You knew this was going to be profiled, sooner or later, especially as the winter holiday season gets revved up, and various coffee merchants are rolling out their seasonal beverages.

A few days ago, The Daily Beast has posted its list of what it considers the forty (40) unhealthiest coffee-based drinks. Now, this is not something considering every possible healthy or unhealthy factor associated with the drinks, just a quick check of the nutritional contents of the drinks by rummaging through the known or estimated nutritional contents (think, those FDA nutritional labels).

While this particular chain is not available everywhere, it seems that the It’s a Grind Coffee House chain (short link) has several of the top caloric counts, including the #1 spot with its Iced Blended Triple Chocolate Mocha beverage. Surprisingly, Starbucks [SBUX] has an entry a bit further down the list, at #8 with its Peppermint White Chocolate Mocha drink. However, keep in mind that the showcased drinks come in varying sizes, so scaling the drinks by volume would be necessary if you are seriously counting carbohydrates and calories… you may find yourself donating portions of your drink(s) to others to stick to your diet.

N.B.

Curious about the guidelines for the FDA’s food labeling guidelines? Read about them on their official site.

• Want the shortened URL? Here ’tis.

Starbucks [SBUX] is at it again: July 21, 2009 is their new Free Pastry Morning*.

Of course, given the lil’ asterisk you see, you’re probably wondering, “What’s the catch?”

And, yes, there is a catch(es):

• You should probably print out the invitation from the Web site;
• You will need to get to your local Starbucks between opening at 10:30 AM local time; the availability of the pastries will be on a first-come, first-served basis, or 10:30 AM, whichever comes first;
• You will need to purchase a hand-crafted beverage (brewed is a good choice);
• You have to choose from their acceptable range of “pastries”.

… and there are plenty of additional availability restrictions toward the bottom of the invitation. Definitely worth a read.

So, if you were destined to fetch some coffee tomorrow anyway, this is a nice extra perk to accompany your perk’ed drink.

The Setup

Are you hankering for a soothing, cool summer drink, as you are strolling/saundering/wandering/slacking around town? Passing by a bunch of retail food chain stores but just wanting something either free-ish or relatively cheap?

The two usual suspects, approaching from two different price point levels, have got offers for you…

The Premise

Starbucks

A few weeks ago, Starbucks [SBUX] had rolled out their $2.00 (USD) summer drinks promotion: you keep your receipt from a drink before 2:00 PM, and then you use that receipt (valid only for that day) as a coupon after 2:00 PM for a cold/iced “grande” beverage of your choice for $2.00. For many drinks on the Starbucks menu, that equates to roughly a 50% discount, if not more.

McDonald’s

A couple of weeks ago, McDonald’s [MCD] has been intensifying its McCafé promotion, including posting more commercials and then… early last week, it announced its Free McCafé Mondays. The premise is that, every Monday until the end of the promotion in early August, you can get either a free 7-ounce iced mocha OR a free 8-ounce hot mocha between 7:00 AM and 7:00 PM… no purchase necessary.

Management Perspective: Starbucks

A $2.00 cold Starbucks drink, at a grande size? Not a bad deal, right? And especially since you could game the system and have a huge stack of collected receipts from that day, up until 2:00 PM.

Adding the cost of the drink that incurred that receipt, Starbucks has managed to part the patron from an additional $2.00. The question becomes, from my view at several Starbucks since the promotion began, what are these people ordering for $2.00? It appears that there seems to be almost an even split between people who are leveraging the promotion to get more of the same drink(s) that they prefer, and those who are using the opportunity to be more adventurous– in order to try drinks that they would otherwise not purchase.

Now, from a promotions standpoint, it almost makes sense to offer free samples of new beverages during a rollout or trial period. And, in fact, some Starbucks outlets have done so, in very tiny sample cups for some of their new products. However, as most customers can attest to, it is usually difficult to determine whether you really like something with a single nibble or sip. Any savvy marketer will tell you that offering teeny-tiny sips or nibbles will only garner mild amusement, at the expense of burning through supplies and labor to generate the microscopic samples, especially in the US market, where obesity unfortunately governs a lot of food purchasing decisions. This means that, to be cynically effective, you’d have to offer a mega-super-sized free “sample” in order to entice individuals who may graze ravenously at your sample stand and then leave to avoid verbal and non-verbal accusations of gluttony, in the hope that there would be at least one of them who would truly enjoy the product enough to purchase one at full price.

