In the past couple of years, Starbucks may have primarily focused its competitive woes on the increased expansion of Dunkin’ Donuts. However, the past year has seen many new competitors forging their own paths in the coffee category. American’s coffee palate has changed; we are pursuing new coffee delights like Kenyan Peaberry, Serra Negra, and Grand Cru.
Artisan coffee shops around the country are offering thicker, chewier, and more robust lattes. These shops snub Starbucks for not being able to provide the same quality coffee. This year’s United States Barista Champion is not a Starbucks employee; Pete Licata works for Honolulu Coffee, Co. out of Hawaii. The owner of Honolulu Coffee, Co. claims that his store is better equipped to offer a boutique coffee experience compared to a coffee behemoth with 13,000 doors. While many customers are still content to go to Starbucks, a growing number of customers are becoming champions of the taste experience over the convenience. Companies like Honolulu Coffee Co. and Blue Bottle Coffee hope that customers understand that their processes for drink preparation are more involved and complicated, but provide a purer coffee experience.
Starbucks is also facing stiff competition from Nestle’s Nespresso sold in ornately designed boutiques for as much as $400. Nespresso is positioned as the “ultimate coffee experience.” This experience extends to the consumer home, upscale restaurants, hotels, luxury outlets, offices, and Nespresso boutiques. With Starbucks facing competition from multiple angles, it will have to continue to innovate to provide the experience customers want. Customers are turning towards flavor and away from convenience.
1. What is the latest competitive bump for Starbucks?
Source: Kay Hymowoitz, “The Coffee Wars Get Recaffeinated,” CMO Blog, October 26, 2011
Sean McClung said:
The latest competitive bump for Starbucks is the threat of the small boutique firms like Honolulu Coffee, Co. and Blue Bottle Coffee offering higher quality coffee. As customers move away from convenience and more towards flavor, Starbuck’s sustainable competitive advantage is weakening because they provide a purer coffee experience through their higher care practices in the brewing process.
Although Starbucks does face competition in the convenience, price, and quality fronts, its unique combination of these three attributes make it well positioned for its target market. As Starbucks’s main target is young professionals, a coffee that is readily available and good quality but not too expensive is key. It is unlikely that the current target market will be willing to pay the high prices that come with extravagant coffees, it would be more beneficial for Starbucks to increase the perceived quality of taste of its coffee, especially in advertisements, than to change the brewing process in ways that could make it too expensive for its target market.