STARBUCKS

Section A

Apurva Gargava Gaurav Gumber Madhura Penchalaiah Mayuresh Raut Mitali Tiku Priyankar Sarkar Sandeep Meena Tarun Bansal

Table of Contents

Topic Executive Summary Situation Analysis Market Opportunities & Issues Objectives Marketing Strategy Target Mistakes Positioning Marketing Mix Review & Control Marketing Organization Contingency Plans

Name Gaurav Priyankar Sandeep Madhura Gaurav Mitali Tarun Apurva Madhura Tarun Mayur

Page Number

Executive Summary

Situation Analysis Company Starbucks Coffee Company opened its first store in 1971 in Seattle, USA. Since then it has always tried to portray itself as The premier roaster and retailer of speciality coffee in the world. It started off as a roaster and retailer of whole bean and gr ound coffee. In 1995, it started serving frappuccino blended beverages and ice-cream. They aim to sell the highest quality coffee. They grow their coffee under the highest standards of quality with ethical sourcing practices. They make coffee out of Arabica beans. The stores often provide a place for meeting friend and family. The company continues to pursue inorganic growth and also continues to put foot in new geographical areas. It is also present in the packages coffee space. The products can be categorised into three broad categories viz. drinks, food and nutrition. However, revenue components have four distinct categories viz. company operated stores, licensed stores, consumer packaged goods, food service operations. Drinks include bottled drinks to smoothies apart from various kinds of coffees. Food include bakery, salads, sandwiches, ice-cream etc. Nutrition includes food nutrition, drink nutrition specially designed for the calorie conscious people. Another revenue stream for the company includes the selling of coffee and tea products they license their trademark through other channels such as grocery and national food service. Customers The customers include a large variety of people. Customers in the USA include the middle and higher income group. However, in the emerging markets Starbucks is perceived as a premium coffee brand. It caters to products in all age categories including kids. It not only provides coffee but also provides food and nutrition. Adults in the age group of 25-40 years of age provide the most amount of revenue for the prestigious company.

Competitors The major competitors of Starbucks include quick-service restaurants and speciality coffee shops. In countries other than the US, there are some regional/international competitors which include the following: Dunkin Donuts Costa Coffee Tim Hortons McDonalds McCafe Caribon Coffee Coffee Bean and Tea Leaf

In the packaged coffee space, the competitors include Smuckers, Kraft, Green Mountain Coffee Roasters etc.

Context

Starbucks has reached a near saturation point in the developed countries. However, considering the rise in the purchasing power of the consumers in the emerging countries, Starbucks is building scalable platforms. There are some concerns pertaining to the fall of the affluent consumer class that frequents the coffee chain. The company has closed 600 stores in the US over the last few years. The shift took place after the economic crisis of 2008-09 in the US. The US consumers prefer more of home-made coffee. However the outlook in Asia still seems robust. The company has plans to open up 1500 stores in Asia by 2015 up from 467 stores (third quarter,FY 2011 figures). Pertaining to India, they have tied up with Tata Coffee Ltd in order to enter one of the most populous markets in the world. However, analysts anticipate a tough competition in the Indian beverage markets. Dunkin Donuts has already set foot in India, hence it has got the first mover advantage. It also has to face steep competition from the local players such as Caf Coffee Day, Barista etc. Everything said, the purchasing power of consumers in the Asian countries continue to rise indicating a place for large conglomerates to co-exist.

Reference: http://www.starbucks.com/ http://www.wikinvest.com/stock/Starbucks_(SBUX)/Competition http://assets.starbucks.com/assets/576b394e057542a5bc78618bef7d15e3.pdf http://www.slashfood.com/2006/06/11/the-10-largest-coffee-chains-in-the-us/ CLSA report Starbucks dated 10th October, 2011 by Diane Geissler and Jeremy Scott

Market Opportunities and Issues

Marketing opportunities In 2004, created a CD-burning service where customers can create their own music CD. Opportunities for revenue growth by expanding its global operations. New markets for coffee are beginning to emerge; for example, in India (with TATA Alliance )and the Pacific Rim. Targeting 15,000 international stores in the next few years Focus on opening stores that have convenient access for pedestrians and drivers China could be one of the largest markets, and therefore the company will focus on Beijing and Shanghai. Large urban population Rising economy Increase in coffee consumption

