[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[19 comments]

Starbucks to expand alcohol sales, partner with Oprah

March 21, 2014

What goes better with Starbucks — wine or tea? How about if the tea is by Oprah Winfrey? The correct answer, according to Howard Schultz and company, is both.

The coffee giant announced that it would expand its rollout of alcohol sales to thousands of locations over the next several years and that it had reached a deal with Ms. Winfrey to begin selling a line of tea under her name.

First the alcohol: Starbucks began testing sales in its home market of Seattle back in 2010. It later expanded the pilot to a small number of other locations in Atlanta, Chicago and Los Angeles. Now, the chain plans to add it to its after 4:00 p.m. menu at locations in urban areas and those near restaurants and theaters for people who are out on the town at night.

"We've tested it long enough in enough markets — this is a program that works," Troy Alstead, Starbucks COO, told Bloomberg News. "As we bring the evening program to stores, there's a meaningful increase in sales during that time of the day."

In the case of the collaboration with Ms. Winfrey, Teavana Oprah Chai Tea will begin selling in Starbucks and Teavana stores in the U.S. and Canada on April 29. Starbucks will make a donation for each product sold to the Oprah Winfrey Leadership Academy Foundation to benefit educational opportunities for youth.

Howard Schultz, chairman, president and CEO of Starbucks, said the introduction of Oprah Chai will help his company "elevate the tea experience in the same way we did for coffee." He added, "I am personally humbled to work with such an inspirational leader and visionary who shares so many of our core values and beliefs. I truly believe that, together, we will set the bar for a world-class tea experience at Starbucks and Teavana."

FINANCIALS:     [NASDAQ:SBUX] [ ]

Discussion Questions:

Will alcohol sales or its association with Oprah Winfrey have the greatest impact on the Starbucks brand and the company's sales? What do you see as the pros and cons of each initiative?

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:

Which is the bigger business initiative for Starbucks: alcohol sales or its collaboration with Oprah

Comments:

Tough call. I don't like the idea of wine at Starbucks (I don't quite know why...something about mixed metaphors, I think) and it only makes sense to be selling high profile tea to non-coffee drinkers.

But wine takes Starbucks into another place - an evening destination for a glass of wine and WiFi. The potential dollar sales value is high, but I worry that it'll compromise the brand some.

[Image of: View Braintrust Panelist button]
Paula Rosenblum, Managing Partner, RSR Research

90% of Americans drink their coffee before 11 a.m. Day part is a huge challenge for coffee shops. Independents love to have karaoke, poetry readings, etc., but they rarely pay the bills.

Cosi has been doing this for a long time and points to a future where the coffeehouse morphs into a community living room. And makes money. How great is that?

[Image of: View Braintrust Panelist button]
Bob Phibbs, President/CEO, The Retail Doctor

Alcohol is an interesting add to the Starbucks mix. As a long-time Starbucks aficionado, the addition of booze seems to fundamentally change their brand proposition. But, I rarely go there after 4 p.m. So, Starbucks will be moving toward a more European type of coffeehouse.

What ultimately makes this work is the day-part play. By restricting the sale of alcohol to evening hours, the integrity of the coffee may remain. Interesting - Starbucks could become more of a "bar" in the evening. I imagine that the franchise will develop a greater rift between segments of patrons. They'll have a real bi-modal distribution on their hands.

[Image of: View Braintrust Panelist button]
Liz Crawford, VP, Strategy & Insights, Match Drive

If you think the table-hog problem is bad now with just coffee, wait till you see it with wine. Soon you can use Starbucks as an office and stay right through Happy Hour!

[Image of: View Braintrust Panelist button]
Ian Percy, President, The Ian Percy Corporation

Hard to say until - we taste that chai.

The pros of alcohol are that it is a high margin, high turn category and gives Starbucks something to sell after 4:00 p.m. The negatives? It's alcohol and people that drink tend to be a little louder and more disruptive than your average latte sipper. Also, having spent most of my college and grad school years tending bar, I can say that selling alcohol brings it own unique set of "challenges" to an operation. Just ask anyone who ever worked in a bar.

As to Oprah, I wonder if she hasn't "jumped the shark" at least in terms of Starbucks' target demographics. Once you get past your basic Earl Grey or Green Tea most of the chain's tea offerings are pretty dreadful. There is also (and as a confirmed tea drinker I can testify to this) NO consistency in the approach to tea brewing from Starbucks to Starbucks.

In some stores the tea is served so scalding hot that it brews (more like boils) in seconds. In others, it is served lukewarm. Some stores double cup and sleeve others single cup and let you burn your hand. And the strings on the bags break about five percent of the time.

In other words, Starbucks does a terrible job with the teas they have, so why should we believe they are going to be any better with Oprah's?

Of course, all that said, she does have a following, but will they follow her into Starbucks?

[Image of: View Braintrust Panelist button]
Ryan Mathews, Founder, ceo, Black Monk Consulting

The association with Oprah may initially spike sales, but not have a lasting impact, especially since the association seems to be with only one flavor of tea.

For those Starbucks near restaurants and theaters, the wine bar transition in the evenings could have a more long-term financial gain. They would probably most benefit if they maintained the same basic atmosphere as in the daytime. One reason Starbucks is a great place to meet for coffee is that you don't have to shout over blasting music to have a conversation. It's a mellow place. That may be a pleasant alternative in the evenings to more trendy bars.

'RetailRetell'

Alcohol sales certainly will attract some consumers at a time of day that is not usually prime regular coffee drinking time. There are many consumers who do not like coffee and do drink tea, so this is a way of attracting more consumers. I see longer lines and fewer available chairs and that may discourage people from coming or staying. If the new products work to attract more consumers or different times of the day, that long line may be more constant and you will not find a place to sit.

