Special Report: Marketing in Vancouver: Starbucks the star of the coffee craze

When a Starbucks Coffee outlet on Vancouver's fashionable Robson Street was threatened with demolition in 1991, the Seattle-based owner opened a second outlet kitty-corner from the first. Far from cannibalizing each other's business, however, the two Starbucks coffee houses prospered over...

When a Starbucks Coffee outlet on Vancouver’s fashionable Robson Street was threatened with demolition in 1991, the Seattle-based owner opened a second outlet kitty-corner from the first.

Far from cannibalizing each other’s business, however, the two Starbucks coffee houses prospered over the next two years, each ranking among the top performers of the whole chain.

Business was so strong that when the original building was finally knocked down last year, the first tenant signed to the new retail complex was Starbucks.

The coffee shop reopened at the location about three months ago to offer Italian ‘panini’ sandwiches along with cappuccino.

Few would argue that, over the past decade, no other company operating in Vancouver has surpassed the marketing success of Starbucks.

Since 1987, the chain has grown from the original outlet in the Seabus Terminal downtown to more than 50 stores in the Greater Vancouver region; growth spurred by the current coffee craze on the West Coast.

For Vancouverites, the name Starbucks is synonymous with coffee-inspired interludes: meetings with friends and business associates, and time alone.

The most fashionable carry refillable thermos cups with the green Starbucks logo emblazoned on the side.

It seems no demographic is immune to the caffeine lure since Starbucks operates in the inner city, the suburbs, the old money districts and the trendiest hot spots.

Starbucks has even thrived along Commercial Drive – the heart of Vancouver’s Italian district – where espresso purists cried foul loudly enough to make the evening news when the company opened outlets there last year.

‘They didn’t want us there so much, we have two stores now,’ says Roly Morris, Starbucks’ vice-president for Canada, with a laugh.

Morris says the small mom-and-pop coffee houses in the Italian neighborhood, supposedly threatened by the perceived Wal-Mart-style invasion of Starbucks, are still making money.

He says Starbucks owes its popularity to its consistent product (beans dark-roasted in Seattle) and its emphasis on proper brewing.

He also points to Vancouver’s proximity to Seattle – the birthplace of Starbucks and the new coffee culture – for the increased espresso awareness.

But, more importantly, Morris says, Starbucks has positioned itself as an affordable luxury where people can dash in for a take-away latte or hang out in comfortable wood-trimmed decors.

As a social convenor, Starbucks offers a smoke-free environment and is perceived to be a healthier alternative to pubs.

It is a formula that works.

Since the 24-year-old company began expanding in 1987, the corporately owned chain has gone public and grown to 56 outlets in southwestern b.c. (its only Canadian market) and more than 500 outlets across the continent.

By year-end, the Starbucks chain will have expanded by 20 outlets in b.c. and entered more markets, including Vancouver Island and the b.c. interior.

With its goal to be the premiere purveyor of whole bean coffee in the world, Starbucks recorded sales of $280 million in fiscal 1994 and $400 million in fiscal 1995.

Coffee by the cup comprises up to 70% of sales, while the balance is made up of coffee paraphernalia and whole bean sales.

And to get an idea of its market penetration, the chain now serves more than 2.5 million people per week.

In b.c., the nearest competitor is Second Cup, an Ontario-based franchise that has redesigned its decor more in the style of Starbucks but only operates 19 outlets in b.c.

Other Vancouver competitors include Blenz and Urban Espresso.

‘We have not seen much erosion of our market share,’ says Harry Roberts, Starbucks’ Seattle-based vice-president of marketing. ‘The competition just forces us to be better.

‘Over the long term, the fact that we are a roaster makes the difference,’ Roberts says.

‘We also have an advantage in our size, allowing us to weather the competition,’ he says.

Starbucks’ momentum has begun to feed itself, but the company’s marketing strategists are maintaining market share through advertising that highlights the beans and the Starbucks brands.

That includes value-added products that create interest in product launches.

Blue Note, for example, Starbucks’ first new coffee product in four years, was launched April 1, bundled with a Capitol Records compact disc of Blue Note label jazz music, available for $9.95.

The cd features Nat King Cole, Sarah Vaughn, and Louis Armstrong. The coffee is a blend of African beans.

Previous bundled offers have put coffee beans and other coffee products together, but the Blue Note launch is a first with music.

It has paid off in free marketing spin-offs. Radio stations are playing the compilation, referring to it as the Starbucks cd.

As another example, frappuccino, a new iced-coffee drink, will be officially launched on May 14, Mother’s Day, though the product is already available in stores.

Frappuccino is a double-strength French-roast coffee that is flavored with a pre-mixed dairy product.

Little media buying has accompanied Starbucks’ growth.

Television advertising has been limited to markets such as Vancouver, that have the store base to support the expense.

Generally, the Starbucks marketing initiative has been through print vehicles such as the weekly Georgia Straight, and community outreach programs that enhance image, and word of mouth.

Causes supported by Starbucks include b.c.’s Children’s Hospital, the Vancouver Opera and the Walk for AIDS.

Starbucks’ ad agency is Seattle-based The Evans Group.