Ronald, Jared & the Mermaid?

Last week it was announced that Starbucks was successful again.

The past few years we have seen a change in consumer spending habits and some companies adjusted while others died.

On a personal note, my wife switched from Starbucks to McDonalds for her daily coffee consuption. She was motivated by price.

I have actually increased my Starbucks visits in the past year. Why? It wasn't the coffee, but the wifi service. There used to be a couple of local shops near my office that I would give my money to for a cup of java and free internet service. Problem was they went out of business or their internet was not always working.

Meanwhile Starbucks switched over to free wifi and now they get some of my coffee cash, along with a couple other locally owned coffee shops.

Over the past couple years, I've been scolding Starbucks for the way they were doing business and it turns out even though they've made plenty of mistakes, they are healthy again.

Number 3 on this list from AdAge.com:

Starbucks Becomes No. 3 U.S. Chain, Passing Burger King and Wendy's

McDonald's Is No. 1, Subway No. 2, as Burger-and-Fry Perennials Slip on Restaurant List Despite Heavy Ad Spending

Published: April 27, 2011

Starbucks, just a few years ago a flailing company closing hundreds of locations, has become the No. 3 restaurant chain in the nation, surpassing Wendy's and Burger King, according to Technomic's recently released 2011 Top 500 Chain Restaurant Report.

For years the top three chains in the U.S. were burger-and-fry heavyweights McDonald's, Burger King and Wendy's. Now Starbucks is surpassed only by McDonald's and No. 2 Subway.

According to the report, Technomic estimates that Starbucks posted about $9.07 billion in U.S. sales, up 8.7% from the prior year, giving the coffee giant 57.2% share in the coffee and other beverage category.

McDonald's, perennially No. 1 in U.S. sales, had about $32.4 billion in U.S. sales in 2010. Subway, despite having about 9,000 more locations in the U.S. than McDonald's, had about $10.6 billion in U.S. sales, according to the report.

Top 10 U.S. Restaurants, per Technomic

1. McDonald's
2. Subway
3. Starbucks
4. Burger King
5. Wendy's
6. Taco Bell
7. Dunkin' Donuts
8. Pizza Hut
9. KFC
10. Sonic Drive-ins

Burger King, on top of recent marketing-management and ownership changes, as well as being on the lookout for a new agency since it announced it was splitting with CP&B after a seven-year relationship, is facing a sales slump. According to Technomic, Burger King, No. 4 on the top 500 list, had about $8.7 billion in U.S. sales, down 2.2% from 2009. In terms of the hamburger category, as well as restaurant chains overall, Burger King could potentially lose to No. 5 restaurant Wendy's, a chain nipping at Burger King's heels with $8.3 billion in U.S. sales, according to Technomic.

In last year's top 500, which ranked chains by 2009 U.S. sales, McDonald's was No. 1 with $31 billion, Subway was No. 2 with $10 billion, Burger King was No. 3 with $8.9 billion, Wendy's was No. 4 with about $8.4 billion and Starbucks was No. 5 with just more than $8.3 billion.

Starbucks last year aggressively upped it measured media ad spending, according to Kantar, doubling it to $94.4 million, up from $47 million in 2009. Still, it doesn't come close to the measured media spending of Wendy's and Burger King. Wendy's in 2010 spent $283.4 million, down from $293.4 million in 2009, according to Kantar. Burger King, pulling back over the years on its outlay, shelled out about $301 million on domestic measured media in 2010, down from $308 million in 2009 and $327 million in 2008. McDonald's spent about $887.8 million on U.S. measured media spending in 2010, up from $872.8 million in 2010.

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The Instant Mermaid?

For all the time I spend in coffee shops, I could live without coffee.

I am working my way thru a Starbucks gift card I got this month, and somewhere I have a gift certificate to one of my favorite local shops. But I've never had Starbucks instant...

Someone has though according to AdAge.com:

How Via Steamed Up the Instant-Coffee Category

Starbucks' Premium Blend May Have Swayed Skeptics but It's Yet to Realize Goal of 'Additional Usage Occasions'

By E.j. Schultz

Published: January 24, 2011

CHICAGO (AdAge.com) -- When Starbucks entered the instant-coffee market two years ago this February, the company was not bashful, heralding the Via launch as a "transformational" moment that would "reinvent" the much-maligned instant category. And when the brand went national that September, President-CEO Howard Schultz flatly said it "will change the way people drink coffee."

REMOVING THE SHAME FROM INSTANT COFFEE: U.S. consumers have avoided ready-made brews, associating them with lower quality, but in Europe, they're the norm.

Was he right?

It's hard to argue with Via's sales results -- topping $180 million globally as of December, according to the company -- which have proven some skeptics wrong.

"I was very dubious as to its chances of successes. We just didn't see that an instant-coffee product would do well in the U.S.," said Bill Patterson, an analyst with market researcher Mintel. But "we are being proven wrong on that," he added. "They should be pretty pleased with what they've achieved."

But if the coffee giant was aiming for a radical makeover in how consumers enjoy coffee, it has missed the mark -- at least so far, said another expert.

"The whole idea that people are going to put this in their purse or briefcase and walk around with it and make their own Starbucks in a flash, I think is unrealistic," said food industry analyst Phil Lempert. Mr. Lempert, who runs supermarketguru.com, even put Via's recent flavored-coffee line extensions on his list of the worst products of 2010, offering this review: "This is one of those products where the added convenience just does not make up for the taste. Inside one of these little packets is a secret recipe of instant and 'micro ground' coffee. But the first ingredient is not coffee -- it is actually sugar. No aroma, no real coffee flavor, and for about a buck each -- no sale!"

Back in 2009, Mr. Schultz predicted that coffee lovers would incorporate Via "into their daily routine so they will never be without great coffee." In other words, Starbucks sought to increase the number of times per day people drink coffee -- or as Mr. Schultz said, create "additional usage occasions." As a result the coffee giant would not only take market share from other instant- coffee brands, but grow the entire category.

By that score there is evidence of success. Via hit grocery and drug stores in May of last year and for 2010 was already the fifth-best-selling instant coffee brand by volume in the U.S. with 10.4% market share, according to Euromonitor International. While other brands lost dollar and volume share -- including a four-point loss by market leader Folgers instant, which has 22.9% volume share -- dollar sales in the entire category grew by 15% to $704.9 million. That's a big jump for a category which shrunk three of the previous four years, with the only increase coming in 2008 at a modest 1.8% gain.

"I think Via contributed a lot of incremental volume to instant coffee," said Richard Haffner, head of global beverage research at Euromonitor International.

For Starbucks, opportunity lies in persuading skeptical Americans to try instant for the first time by enticing them with a more premium version, which, by the way, is also more expensive. Historically, U.S. consumers have mostly avoided ready-made brews, associating them with lower quality. In 2010, instant retail coffee sales in the U.S. accounted for just 8% of the overall coffee market compared with 77% in the U.K., for instance, according to Euromonitor International.

In Europe "you've got a culture where people are always boiling in the kettle for tea," said Mr. Patterson. "If you're boiling in the kettle for tea ... the easiest thing is to make coffee with the same tool."