The better approach is to affix some value to the promoted product(s) by modifying the consumer mindset to accept a discount. If you are accustomed to getting something for free, however small, and then the seller places a premium price for the item, you are probably disinclined to purchase it. On the other hand, if you see that there is a stated “retail” price for the desired item, and you see that you’re getting the item at a significant discount, you are more likely to at least try it at the lower price. You have made it known that you perceive your goods to be at a premium level, but you are willing to “acquiesce” to consumer demand in order to build greater brand loyalty and to expand the consumer goods-substitution. Because you use the discount to gather revenue that you would otherwise NOT have received, you continue to improve profits on high-margin products and mid-mark items.

Management Perspective: McDonald’s

McDonald’s is currently not the market leader in the premium coffee beverage space in the US. While it has been gradually building its steam abroad, given its greater presence, it has a lot of resistance in the US due to its perception as a low-cost fast food purveyor. It has the reach, it has its vast franchise network, and it has its huge food research teams. What can it do to make a big splash in this new segment?

It has opted to take the free sample approach on a couple of items that may have a greater impact than the others in its coffee beverage portfolio. Once again, it really is nonsense to offer such tiny samples that the consumers are unable to decide whether the items in question are worth purchasing at full price, so a true product size has to be provided. Unfortunately, it would run into the same issue mentioned above concerning the food moochers; so a valid way to control the inventory-and-labor bleed is to limit availability of the free samples.

Unfortunately, product availability limitations would require the additional factor of greater advertising: thus, McDonald’s recent advertising campaign promoting the McCafé experience AND the free samples. But control over the availability introduces yet another variable: what is the availability scheduling? Should a lull in business be used, or should a high-traffic timeframe be used, or merely something that is moderate in nature? Both business lulls and moderate traffic timeframes will help cause momentary spikes in traffic, as consumers weigh the convenience of obtaining the free sample and potentially their regular food purchases, against any other time commitments, and then opt to risk the visit. High-traffic timeframes present fantastic, built-in promotional opportunities without impacting or cannibalizing the other timeslots: while there may be a dramatic inventory depletion, you would be assured that the samples would statistically make a greater impression on your consumer base… once again, the convenience and availability factors coincide to improve your odds.

Since timing is important for availability-limited promotions, it must be decided whether this should be considered a test run, or an aggressive push. Aggressive push campaigns tend to prosper with a large shotgun effect (‘natch), so targeting your most dense, high-traffic timeframes would be the timing objective. For continued research and a more gradual investment in shifting your traffic across less dense timeframes, take advantage of the promotion on your significantly less busy timeframes: this is particularly important for new product rollouts that have a heavy labor component, where training makes a significant difference toward the customer experience.

Reaching potential customers who would otherwise never try your specialty products is tricky, so offering free samples with the objective of diverting the revenue away from the competition definitely represents an opportunity. For items such as coffee beverages, a lot of marketers frequently forget that there is, in fact, a limit to how much of these items an average consumer can– well, let’s face it– consume. The average maximum limit will, paradoxically, be a bit lower for the obese population, based on the fact that many of them suffer from gastritis or acid reflux disease or chronic gastroenteritis or other similar GI disorders. So, while the sample sizes must be significantly large to attract them, the number of samples dispensed will tend to reflect the number of interested individuals (as opposed to a n:1 ratio of samples-to-persons).

Upscale-Downscale: Which Are You?

It all comes down to: the consumers. Availability (everyday until an expiration date, or once a week until an expiration date?), cost (free with no obligations, or discounted after meeting a prior requirement?), selection (all cold beverages on your menu, or a couple of items you’d like to heavily promote?), brand perception (which is the more desirable brand?), consumer self-perception (do they prefer to appear elite, or populist… or do they even care?)… They all factor in. 

Take your pick. Or try them both. The competition ultimately helps both companies.

N.B.

