Change brewing at Starbucks

While the company's revamp may be simply a bold nod to its strength of identity, it could also signal an escalation in brand extensions.

Starbucks: Siren logo
Starbucks: Siren logo

Howard Schultz, chief executive and founder of coffee chain Starbucks, told an audience of staff members last week: 'This is an historic moment,' before unveiling the brand's new-look 'coffee-free' logo to whoops and cheers from the crowd.

While US bosses can be prone to hyperbole, Schultz's rhetoric may be justified. The world's biggest coffee chain is dropping the outer circle of its logo, dispensing with the words 'Starbucks Coffee' and changing the colour of the 'Siren' figure from black to green while also giving it greater prominence (see box, right).

'The new logo signifies confidence,' says Chris Allinson, brand development project manager at brand consultancy Added Value. 'It shows that Starbucks regards itself as iconic enough to remove its name.'

Leaving pure aesthetics aside, however, dropping the words from the logo signals a strategic shift in the business. Where Starbucks goes next has been the subject of much speculation since Schultz hinted that changes could be afoot.

'Even though we have been and always will be a coffee company and retailer, it's possible that we'll have other products with our name on it, but no coffee in it,' he said. It may have been ungrammatically expressed and slightly vague, with Schultz declining to elaborate on what he meant, but the intention is clear: diversification is the order of the day at Starbucks.

As well as its instant-coffee brand Via, in some markets the company already sells products such as tea and ice cream in the grocery channel. In a clear illustration of why the words were dropped from the logo design, the label for the tea reads 'Starbucks Coffee Tea'.

'The strength of the Starbucks brand has infinite options for extensions. I don't see why it couldn't sell something like homewares or anything that taps into the Starbucks experience,' says Jim Prior, chief executive of design agency The Partners.

In the US, Starbucks has begun trialling alcohol in selected stores, but whether this could become a major growth area, either in-store or through grocery, is debatable.

'I can't see serving alcohol as a big future revenue stream; it has more chance with products like ice cream,' says Datamonitor consumer markets analyst Mark Whalley.

Clive Black, head of research at Shore Capital, agrees that growth is unlikely to come from entirely unconnected areas.

'We expect diversification to be linked to its core proposition,' he says. Black also believes the in-store food offering has fallen behind rivals such as Costa in the UK.

A possible clue to the importance that Starbucks is placing on diversification came last May, when it appointed Jeff Hansberry as president of Starbucks Global Consumer Products Group and Foodservice. Hansberry, who joined from wine brand Gallo, has been briefed to accelerate growth in Starbucks' consumer products business through the introduction of new offerings and brands.

This is the third time Starbucks has altered its logo since its launch in 1971. As it coincides with its 40th year in business, a global print and digital campaign in March, created by BBDO, is planned to promote the milestone and change of look.

As always with Starbucks, however, the real marketing will be focused on the store environment. The logo will appear in UK stores from March, when its chunky ceramic mugs will also begin to be replaced by ones with a slimmer design. The aim is to rebrand the stores, of which there are 700 in the UK, at a rate of 100 a year.

This most recent announcement is the latest twist in a tumultuous period for Starbucks. When Schultz returned as chief executive three years ago, the business was losing ground to the likes of McDonald's in the US as cash-strapped consumers turned to cheaper alternatives for their caffeine fix. Its aggressive expansion programme left it over-exposed as the world plunged into recession.

Under Schultz's leadership, Starbucks has made emotional engagement a priority. Initiatives include lower coffee machines, to allow customers more face-to-face time with baristas, and a Starbucks Card that offers users treats such as free extras. A refurbishment programme to make stores less uniform has also been undertaken.

'The company realised it had over-expanded, so it took a step back to focus on areas like the quality of its offering and barista training,' says Whalley.

Nonetheless, it has also had to close hundreds of stores and shed staff in a drive to turn around its fortunes. Commentators agree that the strategy has worked and the figures attest to this with global net revenues increasing 9.5% to $10.7bn in 2010. Sales of Starbucks' Via instant coffee added £100m to its balance sheet globally in just 10 months.

One US analyst goes as far to describe the management team as 'visionary'. 'They've pulled themselves out of a trough,' he adds.

Just before he returned to the helm, Schultz, who was still chairman, fired off a now infamous memo to the then-chief executive, Jim Donald, which found its way into the public domain. He voiced fears that in the rush to grow, business decisions were made that had led to a 'watering down of the Starbucks experience'.

Given that the company is embarking on a strategy to stretch the brand into new areas, Schultz must be alive to the danger of repeating past mistakes.


Reaction to the new logo

The Starbucks 'Siren', originally chosen to signify the allure of coffee, has come a long way since her early topless days.

Although her hair was restyled to preserve her modesty, she has remained largely unchanged since 1987. Only minor tweaks were made until last week's overhaul, by an internal team and US branding agency Lippincott.

'The result is an evolved logo that celebrates the Siren in a much bolder way - it's more expressive and energetic and still uses the same vibrant green circle that is so well recognised by our customers around the world,' blogged 'Mike P', Starbucks' senior creative manager.

The comments below his post are less than positive, however. 'The new logo is undistinguished and bland. Don't like it. Looks more like a generic grocery chain brand trying to emulate the real Starbucks one.'

Another questions the importance of the Siren to the brand.

'For many years I did not see a distinguishable picture inside the circle on my Starbucks cup. I only saw the words "Starbucks Coffee" surrounding a black area with a picture that I didn't understand.'

Jim Prior, chief executive of branding agency The Partners, was left 'underwhelmed and disappointed' by the new look. 'I'm not sure that they've taken away the right bit,' he says. 'It feels like an asset-stripping exercise.'

To Prior, the green and black design was more emblematic of the brand than the Siren figure.

Inevitably, Facebook and Twitter campaigns have sprung up to protest against the change, but given the business imperative driving the move, there will probably be no U-turn.



1971: Starbucks opened first store in Seattle, selling coffee beans.

1982: Howard Schultz joined as director of retail operations and marketing. The founders rejected his proposal to sell drinks.

1985: Schultz left to set up his Il Giornale coffee bar chain; two years later, it bought Starbucks and adopted its branding.

1987: Expansion beyond Seattle began.

1992: Starbucks went public.

1998: First branches opened in Europe.

2005: Schultz stepped down as chief executive, remaining chairman.

2007: Rapid expansion resulted in flattening sales. Schultz resumed executive role. First TV ads aired.

2008: Revival plan included store closures and doubling of marketing spend.

2009: Profits rose by 200% in the three months to 27 December.

2010: Instant-coffee brand Via launched in UK.


Operator Market share by Turnover % change Total store
turnover (%) (pounds m) in share numbers
Costa Coffee 37.6 462 29.8 1175
Starbucks 32.4 398 6.7 731
Caffe Nero 14.3 176 10 440
Caffe Ritazza 2.5 n/a n/a 109
Coffee Republic 1.5 19 11.8 83
AMT Coffee 1.5 19 26.7 59
Cafe Thorntons 0.9 12 9.1 42
Puccino's 0.8 10 -33.3 38
Esquires 0.7 9 12.5 33
Soho Coffee Company 0.4 5 25 19
Boston Tea Party 0.4 5 25 9
Coffee#1 0.3 4 33.3 15
Caffe Fratelli 0.3 4 33.3 12
Morelli's Cappuccino 0.2 n/a n/a 7
Gloria Jeans UK 0.1 n/a n/a 2
Others 6.0 n/a n/a 399
Total 100.0 n/a n/a 3173
Source: Allegra Strategies