In the U.S., Starbucks is seeking to change the coffee culture by leveraging what no other competitor has -- a network of 3,000 licensed stores that sits inside grocery stores where the company, though sampling, can increase Via awareness. "The grocery channel, the trade, would probably have no interest in a traditional new instant coffee priced at 6 times [higher than] traditional instant coffee unless it had the brand name of Starbucks and was validated in our stores," Mr. Schultz said at a recent investor conference. "And that's exactly what's happened."

But Mr. Haffner isn't ready to call it a victory just yet: "I think what will tell the tale will be [this] year and how much of the volume they generated [last] year they hang on to."

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In Defense of Starbucks

I read this commentary and it makes sense.

Still I have my reservations, not about the logo design, but what is Starbucks going to be anyway?

From Mediapost:

Unshackling Starbucks' Logo by Vikas Mittal

As our research shows, highly committed consumers react negatively to logo redesigns. To the extent that highly committed consumers are closely connected to the brand, any change can be seen as negative. This is why such changes should be deliberate and carefully managed.

Some experts also are criticizing Starbucks' move to drop "Starbucks" and "coffee" from its logo. Such criticisms may be shortsighted. Realize that major markets for Starbucks lie abroad and not within the U.S. Starbucks has about 400 stores in China and plans to triple that in the next few years. Similarly, it is set to enter India in the next couple of years with a presence in many other countries and cultures.

In such a multicultural, multilingual, and ethnically diverse marketplace, it is important for Starbucks to consolidate its logo by simplifying it, removing linguistic elements, and broadening its value proposition, which is not limited to coffee alone.

By simplifying the logo, Starbucks has obviated the need to translate the words "Starbucks" and "coffee" on its logo into many different languages as it enters regions where English is not the main language. It may seem difficult now, especially to U.S. consumers, but in the long run a visual logo without text will do Starbucks a lot of good. Obviously, the benefits will only materialize if Starbucks supports its brand positioning through marketing-mix elements such as innovative products, high-quality service, and the café ambience people have come to associate with the brand experience.

Could customers get confused if they don't see the words "Starbucks" and "coffee" enmeshed within the logo? It is possible, but not probable. Unlike branding experts who seem to focus on the logo as an isolated entity, customers are usually not presented with the Starbucks logo in isolation. In most cases, customers are in a Starbucks café and know they are buying Starbucks coffee.

When buying Starbucks products in the supermarkets, the logo is displayed on the packaging, which also shows the brand name and the product description, as well as a differentiating message. It is these latter elements that need to be adapted based on the culture and language of the various international markets. Many companies have successfully adopted such a strategy to have a global brand with local roots, and there's no reason why Starbucks cannot do that also.

Starbucks has become an iconic American brand. However, it must now reach beyond the U.S. and become a world-leading brand. From this perspective, un-shackling linguistic barriers ("must spell Starbucks in English on the logo") and crossing the product chasm ("must say coffee") is a necessary first step for Starbucks.

Clearly, Starbucks must support its logo redesign with appropriate investments and resources designed to deliver on the brand promise -- high-quality product, superior service, and distinctive psychological associations. CEO Howard Schultz has the right ideas -- and execution capacity -- in that regards. Let's sit back, take a sip, and enjoy!

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Economic Recovery is in the Beans

My wife introduced me to coffee shops when we met 10 years ago. I never had a $5 cup of coffee before.

In Fort Wayne, we saw plenty of locally owned and operated shops open and close since 2000. We still have a few mom & pops, but Starbucks arrived and they were a game changer.

At one point, we had a full size Starbucks in a parking lot outside of a Meijer SuperStore where inside they had a Mini-Starbucks!

Both of those stores survived the downsizing that Starbucks went thru a couple years ago, but some in outlying towns were shuttered.

I've come to believe that Starbucks is a good company to watch to predict the state of the economy. Because of their size worldwide, they have research in every market they are in or planning to expand to.

Also because they are an experience and not just a food product, they are less flexable with their prices than, say, McDonalds (one of my clients). McDonalds tries to be more than food, but if they doubled their prices, Ronald McDonald would be homeless.

Check out this story on Starbucks future plans:

Starbucks to Double Store Openings on Economic Recovery

By Bloomberg News - Nov 12, 2010

Starbucks Corp., the world’s biggest coffee chain, plans to more than double the rate at which it opens stores to an average of more than one a day as the global economy recovers.

“Our ability to navigate through the financial crisis and come out much stronger gives us reason to start growing the company again,” Chief Executive Officer Howard Schultz said in an interview in China’s Yunnan province today. He plans to open 500 stores in the fiscal year that began in October, with 400 outside the U.S., he said.

China, which offers the best opportunities for investment over the next year according to a Bloomberg survey, will be Starbucks’ biggest growth market in two years, Schultz said. Jinlong Wang, the restaurant operator’s China chief, said outlets in the world’s most populous nation will exceed 1,000 in the “near future.”

Coffee chain operators are expanding in the world’s fastest-growing major economy, as increasingly affluent consumers buy more beverages in coffee shops. Starbucks seeks to boost coffee consumption in China, which is at an annual 22 grams per person, compared with an estimated 3.3 kilograms in Japan, according to data from roaster Key Coffee Inc.

Still, Schultz said “one needs to continue to be mindful of the fragile nature of the global economy.”

Opportunity ‘Underestimated’

While 39 percent of 1,030 investors in the latest Bloomberg Global Poll said they were “seeing opportunity and taking more risks,” 35 percent said they were “still hunkering down.”

China topped the list of markets that offered investors the best opportunities over the next year, followed by Brazil, India and the U.S., according to the survey.

“I think the opportunity that we have in China -- we’ve underestimated it in terms of the number of stores and the reach that Starbucks is going to have,” Schultz said.

The restaurant chain’s planned store-opening rate will be the highest since the 2008 fiscal year, when it opened 1,669 stores, according to its website. The Seattle-based company closed 45 stores in fiscal year 2009 and opened 223 in fiscal year 2010, which ended Oct. 3.

Schultz didn’t specify how many stores he planned to open in China over the next 12 months.

He faces increased competition. Gourmet Master Co., operator of Taiwan’s largest coffee-shop chain, plans to increase its China outlets more than sixfold to 1,000 by 2015. China Resources Enterprise Ltd., which in June said it will acquire control over Hong Kong’s second-biggest coffee chain, last month said it plans to open as many as 1,000 Pacific Coffee shops in the country.

Market Share

Sales at China’s coffee shops more than tripled to 35 million yuan in 2009 from 11 million yuan in 2004, according to data from Euromonitor International. Starbucks dominated the market with a 69.8 percent share last year, compared with No. 2 player Jiangsu Yueda Group Co. Ltd. which operates Costa Coffee restaurants with 5 percent share, according to the researcher.

The number of specialist coffee shops in the country rose to 613 last year from 220 in 2004. Starbucks outlets comprised 59 percent of the total, while Jiangsu Yueda controlled 6 percent by the end of 2009, according to Euromonitor.

