Starbucks’ Strategy and Business Model Undergo an Evolution
This week Starbucks opened its first Evolution Fresh store in suburban Seattle. The Bellevue store’s opening sparks Starbucks’ strategic move into the “healthy living” and “wholesome products” niche markets. Starbucks has a solid track record on which to build. The company treats its workers well (health insurance is a huge expenditure for Starbucks), has long sourced fair trade coffee and provides a mobile office to millions of freelancers and unemployed workers looking for a place to work and job search. The company has and always will ensnare its share of critics, but overall the company is one from which other firms can learn. And when Starbucks suffered its lumps a few years ago, the company bounced back and became an even stronger company. So is the American and eventually, overseas markets ready for a new juice chain? The outlook for Starbucks’ strategy is mixed. One advantage it has is Evolution’s processing technique, which incorporates high-pressure processing without heating the juice and killing the nutrients. Consumers will welcome the change from the sugary drinks that have scared away consumers from other chains. But other fruit juice chains are struggling. Jamba Juice’s sales are plummeting and the company is losing money. Other local chains like Robek’s have a foothold in local markets like Los Angeles but flail elsewhere. And these juices’ price point will make it difficult for Evolution Fresh and Starbucks to compete with fast food chains, even if options from McDonald’s and other companies pale in nutritional value. But with McDonald’s, Dunkin’ Donuts and regional coffee chains like Peet’s constantly nipping at Starbucks’ heels, the company has got to find new adjacencies in order to grow. Evolution Fresh could work, especially if the company can go beyond “natural” and incorporate more organic and local ingredients into its product mix. Such a move would open doors for Starbucks and their suppliers the way the company pushed fair trade coffee into the mainstream. And Evolution Fresh could enter a the Middle East market, which in the long term could score Starbucks more success. Juice bars (such as the one pictured above) are a buzzing in the Gulf States, and Evolution would be a natural fit in the region. Furthermore, if Evolution Fresh stores are a welcoming as most Starbucks’ locations, we could see a new “third place” in which to spend our spare time away from the home and the office. That new Bellevue store could be the start of the next big thing.