Consumers' Choice in Chains: Leaders of the Pack - Starbucks

For all its strength and dominance, Starbucks hardly has become complacent as the leader of the coffee pack.

By Staff -- Restaurants & Institutions, 9/1/2006

It may be bit of a marvel to reflect on how “barista,” “venti” and “Frappuccino” seamlessly have become part of the American vocabulary, but with Starbucks dominating 40% of the specialty coffee market, it isn’t much of a surprise.

For all its strength and dominance, the company hardly has become complacent as the leader of the coffee pack. With more than 40 million customers per week served in 37 countries, it continually evaluates what consumers want in their cups through market research and, importantly, through customer feedback.

Specialty drinks, which at 77% of sales account for the overwhelming majority of Starbucks’ business, are tailored to each customer’s preferences. Here customization does two things: builds loyalty and provides insight into what guests want. Customers also can build customized drinks on the Starbucks Web site and get nutritional profiles for the items. “We have a very open line of communication with customers,” says Starbucks spokesman Alan Hilowitz.

Successful lines of beverages, notably the original Frappuccino, sprang from customer input; demand for a blended, iced coffee drink first surfaced in a Santa Monica unit 11 years ago. More recently, Green Tea Frappuccino, developed for the Taiwanese market, was rolled out in North America last summer, becoming the most successful Frappuccino launch on record. But food offerings have not been ignored. Toasted egg sandwiches now are served at 5,400 domestic locations, with more stores expected to carry the all-day breakfast item next year.

In truth, Starbucks is as much a lifestyle company as foodservice company, its influence extending beyond iconic phrases and liquid treats. Contemporary music, provided by the proprietary Hear Music program (“in its infancy,” says Hilowitz) not only offers customers something pleasant to listen to but also a chance to sample and purchase new music. In turn, a modern cafe aesthetic welcomes traffic throughout the day, enhancing the coffee company’s position as the go-to “third place,” a local gathering spot provided on a global scale.