Middle-income and affluent consumers in China will probably almost triple in 10 years, Boston Consulting Group Inc. said Nov. 8. China’s economic prospects remain “sound,” the World Bank said this month. The Washington-based lender increased its estimate for the nation’s growth this year to 10 percent from a June forecast of 9.5 percent.

Schultz was in Yunnan to announce Starbucks’ plans to set up a farm and processing facilities in Pu’er county, where the namesake tea is grown. He said in April he plans to have “thousands” of stores in China.

Starbucks has about 800 stores in the Greater China region. About half are in mainland China, which doesn’t include Hong Kong, Macau and Taiwan. The restaurant chain’s first mainland China store opened in Beijing in 1999.

To contact the Bloomberg News staff on this story: Michael Wei in Beijing at mwei13@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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Starbucks Lessons

Starbucks.

I could have said, "Don't be Stupid like Starbucks", but I said that a couple years ago when they were falling apart.

And lot's of companies and brands make these same mistakes.

Now that they've worked on getting themselves upright again, here's some lessons that we can learn from their recent history as told to us by Craig Arthur:

How the Quest For Growth Can Be Disastrous for Your Business

Two valuable lessons for all business owners.

By Craig Arthur, Wizard of Ads Partner

Starbucks. The rise. The stumble. The back to basics.

*(Bolding in all quotes by editor)

In his 1997 book “Pour Your Heart into It” then Starbucks CEO Howard Schultz said…

“A company can grow big without losing the passion and personality that built it, but only if it’s driven not by profits but by values and people.”

Schultz went on to say…

“The number-one factor in creating a great, enduring brand is having an appealing product. There’s no substitute. In Starbucks’ case, our product is a lot more than coffee. Customers choose to come to us for three reasons: our coffee, our people, and the experience in our stores.”

“We could save millions of dollars every year if we bought even slightly cheaper coffee. If you can raise profits by shaving costs on your main product and 90 percent of your customers wouldn’t even notice, why not do it? Because we can tell the difference.“

”Higher profits, at the cost of poorer quality? The best people would leave. Morale would fall. The mistake would eventually catch up with us.“

”Every business has a memory. The memory of sacrificing quality for profit would have been fixed in the minds of Starbucks people forever. It would have been an impossible price to pay.“

Starbucks success was built on a Memorable Customer Experience and Prime Locations.

Aroma
”What’s the first thing you notice when you approach a Starbucks store? Almost always, it’s the aroma. Aroma triggers memories more strongly than any of the other senses, and obviously plays a major role in attracting people to our stores.“

Baristas
”The hiss of the expresso machine, the clunk-clunk as the barista knocks the coffee grounds out of the filter, the bubbling of the milk steaming in the metal pitcher, and, at the bean counter, the swish of the metal scoop shovelling out a half-pound of beans, the clatter as they hit the scale - for our customers, these are all familiar, comforting sounds.”

Brand
“Authentic brands do not emerge from marketing cubicles or advertising agencies. They emanate from everything a company does, from store design and site selection to training, production, packaging, and merchandise buying. In companies with strong brands, every senior manager has to evaluate each decision by asking: “Will it strengthen or dilute the brand?”

The CEO’s who followed Schultz should have had that quote etched on their desks.

Schultz stepped down as CEO of Starbucks in 2000, with a total 2,498 stores.

Orin Smith took the reins and at the end of his 5-year term (2000-2004) the total number of Starbucks stores stood at 8,569.

Under new CEO Jim Donald, (2005-2007) the push for expansion accelerated sharply. He added 6,414 stores in three years, bringing the total to 15,011 stores worldwide.

But in the race to please shareholders with increased turnover and increased profits, Starbucks made the major blunder of diluting the customer experience and opening stores in less than prime locations.

On February 14 2007, Schultz sent an email to the Starbucks executive team, with a subject line, “The Commoditization of the Starbucks Experience”.

Here are a few excerpts:
“Over the past 10 years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”

“For example we went to automatic expresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines.”

“This, coupled with the need for fresh roasted coffee… moved us toward the decision and the need for flavour locked packaging.”

“We achieved fresh roasted coffee, but at what cost? The loss of aroma-perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage.”

Luckily for Stabucks, Schultz took back control, and once again they are back on track, but only after a mighty big scare.

In Smart Growth, Building an Enduring Business by Managing the Risks of Growth, author Edward D. Hess wrote, “Starbucks shows that: (1) small changes can add up and can have a big impact; (2) rapid growth can dilute a company’s culture; (3) rapid growth can dilute the customer proposition; and (4) the pressure from the public market to grow can cause dilution of quality controls. All of these outcomes can result in a competitive position vulnerable to attack by new competitors.”

Business success can breed arrogance and give business owners a sense of invincibility.

And the race for business growth and increased profit can lead to business failure.

Lessons from the Starbucks experience:

1. Even a strong brand struggles in a poor location. Remember, expensive rent is the cheapest advertising your money can buy.

2. Dilute the customer experience and watch your business collapse. As a business owner you must evaluate each marketing and cost saving decision by asking: “Will it strengthen or dilute our brand?”

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Starbucks "Other Brand"

from Brandweek:

Why Starbucks Rebranded Seattle's Best Coffee

- Elaine Wong

Starbucks is brewing a fresh image for Seattle’s Best Coffee, a specialty brand it acquired in 2003. The coffee giant (last) week kicked off a rebranding effort, which includes a simpler, more contemporary logo and design. Starbucks hopes to grow Seattle’s Best into a billion-dollar business by expanding it to fast-food channels, convenience stores, drive-through restaurants and even vending machines this fall. But the coffee chain faces a challenge presented by competitors like McDonald’s and Dunkin’ Donuts; both have rolled out lower-priced coffee drinks aimed at penny-pinched consumers. That's why Starbucks is rounding up its best and brightest marketers to lead the rebranding effort. One of them is Michelle Gass, the former evp-marketing, who oversaw the launch of Via. She has served as president of Seattle’s Best Coffee since September. In an interview with Brandweek, Gass and Robson Grieve, president of Creature, the agency that worked on the rebranding, discussed the thinking behind the new Seattle’s Best image, the challenges the brand faces, and more.


Brandweek: You ran marketing at Starbucks and helped grow Frappuccino into a billion-dollar business before being tapped to oversee Seattle’s Best Coffee in September. How would you characterize the transition?
Michelle Gass: I’ve been with Starbucks for 13 years now and this has been an unbelievably exciting journey. Over the last seven months, I’ve had the opportunity to totally reinvent not only a business model, but a brand. This is one of those icons in the Seattle area, and it’s steeped in decades of history. We have really great coffee that’s approachable and great to drink and we offer a premium experience.

BW: Starbucks has looked to Seattle’s Best Coffee as its next big potential business for some time now. Why is it launching the rebranding and new logo identity just now?
MG: That wasn’t a deliberate intention on our part. The business was a nice, healthy, steadily growing business and there was just a moment in time when—and I’ve got to credit [our CEO] Howard Schultz—he said there could be something much bigger here. When you look at the history of Starbucks Coffee Corp., we do grow and develop big, emotional, meaningful brands in this world. Not just with Starbucks businesses like Frappuccino or Via [instant coffee], but Seattle’s Best Coffee has the opportunity to be one of those next, big powerful brands that is not only big, but also has a special place in people’s hearts. That is our objective.