Purchased ethos healthy water for 8 million and also does not use chemical flavor for coffee. Launching the sales of Frappuccino in japan and Taiwan. Advertisements about the free internet (T-Mobile) connections and the excellent service they provide. Starbuck has agreed to serve Starbucks coffee in all united flights. Co-branding with other manufacturers of food and drinks and brand - franchising to manufacturers of other goods and services. This creates opportunities like Creating loyalty for Starbucks brand. Recently signed agreement with Jim Beam Brands to develop and market a Starbucks-branded coffee liqueur drink, which has strong revenue potential because:

Liqueurs represent $4-5 billion opportunity.

Liqueurs with coffee represent a considerable segment of the liqueur market.

There is a significant overlap between consumers of liqueurs and consumers loyal to the Starbucks brand.

Growth in coffee markets: Starbucks has a market share of over 40% of the special coffee market. Therefore growth in this category would result in considerable opportunities for further growth and expansion in the near future.

Issues Expansion potential questionable in Brazil, India, and Russia. Cultural Issues will be a big factor in deciding the companies growth

Coffee may not stay in favor with customers, and another type of beverage or leisure activity could replace it. Rises in the costs of dairy products could affect the companys margins. Competition The U.S. specialty coffee market continues to grow, and an increasing number of firms are looking to enter Competitive coffee shops Copy cat brandsRestaurants,Street carts. At any time, a company with greater financial, marketing, and operating resources could enter the market and compete directly with Starbucks. Competition could enter the market at any time. Like McDonalds, Dunkin Doughnuts, Hard Rock Caf.

Multiple factors, including weather, political, and economic conditions for example, can potentially negatively affect the companys business. Like people living in hot areas would prefer cold products more than hot and vice versa. or restricting global coffee supplies.

Slowing U.S. retail sales

 and an even greater proportion of profit growth

growth

If current U.S. store growth continues, saturation levels within the North American division may be reached within five years. Before reaching this point, US retail sales growth will slow significantly. Need to analyze the way to reduce the risks of selling its coffee products at supermarkets as consumers are demanding for it

Refernces

http://www.starbucks.com/

http://lindsayecameron.wordpress.com/2008/12/01/top-challenges-facing-starbucks/

http://www.scribd.com/doc/76143251/Starbucks-Back-to-Basics-final-Ppt

http://www.gurufocus.com/news/26587/starbucks-growth-brand-and-cultural-issues

http://en.wikipedia.org/wiki/Starbucks#Fair_trade

Objectives Objectives 1. Ensure 100% of our coffee is ethically sourced by 2015. Note: We define ethically sourced as coffee that is third-party verified or certified, either through C.A.F.E. Practices, Fair trade or another externally audited system.

