In response to heightened fast-food competition, Starbucks is re-branding Seattle's Best and moving quickly to expand the coffee brand to convenience stores, drive-through kiosks, coffee carts, vending machines and mobile trucks.
The company has already reached deals to sell Seattle's Best, a competitor acquired in 2003, at Burger King and Subway restaurants and at AMC Entertainment movie theaters. In all, Seattle's Best is expected to reach about 30,000 distribution points by the end of its fiscal year. At the start of the year, Seattle's Best coffee and coffee beans were only sold in the chain's own shops inside nearly 500 Borders bookstores, as well as in about 2,500 supermarkets.
"We are determined to turn the traditional coffee model on its head with innovative new approaches in every phase of our business -- partnerships, retail, and packaged goods -- and to take our premium coffee to the places our customers go in their everyday lives," Michelle Gass, Seattle's Best Coffee president, said in a statement.
The move responds to competition from McDonald's, Dunkin' Donuts and other fast-food chains but also broadens the company's reach to more "regular Joes." In the past three years, the percentage of Americans drinking premium coffee jumped to 35 percent from 29 percent, Tom Ehlers, a veteran Starbucks exec who is vice president of retail for the Seattle's Best unit, told the Wall Street Journal, "Regular people have found their way to great coffee."
He likened the Seattle's
Best venture to Old Navy, the lower-priced concept from The Gap Inc.
Seattle's Best also has a mellower taste than Starbucks that could carry wider appeal. The updated, cleaner logo, similar to Target's logo, is an effort to create a more accessible look than Starbucks.
Pricing will vary widely based on where it is sold, similar to Coca-Cola, according to the Journal. In grocery stores, Seattle's Best beans will cost consumers less than Starbucks-brand beans but more than conventional brands.
On the downside, operating franchisees gives Starbucks less control over quality. Operating a brand in downstream channels could also impact Starbucks' upscale image. Finally, Seattle's Best could cannibalize Starbucks customers.
Discussion questions: What do you think of Starbucks' mass-market rollout of Seattle's Best? What do you think of the comparison of the Seattle's Best opportunity to Old Navy? What are the risks to the Starbucks brand's image?