BW: So, how did you start? What challenges and category nuances did you have to consider?
MG: We started with the history. When you go back to the early approach, in the 1970s, the brand was very [whimsical] and fun, but some of that got lost and when we assessed the market today, we thought it was time to bring a little bit of that fun back. We don’t have to take the category too seriously.

BW: What’s your goal with the new rebranding and logo effort?
MG: We are looking to create a global identity and this is not just a domestic play. We need a brand that reflects our values, and the ones I’m speaking about are fun, optimism, simplicity and mobility and also showing that with great design. When you see Seattle’s Best Coffee and all of our marketing, you’ll get a very clear picture of what we stand for.




BW: How are you looking to expand it?
MG: Just to back up, our business model is multi-faceted. We have retail cafes, but we also have many key partners. You can find us in [airlines] and in some restaurants, like Burger King. It’s important for us to design a [business model] that honors the great history that we have in Seattle’s Best Coffee, but that also brings forward those attributes that make who we are really special and that invite people [to experience the brand] in expected and unexpected ways.

[And so], we are going to innovate in many new channels and in how we deliver coffee. We have interesting and new partnerships that we’re excited about and we’re working on refreshing our approach to our retail stores and our new products. One example is we recently introduced ready-to-drink iced latte products [in major West Coast grocery, convenience and retail stores].

BW: How did you decide on the creative execution and final logo rebranding?
Robson Grieve: The thing it boiled down to was as we looked at the business plan, [we realized] that coffee was a bright spot for people and our coffee, [in particular], was a bright spot for people, whether they encountered it at a cafe or at a partner restaurant. We wanted to build a brand around this ideology . . . We wanted to take it and liberate it from this dense to dark structure and put it in a more modern form and turn it into a more flexible, universal symbol of great coffee not rooted in geography or culture, but really from place to place and all of these new places that we need to take it.

BW: Why the whole focus on premium if consumers are cutting back on discretionary spending now?
MG: There is something really big here, something that we have not fully taken advantage of and now we’re unleashing it from the shadow of Starbucks and saying, “Let’s go build another big, iconic coffee brand.” Starbucks has only 4 percent of the coffee [sales] in the U.S., and that’s less than 1 percent worldwide. So there is room for another coffee brand with a different point of view to coexist happily with the Starbucks brand.

RG: When you look at the data about consumer behavior, spending hasn’t stopped. Spending has shifted and so, people are allowing themselves certain treats or things they want and scaling back on other expenses. I think that’s a positive consumer condition [for growth].

BW: What’s the differentiating factor here?
MG: The way to think about it is that it’s really about occasions. So many times when you’re craving a great cup of coffee and can’t get it because you’re in the back of the line or there might not be a Starbucks store nearby, your ability to access that great coffee just isn’t there. So we see this wide open space to go to all of these places where traditionally there has not been a cup of premium coffee and we have an opportunity to turn the model around on its head and say, “It’s okay for a great cup of coffee to show up in new distribution models,” and new ways of thinking about coffee that the world has yet to see.

BW: Any new advertising on the way?
MG: We do have plans under way. Like our voice, [the tone of the ads] will be fun and simple and you’ll see that topic show up in all kinds of places. We’re going to start a two-way conversation with our consumers. We have plans in the works.

And now for another viewpoint, we go to BrandAutopsy:

SBC = Seattle’s Brand Confusion

Seattle’s Best Coffee (SBC) was purchased by Starbucks Coffee seven years ago. Starbucks hasn’t done much with it except to ink distribution deals with Borders and few fast food companies.

On May 12, SBC launched a “brand reinvention” project. A new logo was revealed, a Facebook page was launched, and a very confusing tagline was unleashed, “The next big thing from Starbucks, isn’t Starbucks.”

Paul Williams, former long-time Starbucks marketer, shares his smart take on the confusing brand reinvention of Seattle’s Best Coffee. Give it a read.

And give this beyond confusing video a look. It’s on YouTube and the description only helps to amplify confusion...

Wait? Does SBC seriously think they can replace Starbucks as the universal symbol for great coffee?

There are so many more confusing elements... just watch the video and read Paul’s post on what went wrong and what should have gone right.

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Crappy Customer Service

Now, I've seen some horror stories, but this is in the top ten. From Drew last week:

The bar is set pretty low

Posted: 16 Apr 2010 05:29 AM PDT

Image by Thomas Hawk via Flickr

In marketing, we talk a lot about being remarkable. We want to delight our customers. We want to create moments that they can't help talking about. In short -- we want to stand above our competition in a way that we become the brand of choice.

I'm here to tell you -- we don't have to be on all too high a step stool do just that.

Earlier this week I was in Mt. Kisko, New York conducting a social media workshop for an advertising agency. After we were done, the agency owner and I decided we needed some caffeine, so we swung through the local Dunkin' Donuts.

What I witnessed in those next 15 minutes could be a half day case course on customer care and employee relations. I'll try to sum it up.

It's around 5:00 in the afternoon, so most of the people in line (and there was a significant line) were just buying some form of coffee. There were two guys behind the counter and a manager who flies in with supplies (milk, syrups etc) and then flies out.

It's taking them forever to fill anyone's order or advance the line. People seem pretty frustrated with the two clerks -- neither of whom seem to actually know how to make many of the coffee drinks. Worse...as they are getting it wrong, they're sort of giggling about it -- clearly uncomfortable. But they're not asking the manager for help, which I observe and think is a bit odd.

Finally, it's my turn to order. I order the two coffees and the guy has to ask me 3 times what I ordered. Meanwhile, the other clerk is taking an order from an old man who is clearly agitated. The manager walks by (carrying more milk) and the old man says to him in a very loud voice, "this is the worst Dunkin' Donuts I have ever been in!" (Now before you keep reading...stop and ask yourself if a customer said that to you in front of a room full of customers...how would you react?)

The manager looks at the old man and in a very sarcastic voice replies, "thanks for the compliment." The old man shakes his head and then commences to shout at the clerk because he's making the wrong coffee. I'm thinking to myself two things: First...blog post heaven and second, this can't get any worse.

I was wrong.

After the old man leaves, muttering under his breath, the manager says to the two clerks -- "if that old guy ever comes in here again -- you tell him to go someplace else." In the next breath, he adds, "and if you two would stop talking to each other and listen (and then he shouts for some emphasis) LISTEN to the customers -- you wouldn't be getting all of these orders wrong." He continues to berate his clerks for a couple more minutes and then storms into the back of the store.

As you might imagine, the two clerks gave him a look that pretty much substituted for the finger and get back to trying to fill the order. Now I get why they didn't ask him for help.

Meanwhile, I am holding up a $10 bill because we got our coffees (mine was wrong but it wasn't worth the drama of saying so) but no one has taken my money. Both clerks nod at the other guy when I ask who I should pay. I practically have to insist that someone take my money. Finally, the kid who filled our order starts to ring us up. I remind him of what we ordered. My coffee alone should have been $3.95 but somehow he ends up charging me $4.20.

