The mission at Starbucks Coffee Co., Seattle, has always been to inspire and nurture the human spirit one person, one cup and one neighborhood at a time, and that extends beyond its retail stores and into consumer packaged goods (CPG) channels, enabling customers to enjoy Starbucks anywhere and in any format.

“We think that it starts and ends with our desire to better serve our customers, and to provide the world’s finest coffee wherever and in whatever form our customers want to enjoy it, in a brand-appropriate way,” says Jeff Hansberry, president of Starbucks channel development and Seattle’s Best Coffee. “For our organization, our vision, our mission, our charge [is] to better serve our customers.”

Hansberry, who joined Starbucks in June 2010, notes that the Starbucks CPG segment had begun to grow before he and his team arrived, but its evolution has accelerated around the realization that the company can better serve its customers, who other companies might refer to as consumers, from its retail stores to local convenience stores and everything in between.

“There are millions of points of distribution that our customers want to be able to access our brand through various points in their day, and the channel development organization is built to better serve our customers wherever and whenever they want our coffee and products,” he says. “That clarity of vision is more recent and that’s really what we’ve been building toward over the last two years.”

Building on strengths

Part of Starbucks’ evolution included implementing a direct model to market, sell and distribute Starbucks and Seattle’s Best Coffee packaged coffees as well as the company’s Tazo tea brand in March 2011. Previously, the company had a distribution partnership with Northfield, Ill.-based Kraft Foods for its packaged coffee and tea.

“With that direct model, we have built a number of capabilities that allow us to effectively represent our brands to customers across the U.S.,” Hansberry says. “As we’ve done that, the capabilities that we’ve built are really around customer relationship management, strategy alignment with our key customers [and] business planning, category management and shopper marketing.

“We’re investing heavily in those capabilities for a couple of reasons,” he continues. “One is because that is an expectation of a leading CPG company, but also beyond that we see those capabilities as enablers for what we call our Blueprint for Growth.”

Within the company’s Blueprint for Growth is its portfolio of assets that includes its retail stores, social and digital assets, and loyalty program, coupled with down-the-aisle availability of products in packaged goods channels and finding ways to connect all of those elements to speak to customers in new and different ways, Hansberry says.

“The power of it is really two-fold: [it’s] an ability to speak to our customers in a way that they’re comfortable with, and it’s an ability to speak with our customers in a compelling way that is very efficient and effective,” he adds.

Among those ways to communicate, Hansberry notes that 60 million customers visit Starbucks retail stores every week, where they are surrounded by the sights, sounds and smells of the café as well as interaction with the baristas. With its social and digital outreach, the company has millions of Facebook fans and Twitter followers as well as millions of visitors every week. Starbucks also has millions of Starbucks Cards in circulation, including registered cards and Starbucks Gold Cards, Hansberry says. The company considers these tools of its Blueprint for Growth plan that create capabilities based on shopper marketing and shopper insights, he explains.

The company also is looking for ways to link its assets with its retailers’ assets to create propositions that add value for both brands in a way that’s creative for both parties, Hansberry says. It also wants to leverage shopper marketing that’s linked to the Starbucks brand group and category management group to allow the teams to work with their retailers to translate insights into category and brand growth.

Juicy entry

This new approach to channel development also is a part of another new venture for the company. In November, Starbucks Coffee Co. announced its acquisition of Evolution Fresh Inc., a super-premium juice business, which was started by the founder of Naked Juice, Jimmy Rosenburg.

“Juice for us is a very big and exciting opportunity; it’s really our point of entry into the $50 billion

health and wellness space,” Hansberry says. “We estimate the [super-premium juice] category at about $1.6 billion in revenue, and it’s growing. We think we have a product in Evolution [Fresh] that is better for you than anything that is out there on the market, and the reason we believe that is we have a juicery in southern California.”

What differentiates Evolution Fresh from other juiceries, Hansberry says, is its high-pressure processing (HPP) technology. HPP cold presses and squeezes the juice to capture the flavor, enzymes and nutrients as well as provides a slightly longer shelf life, he adds. The juice also contains about 3 pounds of vegetables in each bottle.

“I think [statistics show that] 25 to 30 percent of Americans don’t even eat a single fruit or vegetable every single day, so we think there is a great opportunity before us to offer people a very healthy juice,” Hansberry says. “And we think that by introducing them to the kind of nutritional density that this product has that we can help them [live] better, healthier lives.”

