Ans 1 Mr.

Howard Schultz the chairman and CEO of starbucks corporation when after his speech went to
the university’s coffee shop “the brewery” he was very much disappointed as the board outside the
brewery showed “ Now selling starbucks coffee” and he ordered one of their house blend which tasted
nothing like any starbucks coffee. Infact it was not even close to what starbucks coffee actually tasted
like. Also, the shop was really messy and the service provided was also very much poor.

Ans 2 In 1996 the per capita coffee consumption was 1.7 cups per person per day which was a drastic
decrease from the two or three cups per day in 1960’s to 1970’s .The reason behind this decline which
was identified by the leading coffee makers were poor product packaging, development and
positioning.

But the recent popularity of speciality coffee had lead to rise in coffee consumption again.

The trends were as following

 Adoption of a healthier lifestyle,which led consumers to replace alcohol with coffee.

 Coffee bars offered a place where people could meet.
 People liked affordable luxuries and speciality coffee fit the bill.
 Consumers were becoming more knowledgeable about coffee.

Ans 3 As per the 20 year review of the U.S specialty coffee industry the people who lived and worked in
urban areas and have an annual income of $35000 are the one who consume specialty coffee. Also two
parent family with a stay at home mother purchase 41% more of specialty coffee than the average and
single people purchase 39% and consumer with college degree purchase 49% of specialty coffee than
the average.

Female purchase slightly more specialty coffee than men and coffee consumption was highest among
individuals aged 30 to 59 than those aged 20 to 29.

Ans 4 one of the most important product substitute was specialty coffee originating from basic coffee
companies in the grocery chain. Grocery stores were responsible for 81% of specialty coffee sales, and
this figure was expected to fall to 46% in 1999,resulting in greater amounts of coffee being purchased
from specialty stores i.e it was projected to increase from 19% to 54% in 1999.

Ans 5 Starbucks two most importand cornerstones to its success are coffee and their people. They try to
supply the worlds best quality coffee with as much customization as possible. Also starbucks treat the
employees as partners and value each employees suggestion and contribution towards the company.
Starbucks think that if in next 25 years when they look back if they would have grown their company
with the same value and principles which are present today then they will think that they have
succeeded.
Ans 7 Specialty sales were agreements with retailers, wholesalers, restaurants, service providers, etc. to
carry Starbucks coffee. Specialty sales not only provided Starbucks with revenue growth potential but
also with increased name recognition.

The categories are:

 United Airlines — Starbucks was served on all domestic and international flights.

• Nordstrom — Starbucks had developed a special blend for Nordstrom.

• Barnes & Noble Bookstores — Starbucks operated individual but attached locations. Many of these

locations had separate entrances that allowed them to stay open even after Barnes & Noble closed.

• PepsiCo — Starbucks and PepsiCo had jointly developed the Frappuccino product, a milk-based cold

coffee beverage in a bottle.

• PriceCostco — Starbucks had developed a special brand name, Meridian, for PriceCostco.

• Red Hook Breweries — Starbucks provided coffee concentrate as an ingredient for one of the

brewery’s beers, Double Black Stout.

• Dreyers’ Ice Cream — In this joint venture, Starbucks had its own brand of ice cream that Dreyers’

promoted via its grocery channels.

• ARAMARK — This was the world’s leading provider of a broad range of services to businesses

Ans 8 It was estimated that Starbucks’ ice cream would perhaps reach $40 million at retail and
contribute at least $500,000 to earnings during fiscal 1997.

Bottled Frappuccino was Starbucks’ attempt to introduce a quality ready-to-drink coffee beverage into
the North American market place. Starbucks viewed this bottled beverage as a $1 billion opportunity.
These estimates were from Pepsi, who said that it had never seen a product test quite as well as bottled
Frappuccino, where 70 per cent of testers became repeat purchasers.