2. Invest in farmers and their communities by increasing farmer loans to $20 million by 2015.

3. Improve farmers access to carbon markets, helping them generate additional income while protecting the environment.

4. Mobilize our partners (employees) and customers to contribute 1 million hours of community service per year by 2015.

5. Engage a total of 50,000 young people to innovate and take action in their communities by 2015.

6. Build all new, company-owned stores to achieve LEED certification.

7. Develop comprehensive recycling solutions for our paper and plastic cups by 2012.

8. Implement front-of-store recycling in our company-owned stores by 2015.

9. Serve 5 percent of beverages made in our stores in personal tumblers by 2015.

10. Reduce energy consumption by 25% in our company- owned stores by 2015.

11. Purchase renewable energy equivalent to 100% of the electricity used in our global company-owned stores by 2015.

12. Reduce water consumption by 25% in our company-owned stores by 2015.

Marketing Strategy

Target Markets The target audience of Starbucks is people who drink simple but premium coffee to people who like speciality beverages. Starbucks holds around 33 percent of the market share for coffee in the U.S. Majority of its consumers are in cities or upscale suburban areas. Starbucks caters specifically to a well defined target audience due to which it has gained such a high market share. Adults The primary target of Starbucks is men and women in the age group of 25 to 40. They account for almost half (49 percent) of its total business. The main appeal to this consumer age group is hip, contemporary design in its advertising and decor, and latest products which serve as status symbols. Customers are urbanites with relatively high income, professional careers and a focus on social welfare. This target audience grows at a rate of 3 percent annually. Young Adults Young adult, in the age group 18 to 24, contribute to 40 percent of Starbucks sales. Starbucks appeals to this group by positioning itself as a place college students can hang out, study and meet people. New technology is introduced as soon as it comes available, focusing on social networking and actively cultivating a cool image. The young adult audience grows at 4.6 percent each year. Kids and Teens Customers aged 13 to 17 account for 2 percent of Starbucks sales, but most items for kids are purchased by the parents. The focus is on the steamed milk that Starbucks baristas refer to as babyccinos. Teens use Starbucks as a place to meet friends or study. Products are made kid-friendly by offering special child sizes. Complimentary Products 75 percent of Starbucks sales is accounted for, by Specialty coffee drinks. An increasing amount of its business is focused on selling whole bean coffees and merchandise. Starbucks has made its coffees available for direct order online, in supermarkets and offered select food service outlets. As a result, consumers a chance to have the Starbucks experience at home, and it is an area that Starbucks is building. Emerging markets China represents a lucrative opportunity for Starbucks as operating margins in the country are the highest in the company. Starbucks is expected to be successful in the high income market but there is an accelerating competition from Mc Cafe. Apart f rom China, Starbucks focus is on markets showing an increase in per capita income like South Korea, Thailand, Mexico, Turkey. The focus is also on emerging markets where coffee consumption is increasing rapidly like India. Starbucks also has plans to ramp up expansion in Brazil.

Starbucks is coming up in India in collaboration with Tata global beverages ltd. Due to the high cost of coffee; Starbucks will perhaps be targeting a small portion of middle and upper

middle class of consumers which will leave a big segment of population for other coffee chains. References: CLSA Oct report Smallbusiness.chron.com/starbucks-target-audience www.deechdesign.com/starbucks-in-India

Positioning

Perfect Cup of Coffee Starbucks history has shown that they place a huge emphasis on product quality. Their coffee, even if priced slightly more expensive than expected, is notorious for satisfying customers with its rich, delicious taste and aroma. Third Place From the very beginning, the Starbucks marketing strategy has focused on creating the third place for everyone to go to between home and work. Creating this unique and relaxing experience and atmosphere for people has been very important for the company as they have realized that this is one of the strongest concepts attached to the company, to which customers have been strongly attracted. Customer Satisfaction Customer satisfaction is a very important issue with Starbucks. From entrance to the store to the very last drop of their coffees, it is a must that customers feel the uniqueness of enjoying their Starbucks coffee experience. Without a doubt, Starbucks Coffee Company knows the answer to the question, "Why is customer service important." Creating a Starbucks Community The Starbucks marketing strategy has even expanded to create a community around their brand. On their website, individuals are encouraged to express their experiences with Starbucks history, and the company strives to personally join in the discussions. This technique was cleverly pointed out by Webolutions: The Strategic Marketing Agency in their Starbucks Marketing Observations article. Smart Partnerships Starbucks Coffee Company has been known to create strategic partnerships that demonstrate the fact that another way to grow your business is to partner smart. Over the years, the Starbucks Corporation has greatly increased sales just by using this strategy. Innovation Through the years, the Starbucks Coffee Company has been known to think up creative and innovative ideas to add to their products or services. Theyve added different flavors to their coffee, more food on their menu, and even became one of the firsts to offer internet capability in their stores. Brand Marketing The Starbucks marketing strategy has always focused on word-of-mouth advertising and letting the high quality of their products and services speak for themselves. For years, this has been uniquely Starbucks, and it has played a huge part in making Starbucks Coffee Company a success. The definition of viral marketing speaks to this new word of mouth that Starbucks has run with, and made their own.