Starbucks will begin to build the Evolution Fresh brand through its current and additional CPG distribution channels, Starbucks retail stores and through an Evolution Fresh retail experience that began rolling out last month, the company says.

Working together

As Starbucks builds on its capabilities and portfolio, partnerships remain important to the company’s future growth.

Since the early 1990s, Purchase, N.Y.-based PepsiCo and Starbucks Coffee Co. have worked together under the North American Coffee Partnership (NACP) to provide consumers with Starbucks ready-to-drink (RTD) beverage options.

“That’s a great partnership that’s very beneficial to both companies,” Hansberry says. “Through their expertise, we are able to reach many points of distribution very efficiently, leveraging the strengths and execution capability that PepsiCo has to be able to deliver against that mission to provide our products wherever and whenever our customers want to enjoy them.”

Earlier this year, PepsiCo announced that the Starbucks RTD beverages have grown to more than $1 billion in annual retail sales.

“It’s been a great partnership,” Hansberry says. “Both companies work very well together [and] there’s a spirit of mutual respect. We’re grateful for the partnership and the results that we’ve achieved together.”

Hansberry thinks opportunities are available to grow Starbucks RTD brands beyond current customers. He notes that the success of the RTD business begins in Starbucks retail stores by providing customers with quality handcrafted Frappuccino beverages; the RTD Frappuccino brand operates parallel to that so the two can co-exist.

“What we bring to the partnership is that customer experience and that great, perfect Frappuccino every time in our stores,” he says. “What PepsiCo brings to the partnership is the ability to execute with excellence and to distribute Frappuccino to hundreds of thousands of points of distribution.”

In addition to Starbucks Frappuccino, the NACP also distributes Starbucks Doubleshot and Doubleshot Energy + Coffee, Seattle’s Best Coffee’s RTD beverages, and its latest introduction: Starbucks Refreshers, an RTD beverage innovation that delivers refreshment from real fruit juice and a natural boost of energy from green coffee extract.

“We’re really excited about the possibility of [Starbucks] Refreshers,” Hansberry says. “Customers can experience coffee in a completely new way, unroasted and unbrewed, resulting in a delicious refreshment with a natural boost of energy from real fruit juice and green coffee extract.”

Starbucks Refreshers are available now in U.S. grocery aisles in Raspberry Pomegranate, Orange Melon and Strawberry Lemonade flavors.

Ready-to-drink Tazo bottled iced teas are distributed and marketed through a licensing agreement with the Pepsi-Lipton Tea Partnership, which is a partnership between Pepsi-Cola North America and international CPG company Unilever.

Starbucks also has found value in its partnership with Green Mountain Coffee Roasters (GMCR), Waterbury, Vt. In March 2011, GMCR, which manufactures the Keurig Single-Cup Brewing System, and Starbucks entered into a strategic partnership to manufacture, market, distribute and sell Starbucks coffee and Tazo tea K-Cup portion packs for the Keurig brewing system.

The branded K-Cups launched at major food, drug, mass, club, specialty and department store retailers throughout the United States in November. Starbucks coffee K-Cup portion packs were released in Breakfast Blend, Pike Place Roast, House Blend, Sumatra and French Roast varieties. In addition, two selections of Tazo tea K-Cup portion packs — Tazo Awake and Tazo Zen — were released.

Since its original launch, the company added Starbucks Blonde Roast Veranda Blend K-Cup packs. Just two months after the November launch, Starbucks announced that more than 100 million K-Cup portion packs under the Starbucks and Tazo brands had been shipped.

“Green Mountain has created a great platform in the Keurig system,” Hansberry says. “The combination of Starbucks and the Keurig platform, when we did the work exploring this opportunity, was a great match that gave customers we spoke with confidence in delivering real precision in terms of how the coffee was made and tastes, one cup at at time.”

Hansberry says GMCR and Starbucks will continue to explore opportunities for new SKUs, expand distribution into different channels — including an upcoming 2012 introduction of K-Cups in Starbucks retail stores — and launch into additional channels later this year.

“Our [partnerships] help us bring to life our vision of the world’s finest coffee everywhere and in every form that our customers want to enjoy it,” he says.

Starbucks also recently announced its entry into the at-home premium single-cup machine segment with the Verismo system by Starbucks. The Verismo system crafts both Starbucks coffeehouse-quality brewed coffee and espresso beverages, such as lattes and Americano-style coffees, consistently and conveniently one cup at a time on its high-pressure brewing system, according to the company.

