Brand Equity

Starbucks Case Study

By Elizabeth Kulin www.KulinMarketing.com At the time of this case study, in the early-mid 1990’s, Starbucks was the leader in the coffee retail category of the coffee industry. As the consumer want for specialty coffee increased by 15% per year, Starbucks was there to offer the highest quality coffee, outstanding customer service, and in convenient consumer locations. Close relationships with exporters allowed Starbucks to control the quality of their beans, in-house roasting allowed control over taste, supply chain operations allowed control over the supply meeting the demand in time to sell to ready to purchase customers, and attention to human resources allowed the creation of a happy staff that would in turn treat customers with better service and attitudes. This level of control, and output of high quality, had rewarded Starbucks with great financial positioning. Investment companies labeled Starbucks as a great investments opportunity with earnings per share forecasted to double by 1998 (page 27, exhibit 8) and net earnings of 101% increase (page 26, exhibit 7). However, the company wanted to grow more in brand equity and revenue. There were multiple opportunities, which looked positive, but were also inclusive of some risks and threats that the company had to address. For example, its brand equity was not growing as strong as hoped, its goal of opening 20-40 stores by year 2000 was costly and difficult to manage, and although it was among multiple opportunities of growth to choose from, many of the options included brand and investment risks, as well as expediential growth that the supply of coffee beans may not be able to withstand the demand and create a shortage in the supply chain (the ability to acquire and purchases the amount of beans needed). The goal of Starbucks was to increase brand equity and create a brand identity in consumers minds (the customer based brand equity) that is: Coffee = Starbucks. With this consumer brand...