Leanna Bornkamp, Vice President
In the past couple of months, Starbucks has been making a concerted effort to introduce new, upscale coffee shops in urban areas. No surprise there, of course—the company has pursued an aggressive growth strategy for years. What was surprising, though, was Howard Schultz announcing that he would be stepping down as Starbucks CEO to take the reins on the Starbucks Reserve initiative. So why, after all of the initial buzz, haven’t we heard much more about this seismic shift in the company’s strategy?
Starbucks Reserve started as a product line sold online and in traditional store locations. The line was sold in limited batches, with emphasis placed on sustainable sourcing practices and on distinct flavor and quality. Recently though, Starbucks took the Reserve line and crafted it into an experience with Reserve-branded locations, which serve both the traditional food and coffee of a normal Starbucks as well as higher-quality coffee beans and brewing techniques.
These Reserve locations mirror the Reserve line’s attention to sourcing and brewing quality, from the store décor of their source regions, farmers and roasters, to the prominent display of their advanced brewing properties. If customers go for the more expensive options, they’ll walk out of the store with an elegant black disposable coffee cup to signal their investment in higher-quality (a.k.a. more expensive) coffee.
The halo effect the Reserve brand strives to create is in response to the changing competitive landscape. Starbucks is, in many respects, competing in a market of their own creation; now that the consumer demand for coffee has grown in part due to their aggressive marketing strategy, every coffeemaker wants in. Particularly in urban areas, smaller, higher-quality coffee shops have been entering the market with differentiation on quality and attention to detail—and that’s where Reserve locations have also been entering the landscape.
Before Schultz’s December 1st announcement about Starbucks’ emphasis on the new corporate strategy, Reserve stores were quietly popping up in urban centers throughout the country (you may already be familiar with the two near NYU, one on Waverly and Mercer Streets and the other on Broadway and 9th Street). After the announcement, Reserve projects continued to chug along—just this month, they announced a test line of affogato ice cream products, and they just opened their first Reserve Bar integration in a Seattle Starbucks location, as per the region’s local papers. It seems like subtlety has been part of the plan from the beginning—so why the sudden strategic update through a bullhorn, only to immediately quiet back down?
It may be, in our current political climate, that many consumers would find it distasteful for such a socially-conscious company to be discretely peddling their wares when there is much larger work to be done. Schultz is no stranger to using the Starbucks platform as a launchpad for progressive activity—and he knows that to ignore the current state of affairs could do more damage to brand equity than could ever be compensated for by the Reserve line.
Like many firms looking to take a stand with or against current, polarizing events, Starbucks is using internal policies to craft a brand image that it thinks will be most warmly received by its target market. It’s not an easy balance to strike—to be sure, they have stores around the country where the majority of their patrons will disagree with some of their policies, and their stock price has clearly indicated which of their announcements have had a mixed reception—but it’s easy to see how their public policy of inclusivity aligns with and strengthens their brand strategy of warmth and community.
Starbucks isn’t hiding. If anything, the company has proudly announced socially-charged strategic goals that have had the press salivating, and some stockholders surely cringing at the relentless activism: on January 30, for example, Starbucks announced their plan to hire 10,000 refugees over the next five years. It may have damaged the brand to keep quiet on the topics of national discussion, sacrificing their corporate image in the hopes of pushing more marketing communication about their Reserve Brand. They saw the danger of trivializing their new product and service experience by hawking it on top of—or, how some might see it, in spite of—the din of the nation’s unrest.
One thing’s for sure, no matter what becomes of the Reserve experience: as the local political climate and the global coffee culture adapt, so must those doing the brewing. Watching the trajectory of the Starbucks social narrative, in tandem with the slow but steady growth of the Reserve brand, will offer insights into what the company’s consumers want to hear—and will at the very least give us a solid cup of coffee over which to watch the story unfold.