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[21 comments]

Name That Starbucks

July 17, 2009

By George Anderson

When is a Starbucks not a Starbucks? How about when the company changes the name of the store and remodels it to give it more of neighborhood feel?

According to a report by The Seattle Times, the coffee giant is opening three stores in the Seattle area with nary a mention of Starbucks in the store or on product packaging. A test store on 15th Avenue East will open as 15th Avenue Coffee and Tea.

Tim Pfeiffer, senior vice president of global design, said the name change is intended to give stores "a community personality."

The store will serve wine and beer in addition to coffee and tea. It will also host live music and poetry along the line of traditional coffee houses.

Michelle Barry, senior vice president of the Hartman Group, said Starbucks was looking to provide a compelling customer experience. "It's not about nostalgia per se, but more about telling a story and reappropriating some things from the past and re-imagining them in a new environment," she told the paper.

Discussion Questions: What do you think about Starbucks' attempt to present "a community personality" with its new store test? Is the chain acknowledging that it has brand image problems?

FINANCIALS:     [NASDAQ:SBUX]

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What chance for success do you give Starbucks' new community coffee and tea shop concept?

Comments:

An interesting experiment: Maybe the company feels there is revenue potential selling alcoholic drinks (as well as coffee and tea)--which wouldn't be in keeping with Starbucks' brand image. Or perhaps this is a way to generate revenue outside of peak breakfast hours. But wasn't a "community personality" part of Starbucks' reason for being in the first place? Developing a new concept doesn't address the fundamental problems with the core business.

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Dick Seesel, Principal, Retailing In Focus LLC

If this is not an indication of a company in trouble, I don't know what is. To look at ways that you can abandon your brand name to help boost sales is a desperate move. The brand is the personality of the company, and if the brand is not working, fix the company, don't abandon the brand.

I know that Starbucks has always felt that they were the Third Place, after home and work. But to abandon their roots, and to start selling beer and wine, and other non-coffee items; well again it seems to be a desperate move.

Beer, wine, coffee, poetry, no brand name on the door. All we need to add are bongos, turtlenecks and Maynard G. Krebs, and we are back to the early '60s.

Joel Warady, Chief Marketing Officer, Enjoy Life Foods

As much as the company wanted to have Starbucks be the community entertainment or meeting place, the name is associated with coffee drinks. Because that image is so strongly ingrained in consumers' minds, trying another format to emphasize the community association really needs to be done under another name. Consumer response will determine the feasibility of the experiment.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

It sounds to me like Starbucks is looking to test market adding alcohol to the mix without harming its core brand if it's a flop. I can't imagine any other reason as introducing this new concept in the already saturated coffee house market will just cannibalize their core and diminish their substantial brand equity.

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Marge Laney, President, Alert Technologies, Inc.

Society is funny. We love to see the heroic rise but we relish the tragic fall almost as much. Such is the case with Starbucks.

10 years ago, you couldn't attend a marketing conference without hearing speakers going on at length about the genius of Starbucks and the incredible culture they'd created. They were virtually synonymous with in-store experience.

Now it seems as many people are jumping off the coffee cart as it were, and taking malicious pleasure in watching Starbucks struggle to reposition itself.

In my opinion, the company should be applauded for its efforts. If we agree that a brand isn't a place but rather a direction, who can fault Starbucks for experimenting vigorously to find their new direction.

In similar circumstances many brands would simply freeze like deer in the headlights and do nothing.

I think rather than turning on Starbucks, we should throw our support behind them. They're setting an example for all retailers in what to do when times are tough.

Doug Stephens, President, Retail Prophet

I think they are trying things out. Clearly the coffee fad has faded and with McCafe has become more of a commodity--an unprofitable one at that. Every business should be trying to see where their market is going. Leaving off the name seems like a step in the wrong direction at first but may provide them cover if the concepts don't work out.

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Bob Phibbs, President/CEO, The Retail Doctor

Wow! Another misstep that further dilutes the brand. Probably can't sell the real estate so perhaps trying to generate revenue to cover mortgage or lease costs. Sad.

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Anne Howe, Senior Vice President, Shopper Solutions, part of Acosta Mosaic Group

Gourmet coffee has been a straight road to the top of the brand and financial peaks, but liquor now seems quicker.

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Gene Hoffman, President/CEO, Corporate Strategies International

Very interesting concept. As first glance you question their thinking because the brand name is so well known and respected. That said, the new store format is going to include alcoholic beverages and evening entertainment which is something very different from the current format. Starbucks has struggled over the last 2 years with how they were going to grow the year over years sales for each store. Food has been okay for them, but not the home run they hoped for. This new format will give them an opportunity.

With the founder of Starbucks, Howard D. Schultz back at the helm, I think it has a strong chance of making it and look forward to the first one opening in Connecticut.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

Starbucks appears to be trying a new strategy of different brand names. They have spread the brand thin and rather than compete head to head with DD and McCafe, this is an interesting way to create new revenue channels.

DD and McD are trying to gain market share through lower costs and the convenience of drive through. So rather than compete this way, Starbucks is taking advantage of the local/neighborhood trend.

This will be interesting to follow.

Domenick Celentano, Food & Beverage Guide, About.com Food & Beverage

This is an interesting experiment. Ironically, across the street from my building is the Orchard House Cafe. It is a homey coffee house that opened about a year ago. Like Starbucks, they offered a variety of ways you could take your coffee or coffee drinks along with other beverages and light snacks, and small breakfast and lunch items. Critically, they have wireless internet. Over the last year, they have added music and poetry on some nights. They have added gelato. And, they have added beer and wine.

