Starbucks aims to increase mass-market reach

Allison Linn Senior writer • Profile • E-mail

For years, Starbucks Corp. has been working to make itself your favorite stop for a cup of coffee. Increasingly, it also wants to be the only brand that comes to mind when you think about coffee, period.

The Seattle-based coffee retailer is increasing efforts to sell Starbucks pre-made coffee drinks, coffee beans for home brewing and other branded caffeinated products. The efforts include wider distribution, a new advertising campaign and even plans for vending machines that will spit out hot coffee drinks with the touch of a button or two.

Starbucks maintains that its core business will always be the thousands of Starbucks stores that now dot the world, which the company likes to refer to as a “third place” between work and home. But increasingly, executive Gerry Lopez said, the company also is realizing that there are many other times when they might be able to sell someone a Starbucks beverage.

“When they walk out of that store, when they go back to that first place — home — or that second place — work — it’s not like they’re not drinking coffee,” said Lopez, Starbucks’ senior vice president and head of global consumer products.

That means the challenge is, “How do you reach out and continue to build that relationship with that customer so that we are within their sphere whenever they have a need or feel like, ‘Gee, a cup of coffee would feel good right now?’” he said.

The effort has been brewing for years. Starbucks has been working with partner Kraft Food Inc. since 1998 to distribute coffee beans to grocery stores, wholesalers and other retailers. In the last couple years, that distribution has expanded even further to include such unlikely retailers as drug stores. Kraft also now distributes Starbucks’ Seattle’s Best brand beans.

In the next few weeks, Starbucks and Kraft also plan to expand their reach to include coffee bean sales in the United Kingdom. Bob Levi, senior vice president of global brands and partnership for Kraft, said it also would be natural to see more international expansion of its beans sales in the future, which Lopez said could include countries such as Germany.

Starbucks Starbucks vending machines are expected to debut later this year.

A separate deal with PepsiCo Inc., dubbed the North American Coffee Partnership, has put Starbucks’ bottled Frappuccinos and other cold coffee drinks in convenience stores, delis, gas stations and other locations since 1994.

Starbucks is working with Pepsi on the vending machines as well, which are expected to debut later this year after years of discussions. The machines will be located in universities, train stations and other areas where putting a full-fledged store isn’t feasible, said Tracey Doucette, general manager of the North American Coffee Partnership.

Through separate deals with other companies, Starbucks also offers coffee-flavored ice cream and liqueur.

Perhaps because of its own success in these offshoot markets, Starbucks is facing increased competition. Rivals The Coca-Cola Co. and Caribou Coffee Company Inc. recently announced plans to offer their own bottled, cold coffee drink, which could potentially eat into Starbucks and Pepsi’s dominance in that market. Also, more high-end coffees are now edging their way onto grocery store shelves, potentially providing Starbucks with increased rivalry there.

Starbucks believes the increased competition is at least partly a result of its own ubiquity at retailers.

“To ignore the competition would be foolish, but I would say that the reason you’re seeing more coffee on the shelves is because of our success,” said Wendy Pinero, Starbucks’ vice president for packaged coffee and tea in the United States.

Nevertheless, Starbucks recently launched an ad campaign focused on the coffee beans retailers sell for home use.

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