Marketing Mix Products: Starbucks has over 87,000 drink combinations all over the world. It offers the following range of products, classified under broad categories: Drinks Bottled Drinks Brewed Coffee Chocolate Beverages Espresso Beverages Frappuccino Blended Beverages Kids Drinks & Others Tazo Teas Smoothies Food Bakery Starbucks Petites Bistro Boxes Hot Breakfast Salads Sandwiches, Panini & Wraps Ice Cream Yogurt Parfaits Nutrition Food Nutrition Drink Nutrition Delicious Drinks Under 200 Calories Favorite Foods Under 350 Calories Starbucks was established in 1971 by Jerry Baldwin, Gordon Bowker and Zav Seigl, and their vision was to educate consumers about fine coffee. When Howard Schultz took over in 1987, he aimed to create a personal relationship between the consumer and the coffee house, and thus recreate the Italian expresso bar experience in America. They did this by buying only the best quality coffee, introducing innovative products, and providing an unmatched store experience by keeping consumer tastes in decor and ambience in mind. Starbucks uses the following product strategies:

Premium product- Starbucks has positioned themselves as a premium product in the coffee industry. They roast their own coffee after buying dark roast whole coffee beans from places like Kenya, Sumatra, and Ethiopia. Ready Brew- Unlike traditional instant coffee, they brand their coffee as a Ready Brew item. This brand name fits well with their premium positioning because it allows the product to leverage brewed coffee brand associations like freshness and taste, rather than the low quality associations tied to instant. This point of differentiation is particularly important in the U.S. market, where there is a negative stigma attached to instant coffee. Product innovation- Starbucks is very focussed on product innovation. They make it a point to come up with seasonal offerings in their various product categories to give customers the option of trying new and weather specific flavours. Towards this goal, they come up with special flavours- for example, Pumpkin Spice Latte, Salted Caramel Mocha and Apple Pie Frappuccino in autumn/fall, Gingerbread Latte at Christmas. Also, Starbucks product line is not limited to conventional beverages one can drink in coffeehouses, it offers bottled coffee drinks which are sold in supermarkets, souvenirs, drinkware (glasses, mugs, bottles), coffee machines, coffee and tea presses, grinders and other coffee related equipment. Healthy alternatives- They have made a mark for themselves as one of the few cafes/coffee shops that offer healthy variants of most of their products. These include a wide range of low fat and non fat coffees and other bevarages, skim milk preparations, along with special low calorie breakfast and snack dishes. Customer experience- Apart from providing innovative products, Starbucks also focuses on providing customers with a pleasant ambience and decor as part of their experience to high coffee. This includes their Hear Music initiative, which gives consumers the chance to buy music CDs that they hear in their stores. They have also partnered with Apple to allow customers to browse through recently played songs and buy them on iTunes.

Price: Price and quality determine the value of the product. Right from its launch in 1971, Starbucks was an expensive product as compared to its competitors, and it has consistently maintained this pricing strategy, keeping the quality levels high to fit in with that. Starbucks uses the following pricing strategies: Competitive prices based on market- Their latest premium coffee range, VIA Ready Brew, is VIA is priced well above traditional instant coffee. At $0.83 ($0.59 UK) per 12oz serving vs. Nescafe at $0.06 ($0.12 UK, premium blend) per 12oz serving, VIAs pricing strategy is properly aligned with its premium positioning. Additionally, VIA's pricing is below quick-service fresh brewed coffee brands like McDonalds and Dunkin Donuts, which costs $1.35 or $1.65 per 12oz serving (Consumer Reports Source). Because these quick service providers also deliver on premium taste, VIAs lower price provides a value offering to the quick service customer. This price strategy positions VIA to successfully compete with part of the fresh brew market and capture market-share from existing competition. It is important to note that SBUX is pricing VIA lower in the UK. SBUX is likely doing this because a majority of UK's population drinks instant coffee and a higher price might not bring people into the stores to purchase the product.

