Alcohol and Starbucks… Success or failure?

I recently read an article by Mr. Martin Bishop from Landor about Starbucks serving regional wine and beer in some of its Seattle locations. Lately, Starbucks successfully updated its identity and announced that it aims to be more than a coffee company. The brand’s little experiment clearly shows that it means it. But I think such a line extension is the wrong way to go. Let me explain why.

I always thought Starbucks’ brand promise had three pillars: First, they offer an infinite number of “consistent” drinks, which appeals to the seeker in us that looks for self-expression. You can get “the” drink you want no matter how “ridiculous” it is. Want a grande latte with half the vanilla, extra hot, and non-fat? You got it. And it does not matter if you are in Toronto or Istanbul or Hong Kong. Second, Starbucks pays attention to small details and they stand for finer things in life. Their dedication to great graphic and interior design has been exemplary. And that appeals to the dormant connoisseur in us. Finally, for everyday people like most of us, ordering a drink at Starbucks has been an education. The brand took the role of a teacher and thought the entire world about coffee. So when you combine the three, you can understand how they serve “self-image in a cup”. That’s a relevantly differentiating brand promise, which created an extremely successful company. Now, let’s see if the bistro experiment can live up to Starbucks’ promise.

Starbucks’ dedication to design is still admirable. So I don’t think the brand is going to face any difficulty with graphic or interior design. The “aesthetic” pillar is still relevantly differentiating. Also, a global giant like Starbucks is capable of offering a variety of beverages. They can serve some global brands, brew their own beer or produce their own wine. Plus, they can serve local, artisanal beverages. Offering variety of options should not be a problem, although consistent quality could be an issue. Logistically, serving alcohol is more difficult than brewing and serving coffee.

Also, will those beverages e exclusive to Starbucks? I think the “variety” pillar is relevant yet not differentiating.

Finally, they can give great education to their barristas about the drinks. But can the barristas meaningfully differentiate themselves from the waiters of the bar next door? Starbucks’ success stems from the fact that they created a new category and barristas were positioned as “teachers”. That is not the case with artisanal and local wine and beer. Yes, there is still some room for customer education. But Starbucks will be dealing with more sophisticated and educated customers. So I think this pillar is neither relevant nor differentiating.

On top of that, Starbucks can’t offer alcoholic beverages “to-go.” Even during its heydays, Starbucks was not a see-and-be-seen place. It helped people to express their individuality when someone ordered a cup “to-go”. That cup often acted as a conversation starter in friend gatherings or in a meeting room. That won’t be the case with the bistro. So what do I recommend?

I think Starbucks would be better off creating a second retail brand for their bistros, or else they might face the risk of alienating their existing customers and tarnishing their reputation. As of now, I think it would be better if the bistro does not carry Starbucks’ name. Instead, I suggest Toyota-Lexus type of brand architecture. This is definitely a more costly recommendation. But Starbucks is a big corporation that can afford it. Also, they hold so many prime locations. By converting some of their underperforming coffee shops into bistros they can save some money. By leveraging their peerless retail knowledge, they can reduce the time and effort needed to create a new bistro concept. According to the chaos theory, no two brands are the same.

According to the chaos theory, what could work for Starbucks, might not work for others and vice versa. Our next article will focus on a successful line extension from Canada: Tim Horton’s, one of Starbucks’ archrivals.

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5 Comments Add yours

  1. ohio says:

    Ze’ ev Rozov the CEO Sportingo.com had this idea granted in an interview (Sport Business magazine No126; August 2007 p74. He called it fan journalism. It may well work for Starbucks (if it is relabeled fan/drinkers experience or something) whether it positions the bistro as a product line-extension under Starbucks coffee or a product mix extension under the Starbucks name or a horizontal mix using a different company name.

    Since the fan/drinker has more knowledge about the ‘beers’ than Starbucks let them be the drivers or the educators (as you called Starbucks when it comes to coffee) of the initiative.

    According to Chris Newson, CEO Stanbic Bank “the customer needs to be the center of everything…” Starbucks Bistro beer/wine should not be about or centered around Starbucks (they do not know enough) or its ‘beer’ but around the fan educators (kind of prefer that name tag to drinker educator. It more leveragable)

    When Jim is the one who most know his knowledge about beer is top and his the one ‘serving’ Tim his friendS (yes a capital big S) will come over & bring other (un)known friends. ‘Tim’ knows ‘he is’ going to get the best of service or unique experience. Add in the 1st two pillar you mentioned with these two other unique pillars (fan-drinker educators/fan-drinker experience). BOOM!

    The old paradigm of branding (and even market entry has changed). Should we thank the internet for that, I don’t know? That’s the best approach to brand architecture I can think of. It even uses network (mouth/viral) marketing. That’s in line with ‘today’.

  2. Soydanbay says:

    Hi Ohio,
    Thanks for your detailed comment. Honestly, that is not a direction I thought off. That very well be a concept for the “stand alone” bistro. “Co” everything is the future. Co-working, co-office space, collaboration… Your concept could be the future of bistro business: Co-bistro.

  3. ohio says:

    If it is that’s good. You know with so many ideas (that think they are brands)/brands/super[Nike]brands/copy cats/Hiroshima products out there (not to talk about taxes), it gets scary, we all want to recoup the investment back quickly. In the line of this we forget the customer. That even if there a perceived non consumer loyalty about brands any more (just which does the job and at what price?) because humans will always be humans-wired the same way xillions years to infinite (evolution will never change that)- the dna part that ensures the loyalty gene does its job will do its job. Just put the customer 1st especially in tough times cause that’s what your competition will not do (companies are made up of humans not computers and many of ‘us’ making up those companies are influence by today). Cannot remember the mag I read it in (aside the ‘good book’) where it says that there (will be more) are greedy/cold hearted/self centered people around (in this part of time).

    If that is true (so far it is) that’s demography on a global scale (not even regional, men not even regional!) from an ancient book (am sure many will disagree). Only a wise/smart marketer can see it to capitalize on. If Starbucks makes the mistake of competing with the best educators (who [un]fortunately are the drinkers) instead of ‘co’ with them as you coin it… hmmm some one other than Starbucks will be in money. Hey if you tell them please give me some credit (at least you can do that) and if they buy into it give me a double credit.

    would you like to add co-ing to your vocabulary?

    1. Soydanbay says:

      Hi Ohio,

      Well, I don’t see Starbucks hiring my company anytime soon 🙂 That being said, all your comments are visible so if someday some Starbucks employees stumble upon this article, they can see the origin of the “co” idea.
      You are correct that the customer had long been an after thought. Luckily, that is changing thanks to the transparency caused by the internet. We are seeing just the tip of the iceberg, I hope.

  4. Soydanbay says:

    Starbucks Corporation (NASDAQ:SBUX) To Open The Liquor Cabinet: http://t.co/Z6ww7mV

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