The point of this incredibly long tale? Here are some of my takeaways:

• Without training and setting a good example -- no employee can be successful
• Secret shopping is a vital investment if you own a retail establishment
• The manager/leader of an organization sets the tone for everything that happens
• As customers, our standards and expectations are incredibly low (which means it should be easy to exceed them.)
• Some people just should not have "front of the house" jobs
• It only takes one bad experience can taint the consumer's impression about the entire brand (I see and think about Dunkin' Donuts in a totally different way now)

The whole experience was a train wreck. Are you so sure that your management team and front line employees would fare better? Are you really sure?

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The Perfect Cup of Coffee

It was about 10 years ago that I was introduced to coffee shops, where you pay big bucks for a special coffee drink.

Starbucks had not yet made it to Fort Wayne, Indiana, but there were a slew of local places that were opening up.

Then the economy took a hit, and many of the local shops discovered that unless you were special, you would be out of business.

Also Starbucks came to town and opened up nearly a dozen locations. When they cut back, they closed some Starbucks in neighboring small towns, but all the Fort Wayne Starbucks remained open.

I got word this week that they are going to open a second location in downtown Fort Wayne in a new hotel that will be open 24/7.

In the meantime, the coffee wars have heated up. McDonalds improved their brew then added McCafe. Dunkin' Donuts added more stores in Fort Wayne.

Now comes word that 7/11 is going to revamp their coffee image. That's one that I'll have to live without since we don't have a 7/11 in this city anymore.
7-Eleven Revamps Coffee to Attract Younger Crowd Since 1964, when one of its franchisees first created grab-and-go coffee, 7-Eleven Inc. has always offered its No. 1-selling proprietary beverage in glass pots. In fact, customers at the chain's stores pour 1 million cups of coffee from these glass pots every day.

This year, however, that is all about to change.

After more than a year-and-a-half of research and development, the Dallas-based convenience store giant is revamping the way it delivers, presents and markets the coffee category in its stores, as it attempts to attract younger consumers. In an exclusive interview with CSNews Online, Jay Wilkins, 7-Eleven's category manager for hot beverages, spoke in detail about the retailer's new coffee strategy and goals.

While the c-store chain has no doubts about the quality and flavor of its coffee -- or how it stands up against the competition -- Wilkins said there's no denying that the consumer is constantly changing, just as new trends are always emerging.

"Coffee is an integral part of our business," he said, noting a high value is placed on the coffee customer since they are frequent visitors and very loyal. "We know we have a relatively good coffee business, but we also know we want to continue to message to and target that younger customer -- the Millennials, 20- to 35-year-olds. We want to attract new people to our stores, while also making sure we're completely respectful to our customers today."

7-Eleven's existing shoppers are mostly males in their late 30s to early 40s, but Wilkins said they're now going after a mix that's more male/female balanced and younger.

As the company's research showed, what resonates well with Millennials is different than what resonates with 7-Eleven's existing customer base, particularly when it comes to coffee. And so, the retailer is changing things up with this mind. The revamp includes:

-- Switching from glass pots to urns;
-- A new coffee bar with a modernized look and more functional layout;
-- Redesigned cups and coffee branding; and,
-- Promotions aimed at the younger demographic.

Wilkins told CSNews Online the decision was made to replace its long-standing glass pots with urns because younger customers recognize urns as "a freshness cue." 7-Eleven also determined the quality of its coffee could be better sustained with urns since they hold product at a more optimum temperature. "It's not that we want to hold product longer, but we believe we can maintain the quality better," he said.

As for existing customers, Wilkins said there will always be a few who resist -- as is the case with any change. But by and large, he expects the urns to be well received. "I think the biggest hurdle is not whether or not they like an urn; it's getting them to try it and [overcome] the mindset that 'I've made my coffee the same way for so long," he said. "Once they try the urn, they'll see that their coffee still tastes the same."

In combination with the introduction of urns, 7-Eleven took a look at its coffee bars and asked what would work best in terms of flow. With the help of a design firm, the chain created a new coffee bar to accommodate the urns and condiments. It's been several years since the physical plan of its coffee bar was revamped, according to Wilkins.

"One of the strengths 7-Eleven brings is the ability to customize coffee the way you like it. Our research shows our customer gives us a lot of credit for that," he said.

And as the coffee category has expanded with the addition of more beverage choices and condiment options, people are spending increased time at the coffee bar customizing their drinks. For that reason, 7-Eleven's new coffee bar is laid out so there is less congestion at the condiment station. Plus, in those stores with the highest coffee sales -- such as the chain's Long Island locations -- the new coffee bar provides more prep area.

7-Eleven is overhauling the coffee bar's look as well. The new one is more modern and less utilitarian. The counter where the urns sit is a dark chocolate color called mocha, while the prep stations are a lighter tan color called pinion. Everything has rounded edges, so it's easier to move around and more people can use the urns at the same time.

"The coffee bars have a nice, fresh look. We're using more current materials, and all of it has a much stronger appeal to the Millennial consumer," Wilkins explained.

In terms of the actual coffee, not much will change as of now. 7-Eleven will continue to focus on the small number of blends that drive the business. But with the new coffee bar, store operators now have the flexibility to add urns or remove urns at peak times.

"At the end of the day, we have built some layouts that meet the needs of the consumer from a functionality standpoint," Wilkins said of the new coffee bar design. "We're giving the consumer an experience that's familiar from one 7-Eleven to the next. It's not cookie cutter, but it's consistent and more functional."

The company is already testing the new coffee bar and urns in four of its high-volume Long Island stores, and recently installed the new coffee package in 14 stores along the central California coast. Starting in May, 7-Eleven plans to do an additional 20-store test of the urns and new coffee bar in Long Island's Nassau and Suffolk counties. Through testing at these high-volume coffee stores, the chain hopes to learn how to best handle traffic flow at the coffee bar, and how customers will use the urns, condiments and counter space.

As for a rollout, Wilkins said installations will be done gradually. The new coffee package will be incorporated into this year's store remodels, as well as any new builds and acquisitions. "There will a fair number of stores with it by the end of 2010," he noted.

There is one change being rolled out to all 6,350 7-Eleven stores in the U.S. and Canada: redesigned coffee cups and coffee bar branding. The cups reflect new colors and graphics, with each one carrying the tagline, "Great Coffee. Any Way You Take It." The new cups are being substituted as 7-Eleven's stores and distribution warehouse runs through the old cups. The new cups are not in all stores yet, but will be within the next few months.

Customers are sure to notice the changes -- and for now, 7-Eleven will rely on word-of-mouth to let consumers know about the coffee revamp, according to Wilkins.

The retailer is, however, doing a host of other coffee promotions targeted to Millennials, including a partnership with Howard Stern's show, and its new Coffee Cup With a Cause charity program, which began in February and continues throughout the year.

Under the program, 7-Eleven stores nationwide sell limited-edition, 20-ounce coffee cups designed by entertainment and sports celebrities. The cups can be filled with any of 7-Eleven's hot beverages from coffee to tea to hot chocolate. Proceeds from the cups sold benefit the featured celebrity's charity of choice. Nicole Richie, Joel Madden and Benji Madden kicked off the program, and this month, 7-Eleven is selling a cup styled by singer-actress Jennifer Hudson to benefit the Boys & Girls Clubs of America.

"Millennials are much more altruistic; they believe in giving back to the community. Coffee Cup With a Cause allows us to do that in a very special way," Wilkins said, noting the program is off to a strong start and has long-term value for the chain.

Speaking about the revamp as a whole, he added: "It's about doing things that are a little bit different. We're really just looking to invite them (Millennials) into 7-Eleven for a great cup of coffee. At the end of the day, it's still all about that great cup of coffee.”

(Source: Convenience Store News, 03/22/10)

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Starbucks vs......

I started to write "Starbucks vs. McDonalds" since 2009 was the year that McDonalds launched their nationwide assault on Starbucks.

But there were enough problems internally with Starbucks that they have stumbled on their own and others, (like McDonalds), have scooped up some of their business.

Before the crash of 2008 & 2009, a cup of Starbucks was more than a cup of Joe, it was also a cup of Joy.

When Starbucks came to Fort Wayne, Indiana; we already had a few established coffee shops that were doing a decent job. Then when Starbucks popped up, my wife and I tried them. And we found some drinks that they made that we liked and included them in our weekly routines.

Then Starbucks became less friendly, more like a fast food chain. They lost their personal touch. This combined with wanting to support my locally owned coffee shops that provided free wi-fi along with friendly employees that know my name and drink, pretty much pushed Starbucks down to my 3rd or 4th choice unless I am out of town.

Yesterday Seth Godin wrote about this except the beverage he wrote about was lemonade:

The lesson from two lemonade stands

The first stand is run by two kids. They use Countrytime lemonade, paper cups and a bridge table. It's a decent lemonade stand, one in the long tradition of standard lemonade stands. It costs a dollar to buy a cup, which is a pretty good price, considering you get both the lemonade and the satisfaction of knowing you supported two kids.

The other stand is different. The lemonade is free, but there's a big tip jar. When you pull up, the owner of the stand beams as only a proud eleven year old girl can beam. She takes her time and reaches into a pail filled with ice and lemons. She pulls out a lemon. Slices it. Then she squeezes it with a clever little hand juicer.

The whole time that's she's squeezing, she's also talking to you, sharing her insights (and yes, her joy) about the power of lemonade to change your day. It's a beautiful day and she's in no real hurry. Lemonade doesn't hurry, she says. It gets made the right way or not at all. Then she urges you to take a bit less sugar, because it tastes better that way.

While you're talking, a dozen people who might have become customers drive on by because it appears to take too long. You don't mind, though, because you're engaged, almost entranced. A few people pull over and wait in line behind you.

Finally, once she's done, you put $5 in the jar, because your free lemonade was worth at least twice that. Well, maybe the lemonade itself was worth $3, but you'd happily pay again for the transaction. It touched you. In fact, it changed you.

Which entrepreneur do you think has a brighter future?

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Sing Along

When you tire from singing Christmas Carrols today, here's another song you can sing:

Starbucks sets Guinness World Record for global singalong

By Amy Golding, marketingmagazine.co.uk, 11 December 2009, 11:00am

LONDON - Starbucks has set a new Guinness World Record for the 'Most Nations in an Online Sing Along'.

On Monday, Starbucks organised a global ‘sing-along' to pop hit 'All You Need Is Love' to celebrate its partnership with charity scheme (Product) Red.

Representatives in 124 countries performed the hit. The performances were simultaneously streamed on the internet. The event can be viewed at www.StarbucksLoveProject.com.

The coffee chain is now inviting people to add their own rendition of 'All You Need Is Love' to the site.

For every video submitted, Starbucks will make a contribution to the charity.

(Product) Red works with communities in Africa to help to improve the lives of people living with HIV and Aids.

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Is Starbucks Really this Stupid?

I've been watching for quite awhile as the once powerful Coffee King has destroyed themselves, month after month for the past couple of years.

And it's not the economy, or the competition. They need a plan. Click here for more details on a Plan.

And read the latest from Laura Ries:

Starbucks is Shooting Itself in the Cup

Starbucks latest offensive isn’t against McDonald’s or Dunkin’ Donuts it is against itself. And if Starbucks weapon is as successful as it says it will be then they could be shooting themselves in the cup.

Starbucks new weapon is its Via instant coffee, a brand that went nationwide this week after several months of testing in Seattle, Chicago and London.

To support the Via launch, Starbucks will be promoting a “taste challenge” in its own stores. The “taste challenge” aims to convince consumers that they cannot tell the difference between a cup of Starbucks instant coffee and a cup of Starbucks store brew.

Instant coffee as good as store-brewed Starbucks? Sounds impossible.

But Howard Schultz is convinced people won’t be able to tell the difference. He has even been fooling people with Starbucks Via instant coffee for almost a year at home and at his office. Nobody including his wife, according to Schultz, realized it was instant.

It’s a brilliant idea for a new gourmet instant coffee to set-up a blind taste test against the world leader in high-end coffee. Especially if the instant coffee wins the taste test.

It’s an insane idea for the world’s leading gourmet coffee chain to set-up a blind taste test in its own stores that it hopes it will lose. Losing a taste test devalues the loser as much as it praises the winner.

Weaker brands have used blind taste tests for decades to try to take market share from leading brands. The “Pepsi Challenge” and the companion commercials of the 1980’s pitted Pepsi against Coca-Cola.

Blind tasters overwhelmingly picked the sweeter taste of Pepsi over Coke. The humiliation of the taste test losses in part led Coca-Cola to launch the disastrous New Coke. A key factor in the development of New Coke was that it should beat Pepsi in blind taste tests.

Today, Starbucks is using a taste test that could lead to another disaster. If a cheaper, instant coffee can be easily made at home or work and it tastes as good as the real thing, why waste time and money going to a retail store?

Starbucks really let the fox in the hen house by hosting the taste tests in its very own stores. Starbucks is telling consumers exactly what they shouldn’t be telling consumers right in its very own stores.

In the minds of consumers Starbucks is believed to be expensive but “worth it.” Consumers praise the high-quality of the coffee. Hosting a taste test in your own stores to tell consumers your product is no better than instant coffee is not a good message to send and not a good challenge to lose.

Starbucks, of course, claims that its instant coffee will not damage its core store brand since “portability” and “value” are the important selling points of Via.

Apparently, the inconvenience of long lines and extravagance of a high price are things consumers would not give up for a Starbucks instant coffee that tastes the same as the store brand?

A brand can often be successful by being the opposite of the leading brand. Target vs. Walmart. Scope vs. Listerine. Pepsi vs. Coke. Monster vs. Red Bull. But there is no potential for one brand to do two strategies at once and succeed.

A high-end brand needs to stay focused no matter what. Introducing cheaper versions of expensive products damage the credibility and power of the core brand.

In the current economic climate Starbucks has been under intense criticism over its “$4 cup” image. Starbucks needs to flight that by promoting a simple pricing strategy to drive home the message that $2 is really the price of a cup of coffee at Starbucks and that it is worth every penny because it’s Starbucks.

Suggested headline for a Starbucks ad:

“Two bucks and worth it.”

Instead they are spending money on ads with this headline
“Instant coffee that tastes as delicious as our brewed.”

This ad and Via instant coffee at $1 a cup isn’t likely to tempt too many Taster’s Choice drinkers who get a cup of instant for 10 cents.

What the introduction, advertising and promotion of Starbucks Via is most likely to do is drive people out of Starbucks stores by denigrating the brand in the minds of the consumers.

It is the law of unintended consequence. Saying that an instant coffee (even an expensive instant coffee) can taste just as good as the Starbucks real thing devalues the brewed high-end coffee category.

It is bad enough when your competition knocks your brand, it is worse when you do it to yourself. Yet it happens all the time.

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Is Starbucks Really this Crazy?

At 2pm today, I'll have the opposing viewpoint. This is from my email last week:

Starbucks Marketing Via Taste Tests: Crazy Like A Fox

Commentary by Bob Phibbs, The Retail Doctor

(Last) week Starbucks' Via instant coffee arrived and the chain is expecting 10 million consumers to visit its 7,500 company-run cafes to participate in a taste test this weekend.

Howard Schultz, the CEO of Starbucks said, "I've been fooling people for almost a year now. This is not your grandmother's instant coffee. The quality of Via is a mirror image of the quality and taste of Starbucks brewed coffee."

What makes Starbucks' launch so interesting is that I can't think of one other brand trying to get you to try their cheaper version and then proudly saying you can't tell the difference. It's like RL POLO or Coach telling people their outlet stores had the exact same merchandise.

This is not like GAP owning Old Navy but defying someone to tell the difference. GAP realizes they are covering two distinct markets that have some overlap and my guess is so does Starbucks. But Starbucks is crazy like a fox.

Now I have to confess to RetailWire readers, when this was first announced I chimed in with, "This thing is struggling to keep the wheels on. They already ceded to McDonald's earlier this week with their 'value' menu.'" I've changed my mind.

Do they expect the Starbucks customer will switch to instant? Probably not but it gave them the opportunity to come back to the market with lots of press and offers to their 4 million Facebook Fans. What was the hook?

You have to come in to the stores to taste it.

Starbucks is expecting a lot of customers Friday through Monday. And while they're there they also may become reacquainted with their addictive habit of their morning coffee.

The first thing that went during the recession for some were the indulgences of specialty coffee; a weekly habit can cost $1000 a year. It's not a secret that their traffic counts are down; this may just be the gimmick to bring those who have built Starbucks into one of the most easily recognized brands in the world back to the cup.

Sure, Via is a product that is targeted to the 21 billion international fast food and vending machine markets but who wouldn't choose a Starbucks out of a vending machine at your mechanic's over the swill that had been sitting on a burner for two days?

Pundits are still puzzling why Starbucks would "push instant" at the expense of their premium brand. Crazy like a fox.

Notice they could have just as easily sent packets in the mail for you to try or bundled it with your morning newspaper. But they knew the goal of their event: to get people to come back to the store and rebuild a brand sorely in need of a jolt.

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Before Starbucks

there was a brand of coffee called Wilkins that aired these tv ads in the late 50's early 60's featuring Jim Henson of Muppet fame...

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McDonalds vs. Starbucks

The fast food king has had an impact on the coffee king:

McCafe Helps McDonald's Retain Customers

Ever wonder how much a brand extension might help you retain customers? McDonald's saw an opportunity to retain customers who were waking up to the smell of coffee elsewhere.

For some time, the percentage of McDonald’s customers who also visited Starbucks trended steadily at around 17 percent. This trend quickly changed upon the launch of the McDonald’s McCafe coffee line in May of 2009. In one week, the percentage of McDonald’s customers also visiting Starbucks dropped below 15 percent and remained below 15 percent for about 9 weeks.

• An average of 17.1 percent of customers also visited Starbucks from August 2008 to May 2009
• After the May launch of McCafe, average of 14.5 percent of customers also visited Starbucks
• There’s a relative 15 percent decrease in customers visiting Starbucks from the week of May 4 to the week of May 11

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Coffee Battle Continues

Who brews your favorite cup of beans?

McCafe Push to Continue

McDonald's Corp. said it would continue a massive McCafe marketing campaign that has helped push it to No. 2 in a survey of U.S. coffee drinkers, according to a UPI report.

In a separate survey, 6,000 consumers indicated Starbucks was their favorite brand, dislodging Dunkin' Donuts from the No. 1 spot.

Food industry consultant Dennis Lombardi at WD Partners said McDonald's is "like a 9,000-pound gorilla," putting on "a very strong push to build share with its McCafe brand."

But Dunkin' Brands Inc. CEO Nigel Travis told the Boston Globe McDonald's "can't promote coffee forever because they've got lots of other products to focus on."

McDonald's spokeswoman Danya Proud maintained that the company would keep the campaign going strong through the summer.

"Coffee continues to be a significant opportunity for McDonald's," Proud said. "We will continue to see a heavy promotion of our new McCafe through the summer."

(Source: Convenience Store News, 06/23/09)

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Merging Food Options

I recall last summer, on vacation with my wife and she was looking for a good cup of coffee. Starbucks would suffice. We drove about 30 minutes into town and found the only local Starbucks was in the produce section of the grocery store.

So there we sat, amidst the carrots, apples and onions, sipping fresh coffee.

There is another way:

Restaurants Take a Trip to the Store

Restaurant chains are reaching out to consumers in an unexpected place: supermarket aisles.

As the economy has soured, many consumers have ditched going out to eat for a trip to the grocery store, and restaurant chains are following.

Starbucks Corp., which has seen traffic to its stores decline, in April launched a line of coffee-flavored ice cream in supermarkets. Last month, the company began handing out coupon books to its coffee-shop patrons containing such grocery-store deals as $1 off ice cream and $1 off 10-ounce packages of Starbucks brand coffee.

"If consumers are coming in less frequently, they can still treat themselves at home," says Greg Price, vice president of global consumer products at Starbucks.

By putting goods on store shelves, restaurants are able to expand their brands.

Because of weakness in the restaurant industry, "any restaurant is going after additional revenues right now," says Morgan Stanley & Co. restaurant analyst John Glass.

Restaurants are responding to bleak times in their business. Moody's Investors Service issued a report late last month saying the restaurant industry is likely to remain weak for the next 12 to 18 months as declines in restaurant traffic coincide with greater affordability of eating at home.

Burger King Holdings Inc. plans to sell Apple Fries, a product originally developed for its restaurant kid meals, in 10,000 grocery stores nationwide this fall. The apples, skinned and sliced to look like fries and packaged in a French fry container, will be sold in the produce section of traditional supermarkets, along with a low-fat caramel dipping sauce in a ketchup-like pouch.

California Pizza Kitchen Inc. in March began shipping new microwaveable Flatbread Melts sandwiches to supermarkets through a licensing arrangement with Kraft Foods Inc. Dunkin' Brands Inc., meanwhile, has been selling its Dunkin' Donuts coffee in supermarkets nationwide in an effort to bolster its brand image.