They seem to do a pretty good business through the late afternoon, but are empty by 6pm. They close at 8. Meanwhile the Starbucks down the street seems to continue to thrive and is busy through 11 pm, without wine or poetry.

In any case, the Starbucks idea started as a takeoff from the European coffee model. Most served coffee throughout the day and migrated to alcohol as the day continued. The idea was that they were neighborhood gathering places. Perhaps, that is what Starbucks is trying to recapture.

The only disappointment I have in the experiment is that they are dropping the brand name. Like it or not, the Starbucks name has great equity. Why would they not add to the localized name "with coffee by Starbucks"?

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Gene Detroyer, Professor, Independent

Outstanding move by Starbucks! They understand the niche, their customer and sector leadership! The consumer is harkening for more, different and new! Either Starbucks gives it to them or they migrate to others in the niche! This is true sector leadership! Not capitulation. Other chains Grocery and restaurant seemingly give the niche positioning away to new competitors and give up market share all in the name of protecting the Brand--when in fact, they lose market share and devalue the brand by not respecting the wishes of the consumer!

Steven Johnson, Grocerant Guru, Foodservice Solutions

I applaud Starbucks for displaying the courage to evolve their brand in the midst of intense economic forces.

In experimenting with a new in-store design aesthetic and what may be considered bold beverage offerings, along with a more localized/community-minded store name, they will likely succeed where others would be reluctant to take action. Their in-house design studios are wisely reconnecting to the company's roots of authenticity and community.

One of Starbucks' key differentiators has historically been, and continues to be, its culture of transparency, communication, top-down respect for its associates and a deep level of customer-centricity. These values will serve it well as it navigates current market challenges.

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Jeff Hall, President, Second To None

I agree with Doug Stephens above. This is what thought-leaders do. It might be true that economic and competitive pressures have led us here, but do any of us truly believe Starbucks is simply reacting?

Every smart company has a diverse portfolio. For Starbucks, most carry the siren badge. I would expect them to test new concepts and brands. Will these new concepts be Old Navy or Banana Republic?

Starbucks is smart enough to develop sophisticated, robust experiences and then listen to their consumers.

I'd be skeptical if they tried to launch a digital or music venture...wait, they did that. And they learned a great deal from those experiments.

Keep up the good work, Starbucks! I'm sure we'll all watch and learn.

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Chuck Palmer, Vice President of Strategy, JohnRyan

An interesting concept. In Europe, which is where they got their original ideas, it is not unusual for a "caf" to also serve alcohol. Maybe they see an untapped market segment that might work in the U.S. It's a good move to keep it separate from traditional Starbucks locations, so as not to confuse the market. If it's successful, they will have to come up with a non location-specific name that they can apply to all of them, unless of course, they don't want branding.

Jonathan Sapp, Principal, Sapp Devco

Give Starbucks credit for doing something. Clearly they are having problems with their core business. So they are testing new directions and the potential for scaling something different and with more day-part coverage and the benefits of alcohol margins. Something that could nicely cross-sell to early AM coffee drinkers and re-create the brand coolness of Starbucks of a few years ago.

What a terrible idea, especially if it works!!!

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Phil Rubin, CEO, rDialogue

How come I still see a line in every Starbucks I walk into? Maybe they need to work on cleaning up their core operations and they can still be a very successful chain of coffee shops? Poetry, alcohol, live music...doesn't sound like the kind of MASS appeal a national chain requires.

Rick Boretsky, Retail Data Integration Specialist, RIBA Retail (www.ribaretail.com)

Any company this size deserves the right to experiment with new concepts. Smaller companies should not do this. Experimenting under cover of another brand name is smart business when you're under the microscope and could damage your brand equity.

One of the problems with the Starbucks brand is that the name is synonymous with a place, mints, ice cream, and other things in addition to coffee that you can buy in other places. It has been over-extended violating the scarcity principle. When you've got a highly profitable concept you should run with it--in one direction--to get as far ahead of any competition as you can, then perhaps experiment with extending it once you've exploited your position. Crispy Creme did it too. Maybe Starbucks is realizing this and is now using another name while they play around with concepts.

Sid Raisch, President, Advantage Development System

I like the fact that Starbucks is trying something different. Three stores will not break the company but it will be a good test to see if they can extend their brand into other areas. It will be interesting to see how much they focus on this brand while trying to work on the core brand.

Scott Knaul, Director, Retail Strategic Services, Workforce Insight

If Starbucks wants to try a different store format, that's fine, but they won't be fooling anyone. People will consider it Starbucks 2. Will it succeed or fail? Who knows.

But their test stores suddenly multiply and join the crowd of millions of coffee places (including their own), its another Starbucks disaster waiting to happen.

Problem with them is that the expanded way too quickly trying to extract every penny they could from people's pockets. Starbucks is a mainstream coffee place. The hype all died years and years ago.

Many Starbucks still have long lines. Many coworkers I know skip it because the line is sometimes too long. If Starbucks fixes this first, they'll reap quicker returns than more store expansion.

'CPGman'

An interesting experiment, one that executed correctly could become another core brand. The idea of beer and wine also opens up new horizons for the gathering place; keeping the Starbucks affiliation out of it is low risk, high reward.

Brian Anderson, President, BA Search Group

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