[Image of: View Braintrust Panelist button]
Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Oprah Winfrey tea and Starbucks = absolute brand synergy and opportunity for both partners.

Starbucks and alcohol seem like the ultimate oxymoron.

If Starbucks truly is the "third place" where people like to hang out, then maybe they can pull off wine with the after 4 p.m. crowd.

But what happens when wine or beer start showing up on Starbuck's lunch menus to boost mid day traffic and profits?

[Image of: View Braintrust Panelist button]
Chris Petersen, PhD, President, Integrated Marketing Solutions

Alcohol sales? Let's hope SBUX can handle the added complexity. So far, so good.

Oprah tie-ins? I think I'll sell my stock.

Seriously, on the Oprah Chai -- since they are already investing in the Teavana brand and concept, why add Oprah to the mix? I don't recall any Paul Newman coffees in the early days of Starbucks.

[Image of: View Braintrust Panelist button]
Ben Ball, Senior Vice President, Dechert-Hampe

Part of pleasurable experience of Starbucks is the aroma of coffee in its stores. The same can not be said of most bars. I wonder how they're handling that particular challenge.

[Image of: View Staff button]
George Anderson, Editor-in-Chief/Associate Publisher, RetailWire LLC

The Oprah name carries a huge following. But, as Paula said, this is a tough call. Alcohol, if kept to only wine, is the afternoon attraction, sales will grow there more than the Oprah branded tea.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I like both ideas! As a very frequent traveler, there are Starbucks in convenient locations throughout airports. At the end of a long business day, a traveler being able to buy a cold, tasty Cerveza from the chilled cases Starbucks already has in place instead of a juice would be great. Beats the loud, crowded sports bars at the airports. In free-standing or strip center locations, a wine and coffee bar is a concept popping up with local merchants - so why not re-purpose Starbucks as a evening hang out, with a flight of wine for those who imbibe?

The tea and giving back is cool too - and competes with all the local tea houses that have popped up. And Oprah's brand equity is positive. I am strong on both ideas to leverage Starbucks' great locations, real estate and brand loyalty people have for Starbucks and as gathering places.

[Image of: View Braintrust Panelist button]
Diana McHenry, Retail Client Partner, SAP for Retail

Will they write your name on the glass?

The addition of alcohol will have a number of impacts, not the least of which would be store decor. Will my store, with its coffee plantation graphics, now sport photos of Italian vineyards?

Starbucks seems confident, but I wonder how consumers will react.

[Image of: View Braintrust Panelist button]
Cathy Hotka, Principal, Cathy Hotka & Associates

If the association with Oprah was in the '90s or in the last decade, it might have had an impact. I think for most, the "Oprah" thing has long past.

Selling alcohol is even a greater challenge; the licensing issues from community to community being just one mountain to climb. One of the other, more challenging issues will be hiring and training of a completely different staff for the evenings.

I think it is a false premise that alcohol need be ubiquitous. It's a rather unimaginative direction for Starbucks and could have a negative impact on overall sales as a whole.

'Scanner'

George makes a great point regarding environmental aroma challenges, but I love the alcohol addition. It's a great way for Starbucks to make the most of its physical assets and to extend the value into new day parts (or in this case, night parts). I can see Starbucks attracting a crowd that is turned off by loud bars and televisions/music blaring. Starbucks managed to disconnect millions of customers from coffee-makers, now they are going after the cork screw. Once again, it is primarily an alternative, not to other cafes or restaurants, but to staying home/at work. Very in-brand if you ask me.

The Oprah tea association isn't just a celebrity deal, it has a charitable component that will drive interest. There are Oprah fans out there who are waiting for her to tell them what to do next. Grabbing a cup of tea will be the answer.

[Image of: View Braintrust Panelist button]
Carol Spieckerman, President, newmarketbuilders

I don't think it will help Oprah's brand. Associating it with an establishment that is beginning to sell alcohol can be a little complicated.

Tom Borg, Business Expert, Tom Borg Consulting, LLC

I'm not a believer in either of these growth strategies for Starbucks. The sale of alcohol has more potential for more long-term negatives than positives for the brand. And licensing and training of staff will add a lot of cost. Then there's the potential bad publicity, and the potential for bad customer experience caused by a tipsy patron. I see alcohol sales being responsible for an initial revenue bump and then a lot of future bumps until they quietly stop offering it.

[Image of: View Braintrust Panelist button]
Larry Negrich, Vice President, Marketing, nGage Labs

First off, why wine? It's a coffee shop. Why not coffee drinks? That seems much more in keeping with the brand. Drop in after dinner for an "after dinner" coffee drink. That's the perfect way to extend the brand past the daytime hours.

As for the tea? I am a tea drinker and Oprah is hardly a pull for my tea lovin' self. Teavana, on the other hand, is. I have always enjoyed stopping by the Teavana store during my mall visits just to get a tasting.

Starbucks does have the Chai Tea latte, but I look forward to having a full range of tea drinks to choose from, too. Put that Starbucks spin on it and I am so there!

That's my 2 cents.

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Well, you need something to do after the morning coffee rush. The only thing to do is make sure that a plan is in place if O gets caught up in bad PR. Okay, that is negative, but seems these stars get caught up in some kinda mess and fast changes have to be made - especially when you are depending on their personal brand as a core driver for new business.

Me? In retail today with the power of the social network, I would have 2 or 3 big names - less risk then depending on one name...Tom...Dirty Harry, coffee only please....

[Image of: View Braintrust Panelist button]
Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters