Can Starbuck’s Product Managers Take It Upscale?

Will it be possible to make Starbucks even more upscale?
Will it be possible to make Starbucks even more upscale?
Image Credit: By Source

Doesn’t it seem as though the Starbucks coffee shops are just about everywhere by now? There are even some streets that have two of them: one on either side of the street so that people don’t have to flip around to get to a Starbucks. The market for coffee has become so large and so well served that the Starbucks product managers have a real problem on their hands. How are they going to change their product development definition to keep growing the business if they are already everywhere and serving everyone? It turns out that they think that they have the answer: go upscale.

What Is Starbucks Planning On Doing?

So you’re a product manager with a well-known brand and a saturated market. What now? Facing this very dilemma, the Starbucks product managers have taken a look around in their market. When Starbucks was first formed, it was based on the rather novel (at the time) concept that people would be willing to pay US$1 for a cup of coffee. The Starbucks product managers, having been successful in doing this, are now wondering if it might be possible to get people to pay $1 for an ounce of coffee – in other words, sell coffee for $12 for 12 ounces.

There are currently more than 25,000 Starbucks coffee shop location worldwide – now that’s something to put on your product manager resume! The Starbucks product managers now plan on opening between 20 to 30 new stores called “Starbucks Reserve Roastery and Tasting Room”. The plan is to offer customers of these stores rare and exotic coffees that have been grown in small batches. These coffees will then be roasted in the store and then brewed using a number of different types of brewing methods. If this turns out to be successful, the Starbucks product managers may then go ahead and open up to 1,000 more stores (they think big) under the “Starbucks Reserve” brand.

One of the big questions is why is the super popular Starbucks doing this now? The answer is somewhat complicated. It turns out that there are currently a number of independent coffee shops out there that have been offering pricy specialty coffees for quite some time and have been doing very well for themselves. Starbucks product managers have also been watching their customers. What they have noticed is that they have been becoming more and more interested in better coffee. At the same time, in the United States the middle class’s discretionary spending power has been growing smaller and smaller over time. This means that traditional Starbucks may start to lose customers while the demand for high end coffee keeps growing.

Why Might Starbucks Product Managers Be Successful?

The motivation for creating the new upscale version of Starbucks was born three years ago. What the Starbucks product managers had noticed was that their mall based stores were seeing fewer and fewer customers. These stores depend on mall based visitors in order to stay open. What the product managers realized was that they needed to find a way to present these customers with a luxurious experience that was good enough to cause them to leave their homes and come to the mall.

So just exactly who is going to be buying this expensive coffee? The answer might surprise you. One segment is, of course, the wealthy simply because they can afford the best. However, another big group of people who might become customer at the new upscale Starbucks coffee shops are millennials. Millennials have become a major force in the upscale coffee market. What seems to really attract them is a product that has a story behind it. This segment is growing by leaps and bounds. In the eight years from 2008 to 2016, the number of millennials who said that they had bought a gourmet coffee product rose from 13% to 36%.

What the Starbucks product managers are discovering is that they have created the market that they now find themselves in the middle of. In this market, there are a number of independents and other companies such as Blue Bottle Coffee who are occupying the upper end of the market. The lower end of the market is being serviced by McDonalds and Dunkin’ Doughnuts. What Starbucks has learned is that if a coffee contains the name of the grower on it, then the average retail price for a lot of the coffee can be $9.95 higher per pound than those with no name.

What All Of This Means For You

The Starbucks product managers find themselves in a tricky spot. They have been very, very successful in creating a powerful and successful brand in their Starbucks coffee shops. However, with 25,000 stores they have just about saturated their market. Their product manager job description tells them that they now need to look for new ways to grow the business.

What they have decided to do is to create a new type of Starbucks store: an upscale Starbucks. The new store will sell only rare and exotic coffees that have been grown in small batches. These coffees will be specially prepared and will be sold for prices that are roughly $12 for 12 ounces. The traditional market for Starbucks stores is starting to shrink and so Starbucks thinks now is the time for it to move upscale. They are hoping that they will be able to capture millennials who are looking for products that have a story behind them. Other parts of the market will be taken care of by other companies, Starbucks wants to own the upper end.

The Starbucks product managers seem to be making the right move at the right time. The beer industry has been hurt by the rise in craft beers lately and so by creating their own upscale brand, the Starbucks product managers can hang on to more of their market. Now all we have to do is to discover if people are going to be willing to pay $1 for one ounce of coffee!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that Starbucks should also offer high end foods at their new stores?

Click here to get automatic updates when
The Accidental Product Manager Blog is updated.

P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!

What We’ll Be Talking About Next Time

I’m pretty sure that we’ve all felt this way at some point in time. We come home from work, we’re exhausted and then all of sudden we realize that we have nothing planned for dinner. If you are like me, this is the evening that you end up calling out for pizza or grabbing something from McDonalds. Not quite the home cooked meal that you were hoping for. What if there was a way that everything that you needed in order to prepare a home cooked meal could be right there in your kitchen when you needed it? All you’d have to do is throw it together. It turns out that this can be done and in fact this market is getting ready to explode.

Disney is a very large, very successful company. The company is made up of many different parts: consumer products, theme parks, film studios, and media networks. Many parts of the company are doing very well right now, but other parts are not. One of the parts that seems to be struggling is the ESPN sports network. In fact, this part of the company has been doing so poorly lately that it has driven the company’s stock value down by 24%. Clearly the Disney product managers are going to have to take steps to change their product development definition and deal with this problem.