Shot in the Arm
Coffee's Class War
The Toast of Roasts
By now, the word Starbucks may be more recognizable than the word coffee. But apparently that’s not enough name recognition for the Seattle-based giant: This spring, it launched its first all-out national advertising campaign, with posters, newspaper, and magazine ads, and Twitter and You Tube feeds.
Just as Starbucks was hammering its name into the public consciousness across the U.S., it took a very different tack in its hometown, where coffeehouse culture is pervasive, and the Starbucks name is viewed with disdain by some elite coffee drinkers who are constantly pushing the definition of what's good. Starbucks decided to respond by launching three off-brand cafés, the first of which opened this summer and is called 15th Ave. Coffee and Tea. (The others have yet to open their doors.)
Starbucks is under assault at both the high and low ends of the coffee market, putting the company into a very tricky spot. It must fend off maneuvers by mass-market powerhouses McDonald's and Dunkin Donuts, while fighting for credibility among the connoisseurs. On the high end where Starbucks originally made its name, superpremium coffee roasters like Chicago-based Intelligentsia and local, word-of-mouth cafés like Cafe Vivace in Seattle have grabbed the mantle of leadership. Meanwhile, on the lower end, the fast-food giants, which historically churned out coffee as though it were Coke, have decided to gussy up their image by creating lattes and the espressos. “These are two separate businesses,” says Richard Honack, a marketing professor at Northwestern University’s Kellogg School of Management. “They have different tactics to go after the two audiences.” Russell Winer, chair of the marketing department at New York University’s Stern School of Business, warns that the dual strategy “is not easy to pull off.”
So far, Starbucks has been caught in the middle. “They’re not the cheapest, but they’re not perceived to be gourmet anymore,” Winer says. Like many big chains, it is facing a major marketing challenge. Starbucks is feeling pressure from investors, too. On Sunday, Barron's expressed concern that shares of the coffee chain are overvalued.
Starbucks created a lot of its own problems by responding poorly to both sets of competitors. Most observers say the giant chain left the door open for high-end rivals by squandering its reputation—for instance, by switching to prepackaged coffee beans instead of grinding them right in front of the customer. Then it tried to compete with McDonald’s by offering breakfast sandwiches.
Starbucks declined to be interviewed for this story and has never revealed how much it’s spending on the marketing push. However, Honack estimates the spending at “several million” dollars, roughly the same as McDonald’s is laying out for coffee ads (though not its total ad campaign).
The chain’s PR efforts actually began last fall, with a pledge to give free coffee to anyone who voted on November 4. The offer had to be rescinded because it’s illegal under federal law to provide any sort of remuneration for voting.
Oh, well. About six months later, on April 30, the chain announced with great fanfare on its website that it would “launch a long-term, multichannel brand campaign highlighting our exceptional coffee, the unique experience, and the values that have build [sic] our brand from the beginning.”






