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Starbucks on the energy drinks market

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by

Marie Perrat

on 31 May 2013

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Transcript of Starbucks on the energy drinks market

Starbucks Energy drinks Consumers Industry Competition Environment Consumers Industry Competition Legal Consumer profile The "Starbucks experience” → customer-driven marketing strategy
= innovation in products, best locations, comfort

Demographics
Consumer profile: gender equally divided, 25-40 (almost 49% of the total business) and 18-24 (40% of its total business), mid-income levels, higher education experience, single
More precise target market depend on categories of products

Psychographics
Enjoy taste, quality (hand-crafted coffee) and variety of products
A “quick fix”
Friendly environment: warm, welcoming, and urban ambiance How many Starbucks coffee have been drunk? http://globometer.com/boissons-starbucks.php Consumer profile Motivations Direct competition Others:

MacDonalds
Caribou Coffee
Krispy Kreme Doughnut Corporation
Einstein Noah restaurant Group
The Coffee Bean & Tea Leaf
Jamba Juice
Peet’s Coffee & Tea Indirect competition Gas stations

Convenience store: 7-Eleven

Restaurants

Instant coffees (made at home) Environmental friendly processes Consumer profile Industry Direct competition Indirect competition Legal issues FDA has received several letters to engage a study about potential threat on public’s health related to energy drinks.
Not yet concerned by FDA regulations because they are considered as dietary supplements.

10,068 emergency room visits in 2007 to 20,783 in 2011
→ most people involved 18-39 years old

+ FDA has posted adverse-event reports:
40 illnesses and 5 deaths linked to Monster Energy
13 illnesses and 2 lasting disabilities linked to Rockstar Energy
92 illnesses and 13 deaths to 5-Hour Energy shots Trends
How it is seen ? healthy and/or functional products
Reasons of consumption: 67% for insufficient sleep, 65% to increase energy, 54% to drink with alcohol while partying
+ some heavy consumers: 5% of adults consume energy drinks 5-7 times per month and less than 2% drink energy drinks 10 or more times

Demographics
Consumer profile: 18-34, men, Hispanics, Pacific region residents, and adults with children in the household

Consumption issues
29% of users experienced crash episodes → users told they drunk a significant dose
22% of users reported ever having headaches
19% of users had heart palpitations from consuming it 100% reusable or recycled cups (in 2015),
building greener stores (conserving energy and water),
ethical purchases,
being involved in the life community US energy drinks and shot market
Growth of the US energy drinks and shot market : up 60% between 2008 and 2012
Sales in this market worth $12.5bn in 2012 and are estimated at $21.5bn in 2017
Amount of consumption: 48bn litres in 2011 with a growth of 13% per year
Retail distribution:
convenience stores: 59%
mass merchandisers: 13%
supermarkets: 10%
club stores/warehouse: 5%
drug stores: 2%.
all other retailers contribute a significant 11% to market sales.

US Ready To Drink (RTD) beverages market
Market share: 78% energy drinks, 18% energy shots, 4% energy drink mix
Energy drinks only represent 3% of RTD beverages sales

How energy drinks became popular? Sponsorship and brand placement Energy shot brands
5-Hour Energy
6 Hour power
Red Bull shot
Monster Hitman
Stacker 2
Nitro 2 Go
Redline
Vital 4U
Full Throttle
Mountain Dew Amp
Tab
Joker
Lost
Voodoo Energy drinks brands Red Bull is the most well known one Sport drinks
Examples: Gatorade, Powerade, Vitamin Water
What is the difference between sport drinks and energy drinks ?
Energy drinks contain more carbohydrate and calories
→ Red Bull contains 26 gr of carbs, all sugar, per 8.3-oz serving, while Gatorade contains 16 g of carbs per 8-oz. serving, of which 13 g are sugar

Coffee

Tea

Fruit juices

Cereal bars Any questions? A presentation made by:
Marie Perrat
Laure Guillamaud
Vanessa Hou
Yu Zhang Starbucks Refreshers ' 4Ps PRODUCT

Launched in April, 2012
Healthier: less caffeine and sugar than major competitor
3 types: Handcrafted, VIA (on the go), ready to drink (can)

5 flavors : Handcrafted : Very berry hibiscus / Cool Lime Sparkling cans : Strawberry Lemonade / Raspberry Pomegranate / Orange Melon

Green coffee extract
Real fruit juice Low Calories (less than 100 cal) Brand Presentation Created in 1971

World’s famous coffee chain

>20 850 shops & >500 franchises

61 countries

2Q 2013 : +11% ($3,6B)

Fair Trade & Environmental friendly :
Max Havelaar logo, buy coffee above the market price, Ethos Water ($.05 of each bottle sold for "clean water foundation") Farmer support centers in Africa Technology Ingredients