Yeah, you knew that this post would eventually become available for public reading, didn’t you?

But you’re probably wondering, based upon some of the private chatter… what happened to the analysis about Starbucks’ less-than-stellar ice cream offering, right? Don’t worry: more on that a bit later… It’s an interesting subject that deserves separate coverage.

I heard rumblings in the ‘Net-at-large over the past few days that I felt somewhat compelled to verify, about a possible Starbucks [SBUX] product offering in the works. Since I was on my typical stroll through Alexandria en route to my local Starbucks store anyway, I figured that I’d ask the crew there about anything they may have heard…

… And, lo and behold! There was news: Starbucks has been quietly notifying their staff and setting up tastings at various locations to see if there would be significant interest in the new product. Fortunately enough, there was an extra packet of the mystery substance: instant coffee! Reading the label, it did not seem to resemble, by name, any of the currently available coffee packages typically sold at Starbucks.

Trying the instant coffee, I could not immediately recognize the flavor. Thoughts of Folgers and Sanka were dispelled quickly, and the coffee was surprisingly not as pungent or as overwhelming as I initially figured it would be, especially for a dissolving type of instant coffee. Looking at the label, it was supposed to be “bold”, but to me, it was similar in flavor to many of what I’d consider “medium” flavor… similar in body, but different in taste, to the Pike Place blend.

So… if this product successfully passes muster with the Starbucks management, will this become the next big hit for Starbucks?

N.B.

Once I had a chance to get online, I wandered over to the Starbucks press releases on their site and there ’tis: the announcement about their new product.

Starting at Starbucks [SBUX] stores today, you will be able to acquire a shiny new (STARBUCKS)RED Card, a variant of the Starbucks Card that takes makes a 5¢ donation to the Global Fund for every purchase you make.

In the past, Starbucks has partnered with (RED) by donating funds for certain beverages sold at storefronts, but this is the first opportunity where the popular Starbucks Card program is used to contribute to the humanitarian group.

Like Starbucks [SBUX]?

Shop at Costco [COST]?

Have we got a deal for you!

Several people have reported that, since September 29-30, several Costco outlets have begun to sell the famous Starbucks Cards (hmm, I’ve been told, famous due to the posts here, for some odd reason) at a discounted rate: five USD $20.00 Starbucks Cards for USD $80.00.

Too good to pass up? Hmm… yep, if you like Starbucks and shop at Costco.

Management: Starbucks

This is a definite win for Starbucks, since it increases traffic into their stores. The presumptive intent is most likely to allow gifters to bestow these Starbucks Cards to people who enjoy coffee but don’t necessarily frequent Starbucks; this would indicate a way to promote the Starbucks brand to those individuals, who in turn may be incentivized to sign onto the Starbucks site to register their cards.

The value for Starbucks regulars is less obvious: since they already visit Starbucks stores on a routine basis, the question is whether these discounted Starbucks Cards represent a true-value up-sale mechanism. For this, the anticipated unaugmented position is approximately a 50/50 split: some people will opt to try some of the new Starbucks products, which not coincidentally are rolling out now, while others will use the Starbucks Card value to increase or prolong their regular purchasing habits.

The augmentation of the Starbucks Card with the recently announced new Starbucks products and the return of the holiday products may shift the 50/50 split toward a 70/30 split, or even a 75/25 split, in favor of trying the new and holiday products, given the current financial climate. This is obviously a good campaign play on Starbucks’ part.

Management: Costco

This is a moderate win for Costco. They continue to do well, primarily due to the perceived increase in purchasing value as the global economy continues its downward spiral. However, lately, there has been a bit of a slowdown at Costco due to consumers’ need to purchase products in smaller quantities. Offering gift cards is a good way to attract customers who otherwise may forego visiting Costco; this will encourage a prolonged visit and presumably translate to additional sales that may not have otherwise occurred.

The Setup

Awhile ago, I used to frequent the Coventry neighborhood in Cleveland, and hanging around Revolution Records and the Arabica coffeehouse were the fun things to do. It was important for me to get out to Arabica from time to time, to gab with the folks that went there so I could gauge their musical tastes and what was relevant topic-wise on their minds. Plus the fact that a few of my professors also spent time there: getting some face-to-face time or a smaller group chat helped the educational process.

