deepti Goel, head of leasing at Ambience. Starbucks is negotiating for space at another mall in south Delhi. Arjun Sharma, the director of Select Citywalk mall in Saket says he would love to move brands around for the iconic brand. “It’s a relevant brand. It’s a great brand. We always seek marquee brands to improve our tenant mix,” he said.

Another developer in Mumbai, requesting anonymity, said he was even willing to compensate an existing store operator if he vacates his current location.
A Tata Starbucks spokesperson declined to comment on queries sent by ET.

The enthusiasm to put up Starbucks has caused heartburn among a few brands that have been asked to relocate. “We were asked to move to a less-attractive location within the mall, even though the mall owner agreed to give us favourable terms. But it still can’t make up for losing a premium location,” says a manager with an apparel brand, who did not wish to be identified for risk of antagonising the mall owner.


Starbucks, Kraft Foods to Launch Starbucks Coffee in France, Germany

RTTNews –  Following the expansion of their relationship in Europe and the launch of packaged Starbucks coffee in Switzerland in September 2008, Starbucks Corp. and Kraft Foods announced on Thursday that the companies will launch packaged Starbucks coffee in select supermarkets in France and Germany.

Beginning March 2009, French consumers will be able to purchase a selection of ground Starbucks coffee and Tassimo T-Discs at select Monoprix supermarkets. Starbucks currently has 48 coffeehouses in France.

By April 2009, German consumers will find ground and whole bean Starbucks coffee at select supermarkets, while Tassimo T-Discs will be sold nationwide. Starbucks currently has 140 coffeehouses in Germany.

Source: RTT News

Coffee war brews between McDonald’s, Starbucks

NEW YORK (CNN) — McDonald’s new ad campaign is taking a non-too-subtle jab at Starbucks.

Residents in Seattle, Washington, the birthplace of Starbucks, can now see approximately 140 McDonald’s billboards emblazoned with “large is the new grande” or “four bucks is dumb.”

In a statement released Thursday, McDonald’s called it “a light-hearted, fun approach to our brand,” aimed at promoting the company’s McCafe coffee products. However, Starbucks is not finding the ad campaign funny.

“Comparative campaigns are all well and good but only when they’re credible and authentic. If the claim is not supportable or the tone is off, you risk losing credibility,” Deb Trevino, director of global communications for Starbucks, told CNN.

A 12-ounce cup of coffee at Starbucks in Seattle costs just $1.40, only a penny more than the average price for a same size cup at McDonald’s.

Credibility is something that Starbucks claims it is not short on. A portion of coffee sales currently goes towards health care for Starbucks’ baristas, while another goes towards helping AIDS victims in Africa, according to the company.

“We will not enter into a tit-for-tat,” Trevino said. “Our customers are interested in more than just the coffee, they come for the experience.”

For now, McDonald’s said it does not plan to take its “four bucks is dumb” campaign nationwide

Starbucks: How Growth Destroyed Brand Value

Founder and CEO Howard Schultz had a great concept, and it worked for a while. But too many new stores and diverse products changed the experience

Starbucks announcement that it will close 600 stores in the U.S. is a long-overdue admission that there are limits to growth.

In February 2007, a leaked internal memo written by founder Howard Schultz showed that he recognized the problem that his own growth strategy had created: “Stores no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store.” Starbucks tried to add value through innovation, offering wi-fi service, creating and selling its own music. More recently, Starbucks attempted to put the focus back on coffee, revitalizing the quality of its standard beverages. But none of these moves addressed the fundamental problem: Starbucks is a mass brand attempting to command a premium price for an experience that is no longer special. Either you have to cut price (and that implies a commensurate cut in the cost structure) or you have to cut distribution to restore the exclusivity of the brand. Expect the 600 store closings to be the first of a series of downsizing announcements. Sometimes, in the world of marketing, less is more.

Schultz sought, admirably, to bring good coffee and the Italian coffee house experience to the American mass market. Wall Street bought into the vision of Starbucks as the “third place” after home and work. New store openings and new product launches fueled the stock price. But sooner or later chasing quarterly earnings growth targets undermined the Starbucks brand in three ways.

First, the early adopters who valued the club-like atmosphere of relaxing over a quality cup of coffee found themselves in a minority. To grow, Starbucks increasingly appealed to grab and go customers for whom service meant speed of order delivery rather than recognition by and conversation with a barista. Starbucks introduced new store formats like Express to try to cater to this second segment without undermining the first. But many Starbucks veterans have now switched to Peets, Caribou and other more exclusive brands.

Second, Starbucks introduced many new products to broaden its appeal. These new products undercut the integrity of the Starbucks brand for coffee purists. They also challenged the baristas who had to wrestle with an ever-more-complicated menu of drinks. With over half of customers customizing their drinks, baristas hired for their social skills and passion for coffee, no longer had time to dialogue with customers. The brand experience declined as waiting times increased. Moreover, the price premium for a Starbucks coffee seemed less justifiable for grab and go customers as McDonald’s and Dunkin Donuts improved their coffee offerings at much lower prices.

Third, opening new stores and launching a blizzard of new products create only superficial growth. Such strategies take top management’s eye off of improving same store sales year-on-year. This is the heavy lifting of retailing, where a local store manager has to earn brand loyalty and increase purchase frequency in his neighborhood one customer at a time. That store manager’s efforts are undercut when additional stores are opened nearby. Eventually, the point of saturation is reached and cannibalization of existing store sales undermines not just brand health but also manager morale.

None of this need have happened if Starbucks had stayed private and grown at a more controlled pace. To continue to be a premium-priced brand while trading as a public company is very challenging. Tiffany faces a similar problem. That’s why many luxury brands like Prada remain family businesses or are controlled by private investors. They can stay small, exclusive and premium-priced by limiting their distribution to selected stores in the major international cities.

Starbucks to open 150 more European locations

NEW YORK (Reuters) – Starbucks Corp (SBUX.O: Quote, Profile, Research) is boosting its European presence with plans to license 150 new locations in Britain, France and Germany over the next three years in a deal with UK group SSP, Starbucks said on Thursday.

The coffee shops are to be opened at airports and railway stations and come as the chain looks to offset a slumping U.S. market with overseas growth.

Earlier this month Starbucks opened its first coffee shop in Argentina through a Mexican partnership.

The European deal is Starbucks’ largest licensing agreement outside the United States, according to The Wall Street Journal, and could test Europeans’ appetite for yet more take-out coffee.

“This collaboration aligns with our strategy to accelerate growth in our international business,” Starbucks CEO Howard Schultz said in a statement.

“It provides us with a strong platform to further expand the Starbucks brand across Europe.”

SSP is a food-retail operator that already runs three airport Starbucks and also operates Burger King and Pizza Hut outlets.

In November Starbucks reported its first quarterly drop in U.S. customer traffic to established stores and the trend has continued.

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