Feature

Starbucks follows own UK marketing recipe

LONDON - Starbucks is a polarising brand; consumers either embrace its ethos completely, or see it as a symbol of the worst excesses of American capitalism. origins - that places Starbucks in the firing line of the burgeoning anti-capitalist movement.

Starbucks UK marketing director
Starbucks UK marketing director

There is no doubt that it has an exceptionally high profile, not least in the pages of gossip magazines, where skinny US stars are rarely pictured without their skinny Starbucks lattes. Branding experts believe that it is this profile - combined with the company's Stateside

The first Starbucks outlet outside the US opened in Tokyo in 1996. Since then, the company has launched in more than 40 other countries. The brand even has a presence in Paris, the birthplace of cafe culture. Next month, Starbucks will celebrate 10 years of operations in the UK, where it has transformed coffee from breakfast staple to lifestyle accessory - a process sup-ported by its much-publicised partnership with Apple, its Starbucks Entertainment division, and the Hear Music brand, through which the company markets books, music and film.

Rita Clifton, chief executive of Interbrand, says that while Starbucks has faced fierce criticism from anti-capitalist groups and is suffering from slowing growth in the US, the global brand should not be written off prematurely. 'Starbucks has really succeeded in creating a third space between the office and home, and consumers feel an emotional connection to it,' she adds.

However, the signs of strain in the US are undeniable, and analysts have voiced concerns that Starbucks has over-stretched itself with its plans to reach 40,000 stores worldwide. In the three months to the end of September last year, the company's US outlets posted a 1% fall in transactions.

One leading retail analyst draws parallels with McDonald's. 'Starbucks is another brand setting its sights on the international market for growth because it is feeling the competitive pressure in its home market,' he says.

The brand's bottom line has been hit by the rising costs of raw materials, particularly in the US, where consumers have traditionally got their caffeine kick much more cheaply than their UK counterparts. While a tall skinny latte will set you back £2.05 in a British Starbucks, premium coffee retails at a fraction of the price in the US. Starbucks has also struggled to compete with cut-price rivals such as McDonald's and Dunkin' Donuts in the States, as these traditionally food-focused outlets have begun to introduce their own premium coffee offer. This led to Starbucks rolling out an 8oz brewed coffee for just $1 (50p) in January, following the launch of its first ad campaign on US TV in November.

Starbucks chairman Howard Schultz is leading the attempted fightback. He resumed his role as chief executive in January, replacing Jim Donald, who succeeded him in 2000. Cliff Burrows, formerly Starbucks president for Europe, the Middle East and Africa, and the driving force behind its growth in the UK, became president of Starbucks Coffee US last month.

The company has declared a desire to 'reignite its emotional engagement with customers'. This coincides with a back-to-basics programme involving the closure of more than 7000 of its company-operated stores in the US while 135,000 of its baristas have received 'retraining' in the art of coffee-making.

Following disappointing first-quarter results in the US, the group is slowing store openings in the region, aiming to launch 1175 in 2008, compared with 1788 in 2007. Yet the number of non-US openings is rising, with 975 stores planned for this financial year, compared with 788 in 2007.

Despite this, Schultz has spoken of Starbucks' desire to act and feel like a small company - a wish that would seem to be fundamentally at odds with its position as a multinational retail empire.

Starbucks the view from the UK 

Since its arrival in the UK, there has been no let-up in Starbucks' quest to dominate the high street. A seemingly relentless store-opening programme continues apace with plans to open 100 outlets in the Uk this year, and one every fortnight over the next decade - a total of 750 by 2018.

According to management consultants Allegra, the UK branded coffee-chain market now has an estimated turnover of £1.3bn - a figure that is forecast to double over the next decade, as the total number of stores in Britain reaches 6000.

Perhaps due to an awareness that some will find its own part in the sector's wider aggressive growth strategy un-attractive, Brian Waring, Starbucks UK director of marketing, claims his company's growth is steady, and decisions are made on a store-by-store basis. 'For us it is very much about the relationship of customers with their particular store. It is wonderful to see how they are perceived by customers,' he enthuses.

Reminded that some communities, such as that of Stoke Newington in North London, have actively sought to prevent Starbucks from opening, he adds: 'There are some communities where you get feedback. We work really hard to understand that.'

Waring, who has previously worked in marketing for SmithKline Beecham Consumer Brands and Virgin Entertainment Group, is evangelical about Starbucks, which he joined in 2004. He claims to have only positive perceptions of the brand, and that he visits an outlet every day.

It is difficult to ascertain whether his eulogising is simply practised media-handling, or genuine passion. It could be that the rather disturbingly named four-month 'immersion process', during which all employees and partners train as baristas, engenders a cult-like conversion.

Nonetheless, Starbucks' appears to be hitting the right note in the UK. A survey of 6300 UK consumers, conducted by Allegra, found that it was the country's most popular coffee chain, and has 'gained ground' both in terms of its perception 'as an ethical brand, and for fair treatment of its suppliers'.

Despite this, Waring says there is no complacency in the business, and it is following the US' lead with back-to-basics retraining. 'It is about saying we need to make time for this,' he says. 'Our beverages need to be consistent.'

However, the UK operation has its own approach to marketing. Waring stresses that it will not be running TV ads, as in the US, and that its stores will remain the cornerstone of its activity. 'Our stores are what we are all about. We don't build the brand through ads or promotions,' he says. Despite this, the company is preparing to launch a campaign offering customers a fresh coffee if they are not satisfied with their purchase.

At the moment, Starbucks is focusing on corporate social responsibility, and Waring is in the process of recruiting a head of communications and CSR.

Whoever gets the job will face a serious perception problem. Giles Gibbons, chief executive of CSR consultancy Good Business, believes the best strategy is simply to 'relax a little'. However, he has a warning. 'Until the brand can resolve the problem of its generic format, it is going to be a struggle to get a CSR message across,' he says.

While Starbucks may be in vogue with UK consumers for now, if the chill wind blowing across the US business makes its way over the Atlantic, it may need to rethink its strategy on these shores, too.