Sometimes it’d be a bit smoky there, and sometimes there would be a silly guy (or gal) spouting off about something silly (and frequently nonsensical) about somesuch or nonsuch, but it was usually quite nice and fairly quiet (not too much background crowd noise that would drown out conversation among “decent folk”).

It seems like just yesterday, but actually it’s been more than twenty years.

Oh, how times have changed.

The Premise

Last month, I encountered a post about the reaction of independent coffee vendors to Starbucks’  [SBUX] recent events. In it, Melissa posits that while Starbucks dots the landscape, there is still plenty of room for the independents, and there is no longer the apprehension (or outright fear) of competition from Starbucks that there used to be. The comparison that is alluded to is the difference between a McDonald’s [MCD] and a fine dining restaurant, where Starbucks represents the McD’s of gourmet coffee.

This is a healthy outlook for many coffee beverage vendors because otherwise, Starbucks itself would be lurking around every corner in a stagnant market, with very little drive to innovate. Of course, given the condition of today’s economy, that would most likely spell doom for the company.

Irony is the Strangest Form of Flattery

In an ironic twist, if Starbucks is the McD’s of gourmet coffee, what does that make McDonald’s itself? As you may have heard, or in my case, personally experienced, McDonald’s has also entered into the gourmet coffee dispensing business. Unfortunately for McD’s, and luckily for Starbucks, the gourmet coffee machinery is considered to be an optional purchase that many franchisees have chosen not to obtain, thereby making Starbucks a viable venture in many densely populated areas that share confluence with the local McDonald’s stores.

The Action

So, while I’m still doing the massive 90-mile driving course of Starbucks stores, I’m also still looking for that cool, traditional, avant-garde coffeehouse that I started with, decades ago. I’m sure they exist somewhere in my area, along with smaller coffee retailer chains, but given the vast areas I pass through, it seems less likely that I’ll encounter one that is as convenient (or as omnipresent) as Starbucks.

Plus, let’s not forget the Starbucks Card.

N.B.

Other potential titles:

• Renaissance of the Old Coffeehouse? Finally…?
• The Romance of the Old Coffeehouse

The Setup

One day last week, as I was minding my own business (somewhat) and typing up my latest musings and meanderings, including a quick note about the Xbox 360 price drop (which definitely caught the attention of a lot of the Starbucks patrons around me!) and sampling one of the new breakfast items that had been rolled out that morning, a barista came over and plopped down on the stool next to me and lamented that she’s tired of all of the people who come in every so often and grouse about the Pike Place Roast and the lack of “stronger” coffee brews that they used to get at Starbucks.

The View From Above

As she was explaining to me how powerless she felt about this, I wondered, “Hmm… this can’t be something that’s endemic to only this Starbucks…”

About a month after the Pike Place Blend appeared, I had noticed a lot of people standing in line commenting about how they don’t like how “weak” the caffeine smells in the Pike Place Blend. Other people have mentioned that they didn’t like the smooth flavor of the Pike Place Blend, preferring the stronger flavor and acidic “bite” of the “bolder” brews that Starbucks [SBUX] switched to offering only in the mornings as the alternate coffee to the Pike Place Blend.

I wondered if there was any reporting being done on this issue of persons’ personal preferences in coffee taste. Apparently, yes! Various news services have had at least one post regarding the taste of the new blend, and whether it is a ploy to attract more people who have traditionally shied away from Starbucks coffees due to the “too-strong” taste of the drip coffee.

More likely, it is a way to convert customers who have traditionally been going to Starbucks anyway, but not for the drip coffee… instead, these customers have been getting the bar drinks but have been put-off by the drip coffee or, in many cases, the criticisms by drip coffee customers who would vocally declare how “nice and strong” the coffee has been.