Through a strategic relationship with Germany-based Krueger GmbH & Co. KG, Starbucks will market and sell Verismo and Starbucks-sourced 100 percent Arabica coffee and milk pods starting this fall, the company says.

During an investor webcast announcing the venture, the company underscored its commitment to GMCR, the low-pressure Keurig brewing systems and its continued support. Starbucks’ relationship with GMCR is as solid today as when it began, said Chairman, President and Chief Executive Officer Howard Schultz during the webcast.

Verismo will be sold online and at select Starbucks retail stores, as well as specialty retailers across the United States, Canada and in select international markets. Espresso and brewed coffee pods will initially be available in a full range of Starbucks roast spectrums, along with a variety of milk pods, the company says.

Blonde ambition

The Starbucks brand’s grounding in the super-premium coffee segment has allowed the company to attract bold coffee drinkers and communicate about the origins of coffee, but a recent study identified more opportunities for the company in the coffee category.

In January, the company released Starbucks Blonde Roast, a lighter roast to meet the needs of the 40 percent — or 54 million coffee drinkers — in the United States who say they prefer a lighter roast coffee, the company says.

Available in Veranda Blend, Willow Blend and Decaf Willow Blend, Starbucks Blonde Roast offers a mellow and approachable coffee that also is flavorful and lighter bodied with a mild taste and gentle finish, the company says. The product launched in the United States concurrently in grocery and Starbucks retail channels in whole bean, ground, K-Cups, Via and brewed options.

“It took 80 different roast and recipe iterations to get to that roast [and] to get it right,” says Anthony Carroll, manager of coffee quality. “Our master roasters were able to do it in a very Starbucks way, so you get the character and the taste of the bean to come through, but also you get the lighter roast at the same time for a smooth taste and mellow finish.”

Before the company could get to its finished product, Starbucks conducted an attitude and usage study for its packaged coffee to understand what consumers liked, didn’t like, how it could be optimized and how it is received versus its competition, says Jill Marchick, director of consumer insights for Starbucks Coffee Co. One of the study’s findings was that some consumers felt that the Starbucks taste profile was a little too bold and “roasty” for them, she says.

The company then turned to its research and development department to perform a sensory mapping demonstration of Starbucks coffee. “The attitude and usage study coupled with the sensory mapping showed there was a huge opportunity in this lighter roast area,” Marchick says.

Once the company established the need for a lighter roast and developed the roast varieties, it also was tasked with what to call the new platform. Research showed that consumers liked the new coffee but not the word “lighter.” The terminology seemed as if something was removed or that the coffee was weak and not going to be as flavorful, she says. This led to the adoption of “Blonde Roast,” which reflected the roast and was understood by consumers.

Prior to its commercial launch, Blonde was tested in the United States with consumers and baristas, as well as with consumers in England and Japan.

Meeting customers’ needs

In addition to creating Blonde Roast, research from the company’s attitude and usage study presented another opportunity: for Starbucks to better communicate roast profiles through its coffee packaging.

“Consumers don’t really shop by origin; they really shop by taste or roast profile,” Marchick says. “What we wanted to do was to optimize our packaging so that it’s easy for consumers to find the roast that they’re looking for, and that’s how we arrived at the new packaging architecture, [which] is [designed] to be more consumer-oriented and geared toward the way consumers shop.”

Marchick notes that consumers spend approximately 60 seconds in the grocery aisle making a decision about which coffee to buy. In addition, its research showed that approximately 25 percent of shoppers leave the coffee aisle without making a purchase because they can’t find what they are looking for or the section doesn’t make sense to them.

Starbucks also found that although some bold coffee drinkers express an interest in the origin of the coffees and learning more about where the coffee comes from, it is really more of a secondary point in choosing coffee, Marchick says.

“We went into grocery stores and observed customers shopping to see how they made a decision to purchase,” she says. “It’s helpful to observe people when they’re shopping because there are a lot of things that we don’t think to consider. Observational research is definitely a component of what we do as well as doing quantitative research to really understand how consumers interact with a brand.”

The new packaging architecture was applied to Starbucks packaged coffees with the release of the Blonde Roast in January. 

Instant growth

Starbucks first entered the single-serve coffee market with the development of Starbucks Via Ready Brew, which was introduced in 2009. In 2011, Via contributed $250 million in system-wide sales, the company says.

Marchick says the research that went into developing the appropriate positioning for Starbucks Via Ready Brew helped take a coffee segment that typically was perceived negatively in the United States and turn it into a positive.