They have added contain that boost you like electrolytes : Lipovitan D (that contains taurin) = + (80 mg) (No more than 48 in an original soda) => Ingredients and effects Ephedrine: stimulant that works on the central nervous system
--> a common ingredient in weight-loss products and decongestants
--> concerns about its effects on the heart
Taurine: produced by the body, it helps regulate heart beat and muscle contractions
--> Health experts aren't sure what effect it has
--> the rumor that taurine comes from bull testicles is false).
Ginseng
--> medicinal properties: reducing stress and boosting energy levels.
B-vitamins
--> convert sugar to energy and improve muscle tone
Guarana seed: a stimulant
Carnitine: amino acid
--> fatty acid metabolism.
Creatine: organic acid
--> helps supply energy for muscle contractions.
Inositol: member of the vitamin B complex
--> that helps relay messages within cells in the body.
Ginkgo biloba:
-->thought to enhance memory. Product Preservation Aluminium Cans
Convenience to store in shelves
Good conservation for sparkling beverages
Easy to recycle
Cheap
Rust proof
Light weight PRICE

Handcrafted: $2.90 (12 oz)
VIA: $5.95 per pack (5 sticks)
Ready to drink: $1.99 (suggested retail price for 12 oz) PROMOTION
Own product website
Videos
Facebook page : 1 that seems «official» with 6,200 likes
Coupons, Free Samples and Special Offers PLACE

Grocery stores
Convenience licensed stores Starbucks stores
Starbucks.com Legal & government Legislators sponsor bills limiting sale of drinks to people 19 and over, requiring warning signs.
The sign bill would require store proprietors to post: "Energy drinks may contain large quantities of caffeine and other ingredients, including herbal supplements, amino acids and vitamins. Consumption of these beverages may aggravate heart conditions, cause headaches, rapid heartbeat, dehydration, disruption of sleep patterns and concentration, and in rare cases, death. These effects may be magnified in children under age of 19. The ingredients of these drinks may interfere with certain prescription medications for attention deficit disorder, asthma, allergies, birth control and other conditions. Mixing energy drinks with alcohol or other drugs may pose additional health risks."
"We need to do all we can to ensure the health and welfare of children by restricting their ability to purchase energy drinks," Muratore said. Consumer safety Best Producer of Coffee :
Brasil 36% : rising cost
Vietnam 14% : - 30% robusta production
Indonesia 7%
Colombia 7% : rising cost source : zonebourse.com Strenghts Starbucks
-Worlwide company (high incomes growing, brand awareness) but USA is still the major market
-"Starbucks experience" (world's admired company)
-Huge product line (innovation, renewal of the offer)
-Green preoccupation (customer awareness)
-Quality of the coffee beans
-Pattents on recipes

Starbucks Refreshers
-Energy drinks mix is still a niche market Weaknesses Starbucks
-Coffee & snacks shops industry is mature (but Starbucks is expanding on other growing markets)
-Growth of coffee cost of production and coffee beans price
-Strong competition
-Bad buzz

Energy drinks
-Strong competition (well-known established brands)
-Only 3% of the RTD market
-FDA potential regulation in future
-Limited sales (age)
-Packaging regulations (warning signs)
-Recipe regulations
-Bad buzz Opportunities Threats Product range Starbucks
-High price policy
-Nutrition facts for teenagers and children

Energy drinks
-Heavy customers could have health problems (bad advertising)
-Some bad experiences after drinking it

Starbucks Refreshers
-Strong competition due to convenience stores
-Lack of awareness (own field market study on 100 customers)
--> 83% of Starbucks customers don't know about Refreshers
--> about 70% of the ones who knew it don't see it as an energy drink Starbucks
-Customer trend on natural products

Energy drinks
-Functional product
-Growth of US market (up to 60% 2008-2012)
-Good conservation due to aluminium cans Quality of the products Starbucks water is at a minimum triple filtered

Costa Rica's Doka Estate : renowned for superior bean
"Coffee is like wine — you pay for the name," says Edgar Vargas Customer trend on natural products Conscious shoppers are increasing their spending on
organics,
sourcing food products,
buying sustainable 'Farm to Table' food products traceable to local / regional farmers and producers
(2013 MamboTrack Annual Natural and Organic Product Survey)
--> values claimed by Starbucks ... explaining a high price policy a simple idea: high value at moderate cost
--> people feel like they are getting a good deal for their money, they are more likely to pay a higher cost
--> strict quality controls in its coffee sourcing as well as in its customer service and peripheral products to justify its costs. Nutrition issues
with children consumption products too sugary
--> infantile diabete

too much caffeine
--> heart attacks and cardiac arrests

Frappuccino is a trick for parents Bad buzz Several accusations about their ethics:
exploiting farmers
burning their beans to make them darker
lagging on using Fair Trade coffee
(thanks to the Organic Consumers Association) And now the Starbucks Refreshers ! SWOT Conclusion That's why we are going to relaunch
the Starbuck's Refreshers
strong company
market potential
make a better promotion
Full transcript