Differentiation- Starbucks spends a lot of time and energy differentiating itself from the competition. This is most visibly seen in the design of its coffee shops, the music played there and the types of products it sells, such as coffee-brewing equipment and jazz CDs. Starbucks makes it a point to stay current with the latest technology, oftentimes being the first to introduce the newest advancements to its customers. For example, Starbucks was one of the first companies to adopt locationbased promotions and mobile payments. Brand value authority- Starbucks' pricing strategy has a lot to do with how it positions itself as an authority on coffee, allowing the company to charge premium prices. Thus, when Starbucks introduces new products at higher prices, consumers are willing to pay extra without even having tried the products because they associate the Starbucks name with high quality. Relative value pricing- Starbucks also uses relative pricing. It offers premium items, like its espresso drinks or its Starbucks brand whole-bean coffees sold in grocery stores, along side lower-cost items, like its drip coffees or its Seattles Best line. While the risk exists that more customers will choose the lower-priced items, by offering higher-priced items along side lower-cost alternatives, Starbucks is justifying the higher price through comparison.

Starbucks has always tried to deliver the high value it promises to its the consumers. They buy high quality beans, and provide effective and efficient training to their staff, especially the baristas, who are specially trained to advice customers on new and existing flavours and products. Moreover, they ensure that they create an atmosphere where people can enjoy c o f f e e , m e e t o t h e r people as a community, and take a break from the busy life. All these i n i t i a t i v e s j u s t i f y t h e i r pricing and show how their pricing strategy has supported their positioning. Place: Starbucks is the largest selling coffee chain in the world. It operates in all 50 states in the United States, plus the District of Columbia and Puerto Rico. They also operates in 34 countries outside the United States, including Australia, Canada, China, Germany, Singapore, Thailand, and the United Kingdom. Starbucks uses the following placement strategies: High visibility- Starbucks retail stores are typically located in high-traffic, highvisibility locations. They have also set up stores in other locations and stores that are frequented by people often, for example- Barnes and Nobles. They always selected highly visible locations and opened stores as clusters. As demand grew, these store clusters made them able to manage the increased traffic and to keep their competitive position. In the same way, they took care about the services provided in the stores. Varied placement options- Because the Company can vary the size and format, its stores are located in or near a variety of settings, including downtown and suburban retail centers, office buildings and university campuses. The Company can also locate retail stores in select rural and off-highway locations to serve a broader array of customers outside major metropolitan markets and further expand brand awareness. Catering to all potential customers- While the Company selectively locates stores in shopping malls, it focuses on locations that provide convenient access for pedestrians and drivers. To provide a greater degree of access and convenience for

non-pedestrian customers, the Company has increased focus on drive-thru retail stores. Promotions: All marketing activities that attempt to stimulate buyer action or sales of a product can be considered as promotion. Starbucks employs a number of diverse promo events to market their range of products. Starbucks uses the following promo strategies: Building a local image- Starbucks used to organise a big community event prior to the opening of its stores. Artworks were designed to boast each citys personality, and it was used on commuter mugs and T-shirts. They also recruited local ambassadors from new partners and from customers to promote their brand. They didnt use advertising but they used those funds for acquiring key locations. In this way, Starbucks tried to establish a national dominance before other speciality coffee bars came into the picture. Customer feedback- Starbucks started a community website, My Starbucks Idea, designed to collect suggestions and feedback from customers. More than 70,000 ideas were submitted on this platform, and Starbucks implemented those that fit in with their brand image and strategy. These include- a free coffee for Gold Card members on their birthday, introduction of a Starbucks VIP card, and the offer of getting a free cup of coffee with every bag of coffee beans bought. Sales strategies- These include a basket of options like cards, online coupons, special offers on websites, free coffee on predetermined dates, and promotions through social media sites like Facebook and Twitter. Merchandising- Starbucks also has a wide range of merchandising products like coffee mugs, t-shirts, flasks, coffee filled toys. Corporate Social Responsibility- Starbucks undertakes a wide variety of social responsibility projects. These include- building greener stores and using greener cups, along with purchasing renewable energy. They also partake in community services like Youth Action, and setting up Community stores. In terms of ethics, they stress on the fact that all their raw material is ethically sourced, and that they provide farmer support.

http://warrington.ufl.edu/mkt/retailcenter/docs/TeachRetail_CaseNoteExample.pdf http://business.library.wisc.edu/resources/kavajecz/10_Fall/Starbucks_Report.pdf http://www.starbucks.com/menu/catalog/product?drink=bottleddrinks#view_control=product

Review and Control

Marketing Organisation

Howard Schultz
Chairman of the Board, President, Chief Executive Officer

Michelle Gass
President, Starbucks Europe, Middle East and Africa (EMEA)

