ustaad

Starbucks: Understanding the Business Model

Nice article. I disagree with the author's assertion that SBUX has lots of room to grow because coffee is the second most popular drink in the world and they are the leading brand in coffee.

I would argue that SBUX is dispensing an upscale experience to the majority of SBUX regulars. Convenience is important but without the feel good value of the upscale experience is not worth much.

SBUX does have lots of room to grow. It will grow by converting non-coffee drinkers to wannabe coffee drinkers who don't mind shelling out $5 to be seen walking into work or around the mall with a SBUX cup in their hand. The same beverage in a non-SBUX cup is likely worth less than $2 and more importantly a lot less life style points.

I will concede that there is a population of coffee connoisseurs who shop at SBUX for convenience. I will argue that their average purchase price is a lot less than the life style SBUX shopper.

The feel good aspect of the SBUX experience will resonate with newbie affluent consumers in emerging economies. Of all things "luxurious" SBUX is the cheapest to buy, easiest to access and can be consumed frequently to assert adherence to a particular lifestyle. Over the long haul, SBUX will grow and be omnipresent like MCD. All SBUX has to do is follow the phenomenally successful MCD model (franchise) and become just a brand and step away from being a retail operation.