“We needed to show consumers that this is Starbucks Via. This is not the instant coffee they are familiar with; it’s an instant way to get Starbucks, but it’s still made of 100 percent Arabica [coffee]. It’s ground Starbucks coffee,” she says.

Via’s launch included varieties such as French Roast, Iced Coffee and Flavored Coffee products such as Vanilla, Mocha and Caramel. With its growing popularity, the company has since added varieties including Veranda Blend, Breakfast Blend and its limited-edition Tribute Blend, which was developed in honor of Starbucks Coffee Co.’s 40th anniversary last year and also is available in ground and whole bean formats.

Providing an entry point

Although the Starbucks brand continues to develop products for consumers in the super-premium coffee market, the company is turning to its Seattle’s Best Coffee brand as an entry point into the premium coffee segment.

“In the last couple of decades, Starbucks has created something pretty interesting — what I call an updraft of expectations around coffee,” says Chris Bruzzo, chief marketing officer of Seattle’s Best Coffee.

Thus Starbucks’ popularity created a gap of space between the entry-level coffee segment and the super-premium space where Starbucks resides. The mid-tier segment, which is where Seattle’s Best Coffee fits, is designed for consumers who are not ready to pay for super-premium coffees, he says.

“They need an on-ramp; they need an easy place to start and that’s what we do,” Bruzzo says. “It goes into everything we do, like how we package our coffee.”

With a mission to bring simplicity to premium coffee, Seattle’s Best Coffee launched the Level System at the beginning of 2011, the company says. The Level System uses numbers and bold colors to show the roast of each blend.

“There’s a lot of seriousness [in coffee] and it can be hard to understand,” Bruzzo says. “In the grocery aisle where there are too many choices and if you’re not familiar with what it means to buy super-premium coffee, this is a brilliant idea because it makes it accessible so I can find my Level, then I can consistently hit it and I can move up and down from there for different occasions and different needs.”

With the packaging change, Seattle’s Best Coffee took its number of available SKUs down from 24 to 10 — five main SKUs with Levels 1 through 5 and variations including Level 4 Organic Fair Trade, Level 3 Decaf, Hazelnut and Cinnamon.

“We’re getting great receptivity when we’re positioned, priced and promoted correctly; we really see the volumes take off,” Bruzzo says. “The business is building well for what is effectively a whole new brand on shelf, [and] it’s doing great at grocery.”

That success has been coupled with the expansion of Seattle’s Best Coffee to more than 50,000 points of distribution including on all Delta Air Lines flights and at foodservice outlets such as Subway, Burger King and, most recently, Taco Bell in 10 Western states. Seattle’s Best Coffee also has leveraged these distribution relationships with recent promotions. In November, Seattle’s Best Coffee, Subway and Walmart all worked together to offer free Seattle’s Best Coffee at the 1,700 Subway locations inside Walmart stores to employees who worked on the popular holiday shopping day Black Friday.

“Four hundred thousand samples were given away in those 1,700 stores, so that felt good. The next week we looked at the results of packaged coffee sales at Walmart; [they were] way up in stores that had the sampling versus stores that didn’t — double digits better,” Bruzzo says.

Beyond its brewed and packaged coffee, Seattle’s Best Coffee also entered the RTD space when it nationally launched its Iced Latte, Mocha and Vanilla canned lattes in January 2011.

“You’ve got a new and emerging need state around ready-to-drink coffee,” Bruzzo says. “[It’s] cold, in a can or a bottle [and] it’s a fast-growing segment within the RTD [market], and if we’re going to be in all the places that our consumers need us to be, then our goal is to have relevant products in those channels.”

Bruzzo adds that Seattle’s Best Coffee is more willing to make adjustments on its product positionings than more established brands.

“As a start-up brand, you’ve got to be ready to reinvent constantly [and] also early on, so we’re in the process now of evaluating how this is doing in terms of velocity and then getting ready to reinvent and create the next chapter in that story,” he says.

As Seattle’s Best Coffee increases its recognition among consumers, the brand has plans to release a value-priced 20-ounce Level 4 package in Walmart stores, as well as add more flavors such as Vanilla and holiday seasonal varieties. Similar to Starbucks’ retail expansion and plans for Evolution Fresh, Bruzzo says Seattle’s Best Coffee has plans for a retail strategy this year, which will be a reinvention compared to the nearly 100 Seattle’s Best Coffee retail stores that are in existence now. BI