John Culver Annie Young-Scrivner

Global Chief Marketing Officer President, Starbucks Coffee China and Asia Pacific

Brian Waring
Vice-president of marketing, EMEA

Brady Brewer Terry Davenport

Senior Vice President, Marketing Vice President, Marketing & Category, China/Asia Pacific

Europe, U.K., Middle East, Russia and Africa

United States, Canada, Mexico and Latin America

All Asia Pacific markets and China

Starbucks Current Marketing Focus

First tea store: Starbucks will open its first tea-only store in October 2012 under the Tazo brand reported the Associated Press. The shop will sell more than 80 varieties of loose-leaf tea, which will be priced by the ounce. While there are no immediate plans to open more stores, the company may consider additional Tazo shops "if we see another opportunity where a location is the right fit," the Company said. Starbucks is expanding its offerings beyond coffee to win new customers and help accelerate sales growth. "We see Tazo as fitting into our emerging brands portfolio," Starbucks said. The Tazo store will also sell pastries, baked goods and packaged chocolates. "We've recognized the unique opportunities we have with Tazo in multiple channels of distribution as part of our health and wellness initiative," CEO Schultz said. Evolution Fresh shops: In 2011 Starbucks acquired Evolution Fresh, a superpremium juice company and said at that time that it planned to reinvent the superpremium juice segment. In March 2012, Starbucks opened its first premium juice store, Evolution Fresh, in Bellevue Square--a move aimed at boosting the company's position in the $50 billion health food sector. Aside from juices, the Evolution Fresh shops will have wraps, soups, salads, vegetarian and vegan options

and other offerings. Starbucks said Evolution Fresh shops will make their way into Starbucks' company-owned stores later in 2012 and several more stand-alone stores will open in the Seattle market in 2013 as well as stores on the East and West coasts. An NRN article in May 2012 cited CEO Schultz saying that consumer response to the concept has been positive and early lessons from the first location will be applied to plans for future expansion. While Starbucks is incorporating Evolution Fresh bottled products in its stores and as part of the company's growing consumer packaged goods, or CPG, line in other retail outlets, Schultz sees the juice platform as a billion dollar opportunity for Starbucks. Collaboration on theme park cafes: In April 2012 Starbucks announced a deal with Walt Disney to open stores in the theme parks at Disneyland Park and Walt Disney World Resort. The first of six Starbucks cafes will open in June 2012 at Disney California Adventure. For Starbucks, which is running out of ways to expand in the U.S., this is a market ripe for growth given all the Disney Parks inside and outside the U.S. "Starbucks and Disney have many things in common," Starbucks said. "We share a passion that every experience with our brand exceeds our customers' expectations." Lowering goals for reusable cups: In March 2012, Starbucks lowered its goal of serving its drinks served in reusable cups. One of the company's original goals was to serve at least 25 percent of its beverages in reusable cups, tumblers or mugs by 2015. "With the majority of Starbucks beverages consumed outside of our stores, we feel that focusing on personal tumblers will help us make a meaningful impact," Starbucks spokeswoman said. One of those areas of progress is in offering recycling bins in all of its company stores by 2015. At the beginning of 2012, fewer than 18 percent of Starbucks locations had recycling. "We continue to make progress toward our environmental stewardship and ethical sourcing goals, and believe more than ever that Starbucks has a shared responsibility to operate our business in ways that contribute to the economic and environmental well-being of the communities we touch," CEO Schultz said. Exploring New Ways to Build Sales: In December 2011, Starbucks said that Chicago will be the next market to see Starbucks locations selling beer and wine and expanded food offerings. Five to seven locations -- both new and existing -- are scheduled to open or be remodeled in Chicago before the end of 2012 with the beerand-wine options and new design elements. The goal: to explore ways to build sales later in the day. So far, units testing the format have shown double-digit same-storesales increases after 4 p.m. "This is definitely not something we're bringing to all new stores across the country; it will depend on the neighborhood," the company said. Starbucks also plans to expand its offering of beer, wine and an expanded food menu to a handful of stores in Atlanta and Southern California before the end of 2012. The restaurants will also incorporate more flexible seating to accommodate both, individuals and small groups, as well as larger parties like community meetings or book clubs, the Company said. Strengthen Presence in Latin America: In November 2011, Starbucks opened its 500th store in Latin America. The Company sees strong growth potential in Brazil, where it plans to open several hundred stores in the next five years. In October, Starbucks strengthened its relationship with Alsea, its joint venture partner in Argentina, Chile, and Mexico, with which it plans to open more than 300 new stores in Argentina and Mexico within the next five years. QR Advertising Program: In October 2011 Starbucks embarked on a Quick Response (QR) code program that is designed to highlight the Company's new mobile app and to let customers learn more about its coffee. Starbucks started posting the codes, which were created by Scanbuy, in different shop locations. These twodimensional barcodes can also be seen in billboards and in magazine and newspaper ads. The coffee shop's QR code advertisements serve a double purpose. First, they promote Starbucks' mobile payment app, and, second, they give consumers additional information regarding the coffee that Starbucks sells.

