Sometimes it’s good to be known for doing one thing well. But it’s also a dangerous proposition, putting your bottom line at the mercy of consumer trends. But when you’re a billion dollar global brand, with your livelihood – not to mention the livelihoods of tens of thousands of employees and suppliers – riding on your bottom line, you don’t want to leave yourself susceptible to consumers suddenly deciding en masse that the product you’re selling is “over.”
As a breakfast staple since time immemorial, it isn’t likely that coffee will ever go out of style; meanwhile, with an outpost on practically every block in every major city in the world, Starbucks has seemingly defied any and all conventions about oversaturation killing consumer interest. But while there will always be a stream of consumers ordering a cup of black coffee for their morning commute, one thing Starbucks CEO Howard Schultz is predicting is an inevitable downturn of consumers maintaining their excitement for frothy premium coffee drinks like Frappuccinos and Pumpkin Spice Lattes – in other words, Starbucks’ bread and butter. If Starbucks is going to continue to thrive at its current capacity, it’s going to have to offer up some new flavor profiles and keep audiences interested.
But how do you diversify when you’re a massive brand known for selling one thing? That’s what Starbucks is trying to find out, utilizing partnerships and acquisitions along the way to see what sticks.
Acquiring the Tea Market and Moving it Forward
Last year, Starbucks made a major move toward diversification by finalizing its acquisition of the Atlanta-based retail chain Teavana for $620 million. Starbucks has taken this acquisition to heart, throwing itself into the expansion of the specialty tea brand – in October of 2013, Starbucks brought Teavana from a strictly retail space into the foodservice world with the launch of the first Teavana tea bar in New York City. Betting on the success of this test location, Schultz expressed to the media that he hoped to build out the brand’s existing retail locations and open a thousand new full service Teavana tea bars within the next five years.
But this isn’t a case of Starbucks competing against itself with its newly acquired Teavana brand – it’s expressly about not putting all of its revenue eggs in one coffee-based basket. Tea is a huge global market – a $90 billion market worldwide, in fact, with more consumer interest in more regions than coffee. By acquiring Teavana and incorporating it properly into the Starbucks brand now, the company as a whole can have more faith in remaining afloat even if coffee prices fluctuate unfavorably or consumer interest in coffee wanes.
Though this means a steadier source of revenue for The Starbucks Company on the whole, there’s also a benefit to the Starbucks brand itself through the power of brand integration. Earlier this year, with much fanfare, Starbucks launched a Teavana-branded chai tea designed by Opra herself; this summer, Starbucks has launched a line of Teavana shaken iced teas. Until the company is able to build out all of the Teavana tea bars that it hopes for – and even after it does – Starbucks will be able to leverage the appeal of new tea offers with the convenience of its own ubiquitous presence to draw in a new potential customer base and a new opportunity for income.
A New Approach to Soft Drinks
Starbucks has always sold Italian sodas, lightly flavored with a shot of any syrup they have on tap, but they were never specifically branded or capitalized on before. But as Starbucks continues its plans to diversify its offerings, the brand has turned to soft drinks by launching its new Fizzio™ Handcraftted Sodas line alongside its Teavana iced teas as the centerpiece of its Summer 2014 season.
“We have heard from our customers that they’re looking for more refreshing, cold beverages, especially during the warm summer months,” said Cliff Burrows, group president, U.S., Americas and Teavana in a press release issued by Starbucks. “Fizzio Handcrafted Soda is unlike any soda in the marketplace because it’s handcrafted and made-to-order each time. The addition of Fizzio and Teavana Iced Teas gives our customers more refreshing beverage choices made with the premium ingredients they expect from Starbucks.”
Instead of relying on its usual stable of flavor syrups, Starbucks has put the time and effort into creating traditional yet more complex flavors like spiced root beer and lemon ale especially for the Fizzio™ line. With soft drink sales in decline for major brands like Coca-Cola and Pepsi, this may seem like a counterintuitive move on the part of Starbucks. Then again, Fizzio™ isn’t really competing with Coca-Cola or Pepsi.
Starbucks isn’t serving its Fizzio™ drinks out of regular soda fountain taps – to underscore the line’s “handcrafted” nature, the brand has launched a special Fizzio™ machine at its stores, offering what the brand calls “a