For retailers, the well-known restaurant brands are a customer draw. "If people can save a few dollars and save some time by eating at home, these types of familiar brands....make it easier and more cost-effective," says Meghan Glynn, spokeswoman for supermarket chain Kroger Co., which carries California Pizza Kitchen products, Dunkin' Donuts coffee and other restaurant brand goods.

Some restaurant chains began developing grocery items prior to the recession as a way to boost brand recognition, but now they are finding that packaged food helps them offset some of the loss in traffic to their restaurants.

"Our comparable restaurant sales are down," says California Pizza Kitchen co-chief executive Rick Rosenfield. "People are trading down to supermarkets and we're softening the blow by being there for them." The chain reported a 5.9 percent decline in comparable restaurant sales for the first quarter.

There are risks. Consumers already are bombarded by numerous varieties of cereal, soup, frozen dinners and other products in grocery stores, and some supermarket chains are culling products from shelves.

In addition, some restaurant-branded products are positioned as premium and so carry high prices. A 12-ounce bag of Dunkin' Donuts coffee costs $8.99 in some stores, and California Pizza Kitchen's Flatbread Melts sandwiches, intended for one person, cost $3.49 each. That's still cheaper than eating out, but more expensive than items like soup and macaroni-and-cheese.

"Restaurants are thinking, 'If we can't capture those consumers in our own stores, we'll get them at home and, when the economy improves, they'll return to our stores,' " says Bill Cross, vice president of food licensing at Broad Street Licensing Group, a Montclair, N.J., company that has brokered licensing deals for restaurant chains.

California Pizza Kitchen has been selling its branded pizzas in supermarkets since 1998. Last year, as the economy worsened, grocery sales of frozen California Pizza Kitchen pizza increased 19.6 percent to $159 million. Kraft pockets the bulk of the revenue and pays California Pizza Kitchen an annual royalty, which last year amounted to $6.6 million.

That's just a fraction of the chain's $677 million in annual revenue, but it's pure profit, because Kraft underwrites all of the R&D and advertising, Mr. Rosenfield says.

Burger King's Apple Fries come on the heels of the branded salty and sweet chips the chain introduced to supermarkets and convenience stores in late 2007 -- right about the time the recession was starting.

"It gives our brand a lot of great new exposure to consumers who might not have Burger King top of mind," says John Schaufelberger, the company's senior vice president of global product marketing and innovation.

(Source: The Wall Street Journal, 06/10/09)

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Does Coffee Advertising Work?

10 years ago, I hardly drank it.

Then I met my wife, who has a passion for a good tasting cup of coffee, although she usually drinks decaf.

She introduced me to a couple local coffee shops where we would try different drinks and deserts and check out the entertainment.

Starbucks had not yet invaded Fort Wayne, Indiana.

We would sometimes have days off in the middle of the week and travel to find new coffee shops.

After a couple of years, I was hooked on the coffee shop experience and I was also back in the advertising and marketing business. Advertising did not persuade me to drink coffee. My wife did. Classic Word of Mouth.

Earlier this month, we took a trip to the New England States and found very few Starbucks but lots of Dunkin' Donuts. I also could judge a small town's fortunes by whether or not they had a McDonalds.

All three are battling it out in the coffee biz these days along with the local Mom & Pops that I will visit when I am in Fort Wayne, even though we have the Big 3 available too.

AdAge released a report on the results of the advertising that the Big 3 have been brewing up the past few months. Be sure to read the last paragraph:

All That Advertising Brings Buzz for Coffee Marketers

Brand Index: Consumers Saying More Positive Things About Starbucks, McDonald's, Dunkin'

By Emily Bryson York

Published: June 11, 2009

CHICAGO (AdAge.com) -- The coffee wars generated a flurry of advertising in May. McDonald's launched its first McCafe blitz, Dunkin' Donuts made its first concerted doughnut push in more than a decade and Starbucks began its first pure branding campaign. While it's too soon to say what the impact on sales has been, all three marketers saw a major uptick in buzz, as measured by Brand Index.

Dunkin' led McDonald's and Starbucks in buzz and value perception.

Brand Index, which tracks more than 1,000 brands by conducting 5,000 daily interviews from a panel of 1.5 million consumers, monitors key brand attributes, including buzz, value perception, quality ratings and customer satisfaction to compile its index (which has a range of -100 to 100).

Dunkin' began May with a 24, peaked at 33 mid-month and settled at about 32 this week. McDonald's started with a 15, peaked around 24 and had dropped off to 16 by June 9. Starbucks' campaign, which has been confined to newspapers and select outdoor markets in its initial phases, has been more cyclical. The company began May with a score of 1, shot up to 11 within a week and plummeted again. In the past week, the chain's buzz has shot up to double digits again.

Those numbers may seem low, but ratings vary dramatically by category. Within the fast-food sector, a good buzz rating is considered to be anything above 10. Ratings closer to zero mean consumers have heard an even number of positive and negative things about a brand.

"Over the last few weeks, Starbucks has generated buzz through a variety of channels, including our national 'Coffee value and values' campaign hitting its stride, beginning our sponsorship with 'Morning Joe' on MSNBC and being named No. 1 best coffee by the Zagat survey," Starbucks' senior VP-marketing, Terry Davenport, said in a statement. He added that the retailer's online activity, including using Facebook and Twitter to tout its efforts, has also built excitement among baristas in its stores.

Dunkin' did not immediately respond to a request for comment.

McDonald's spokeswoman Danya Proud said the burger chain has been "extremely pleased" with the results of its coffee push. In particular, she said, the chain's "McCafé Your Day" online competition with Visa has gotten more than 10,000 entries. That response rate makes it "by far the most successful online sweepstakes in the company's history," Ms. Proud said.

Starbucks tries 'a different tack'
But all three companies got a pretty strong jump in buzz, said Ted Marzilli, global managing director at Brand Index. Starbucks' jump, he said, had the "highest magnitude," especially because it was coming from about zero. He said Starbucks should be heartened that it not only made a splash when its competitors were outspending it but got a second spike in interest as McDonald's and Dunkin' were leveling off.

"They're probably going to be outgunned by McDonald's and Dunkin'," he said, noting that those brands spend more on advertising. "Starbucks is trying a different tack in last couple of months, getting people to think about bigger concepts. How expensive is a $3 latte when you think about other things like providing health care, working with farmers in areas where coffee is imported? That slightly different tack seems to be making a mark."

Mr. Marzilli said an increase in buzz can trigger shifts in other metrics, but not always. And as it stands, Starbucks is still struggling with its "value" perception, or whether consumers view the brand as giving them the most bang for their bucks. The chain has been hovering around -26, with a small spike last week that seems to have already corrected. McDonald's is just behind Dunkin' in value perception, around 25 to Dunkin's 26.

But when consumers want to treat themselves, all these numbers may go out the window. According to Brand Index, 43% of adults asked where they were most likely to purchase a "premium coffee drink" said Starbucks, 15% picked McDonald's, 11% sided with Dunkin' and 31% had no preference.

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