CPG Push: Starbucks is taking its products from the coffee counter to grocery aisle and plans to roll out a "pipeline" of new products in the next 12 to 18 months. All will follow the model of the hugely successful rollout of its Via instant coffee, with a highly publicized debut in the Company's shops, followed by an even more-heavily marketed transition to the grocery aisles. Creating a "very significant consumer packaged goods" (CPG) business is a "centerpiece" of the Company's growth strategy. Grocery products -- coffee beans, bottled frappuccinos and ice cream -- presently account for nearly 10% of Starbucks' sales and 25% of total Company operating profit. The Company stated that it has the infrastructure to handle distribution and that the Company is looking to make its popular loyalty card applicable to purchases of Starbucks grocery products. Strategic Sponsorship: The Company recently signed on as one of the official sponsors of NBC's second season of The Voice, which premiered in February 2012. Products from the sponsors will feature prominently throughout the singing contest in various capacities. "Music has long been a part of the coffeehouse heritage and Starbucks Experience," says Davenport. "This collaboration will leverage our shared values - music and community - for opportunities to make a positive impact across the country through inspirational videos reaching millions of people." Online Surveys: To get a more accurate breakdown of its customers, Starbucks launched what it calls its "customer passion panel" as a fully online venture. Davenport described it as a "panel that is actually...demographically representative. If we've got a particular idea and want to make sure it skews higher or lower, then we can go out and ask those questions in a very specific way."

Contingency Plans Contingency planning is a systematic approach to identifying what can go wrong in a situation. Contingencies are relevant events anticipated by a planner, including lowprobability events that would have major impacts. Contingency planning is a "What if?" skill important in all types of planning domains.

Starbucks Corp has ambitious expansion plans in China, but like any big new emerging market there are teething problems. Chief executive Howard Schultz expects mainland China to overtake Canada as Starbucks' second-largest market by 2014 and some analysts believe it could one day rival the United States as the company's biggest market.

Starbucks entered China in 1999 and now has more than 570 stores in 48 cities. By 2015, it plans more than 1,500 stores in 70-plus cities, though that would still only account for about half of China's major cities and would be just a fraction of the 10,800 stores in the United States.

But even with that big silver lining there are big impediments to growth, that include :

Rapid Expansion :

While the projected rate of growth is very robust -- 200% in only three years -- not all cities in China are alike.

o Smaller cities with lower income levels may not react as strongly as their larger counterparts. Lower economic growth may affect the smaller markets more than the larger ones. o Management attention definitely will be taxed somewhat as the top planners try to grasp and control rapid growth that involves undertaking too many initiatives simultaneously, such as openings, marketing programs, management controls and so forth. Low Income :

o Based on average wages in China, it would take 1.3 hours of work in the more affluent east of China to buy a Starbucks tall (12-ounce) caramel macchiato. That goes up to 1.6 hours in the west and 1.9 hours in central China.

Attracting quality employees :

Attracting quality employees when competition for skilled workers is intensifying as other chains also expand and to that end, Starbucks announced plans to launch a training program called Starbucks China University next year. It also unveiled a 1 million yuan ($158,700) fund that will provide emergency financial assistance for Starbucks employees