The Action

It is not feasible for most Starbucks stores to offer a huge selection of drip coffee, unless they’re switching to significantly smaller brew receptacles or to individually brewed coffee (which is coming soon already)… To keep the coffee fresh, the receptacles have already been reduced in size, which has actually garnered positive responses from a lot of customers I’ve talked with, regardless of the debate over the Pike Place Blend. And I have re-encountered a lot of people in line at the various Starbucks stores I rotate through, whom I previously talked with about their bar drink choices who actually have added the Pike Place Blend coffee to their list of beverages since it was rolled out.

Go figure.

Oops! The clock has rolled one minute past 12:00 noon. That means that Starbucks stores will not brew any more of the alternate coffee bean today… the only brew getting replenished is the Pike Place Roast.

In tandem with the Clover test rollout in Seattle yesterday, Starbucks [SBUX] also announced that there would be specially selected coffee beans released to be used in conjunction with the Clover brewers. Matching the “small” boutique-iness of the Clover brewing process, small batch coffee releases will accompany the Clover devices in their rollouts.

For this September, there are four beans named, in a flowery language description (from the press release):

• Distinctive citrus juiciness of Costa Rica Agrivid
• Herbal overtones of El Salvador Pacamara
• Subtle cherry and currant notes of Tanzania Blackburn Estate and
• A soft finish of Zambia Kasama

The part that most interests me about the beans is that they’re supposedly only going to be available at the Starbucks locations that come equipped with a Clover: this obviously means that, unless I’m currently near one of the Seattle stores right now, I won’t be able to grab some of the Tanzania Blackburn Estate and Zambia Kasama beans anytime soon. And to make matters more interesting, the whole beans will be hand-dispensed, like in Starbucks’ old days.

While the test rollout occurred in Seattle, there are two other cities named for the next phase in test rollouts:

• Boston (was there once for an APMA Annual Conference a few years ago)
• San Francisco (been there repeatedly for JavaOne Conferences)

More Reading

• Starbucks’ press release about the Clover and its accompanying ‘beans

“What’s a Clover machine?”

A few decades ago, I was a dead-serious coffee aficionado, and I used to spend a lot of time debating the benefits and disadvantages of various roasting and brewing techniques, and the machinery that was involved. At the time, the brewing equipment was somewhat rudimentary compared to the modern machines available today, especially the professional-grade ones typically seen in coffeehouses.

The Clover takes the concept of the “one masterfully brewed custom cup o’ coffee” to the next level, by offering professional brewing techniques encapsulated in a convenient device that communicates with CloverNet, a Web-based control and reporting system that provides centralized control for managers.

Oh, and to get one of these machines into your hands, you’ll be paying about USD $11,000… assuming you’ll be able to get one… (Keep reading to find out why…)

Starbucks Steps In

Yesterday, CNN reported that Starbucks rolled out Clover brewing machines at some of its Seattle stores. This is intriguing to me: I would certainly like to sample some Clover-brewed coffee, by selecting several different coffee beans and bean blends that I like and having a Clover percolate out several cups for me.

But this past April, Starbucks [SBUX] acquired the Coffee Equipment Company, the maker of the Clover equipment and stated that they will no longer sell Clovers to others. Naturally, if you’re an independent coffee store owner, this may pose an obstacle to your differentiation clauses in your business plan.

The Coffee Equipment Company posted their response to the Starbucks acquisition on their original home page. While existing customers are supposed to be able to continue to receive service and parts for their Clovers, no new business will be accepted.

Sense and Sensibility of Exclusivity (For Now)

But, from a business perspective, the CloverNet proposition requires a large interested company the size of Starbucks to be able to flesh out its kinks and mature the technology to acceptable levels. It may be even possible (and desirable) to start selling Clover-like devices sometime in the future with the next generation of CloverNet. With improved economy of scale, the pricing for the future Clovers should dramatically be reduced, and CloverNet may even be ubiquitous enough to work well under cloud computing terms so end users would be able to track their own preferences and brewed cup availabilities across multiple geographic locations. I’d certainly enjoy having my personal Clover communicate with Clovers along my travel routes so I can have a variety of different brewed beverages through time and space.

N.B.

Here are some pages to help you learn more about the Clover and its manufacturer:

• The Clover 1S Machine
  • Specifications for the Clover 1S
• CloverNet
• Coffee Equipment Company: new homepage
  • Interesting photo of the team