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Starbucks – from zero to hero

July 29, 2011

Starbucks is a strange brand; hated by many for its ubiquity, but loved for the simple indulgent pleasure it brings.

When it went down in 2008- there were cheers from various quarters, the company had gotten too big too fast and those on the sidelines wanted to see if suffer.

In the tough months ahead, Starbucks refused to accept the status quo and took a long hard look at itself and started to re-tool and re-build.

While other brands falter along with the economy, Starbucks stands tall and seems to be going from strength to strength despite suffering the effects of some sharp increases in the price of their core commodity.

There’s something very interesting about coffee and the consumer; it’s become such an important ritual that as soon as confidence picks up a bit, people are back to the habit.

Today, where serious purchases are being questioned, a Starbucks purchase and experience becomes elevated to an extreme.It’s something that’s affordable and isn’t going to break the bank, but it’s a small indulgence- as coined by Faith Popcorn years ago.

The financial results for the latest quarter (Q3 2011) are close to spectacular and are going to make Starbucks the envy of every struggling retail and restaurant chain. The slight up- tick in consumer confidence, coupled with brilliant strategic thinking and execution are the reasons behind the recent success.

At a time, when people are wondering how to get customers into their stores- Starbucks’ average daily transactions per store were the highest on record, even stronger than 2006. Operating income in the US rose by 22% year over year and margin improved to 19%.

The company is succeeding because it’s innovating on all fronts.

New product introductions: Petites, personalized Frapuccinos

Technology: A mobile payments innovator- 1 million downloaded apps with $50 million stored.

The brand is poised to benefit from the fusion of the social/mobile/deals space and create campaigns that have the power to drive individual store traffic.We can predict that Starbucks will be the first brand to crack the geo-local marketing code at scale.

While for many brands the recession was an excuse to hunker down, try to find ways to save money and wait it out until the return of economic green shoots, Starbucks had the guts to re-invent itself, a giant task that’s paying big dividends right now.



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