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Jan-Feb 2008 > Cover Story
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HOW RTD INNOVATION KEEPS THE BUCKS FLOWING

By Aliyah Baruchin

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So what is that process? How have three base products and a handful of extensions created a niche that solid?

There are five guidelines that help Starbucks innovate RTD offerings with this kind of power:

1. It’s all about the coffee – and the Starbucks experience.


Like every other product-based decision at Starbucks, innovation originates with and is founded on coffee excellence, the company’s original advantage. “The first thing that guides all of our innovation is that we need to champion the bean,” says Amy Wirtanen, Director of Innovation for the North American Coffee Partnership. “The coffee is the core of our business; it is the reason why we exist. And whatever we do – from a flavor standpoint or from an offering standpoint – it has to be the highest quality coffee that we can offer.”

In that way, too, the company satisfies customer desires. RTD expansion, Lopez says, “builds brand equity – it lets us continue to surprise and delight our customers.”

Says Wirtanen, “We start with learning from the store; the Starbucks retail experience is what we’re trying to champion and then translate into the RTD coffee category. What we try and do is take the best-of-the-best offerings and then bring those to our consumers in the RTD environment.” Does Starbucks fear the energy-drink boom? “Definitely not,” she says. “We look at all different categories in the marketplace to gather learning, but we don’t emulate any one category. Coffee at its purest has a lot of equity that we can really deliver to our consumers to enhance their day.”


2. Use packaging to evoke and support need states.


Packaging is key throughout the RTD coffee line. “We look at all kinds of packaging offerings or options when we are introducing a new innovation, and mainly
we’re trying to fit the package with the consumer experience that we’re trying to deliver,” says Wirtanen. “If they’re going to be out and about in a very convenient, active environment, then a can makes perfect sense because it’s lightweight and it’s so convenient to carry.
The glass bottle for Frappuccino has a great premium equity around it, and it’s the perfect fit with that Frappuccino experience.”

She’s right: Frappuccino is a beautiful little milk bottle, immediately reminiscent of what used to appear in the silver box on the porch each day at dawn. The product name floats across the front of the bottle in a whimsical retro font; stars twinkle on the label, dot the “i.” It’s all about delight, an impression that is immediately confirmed by the first sip: the stuff is just jaw-droppingly delicious. The product is targeted to 18-44 and skews slightly to women, depending on serving size, but at heart it’s just an equal-opportunity indulgence. “Frappuccino is a great way to take a break in your afternoon and kind of rejuvenate yourself,” says Wirtanen. In that way, the product echoes the much-lauded “third place between work-and-home” role of the Starbucks store.

Where Frappuccino is the treat, Starbucks DoubleShot is the jolt: a tiny, slim can of espresso and cream that’s bold, powerful, and a tad bitter in taste. The can is correspondingly decorated in hard-edged brown graphics and clean sans-serif fonts, with a military-looking epaulet of a rectangle boasting two stars. “DoubleShot is definitely the one that goes against more of an urban, active lifestyle consumer,” says Wirtanen. “Our target is a little bit younger – 18 to 34 – and we talk about these consumers in terms of these intensity-seekers, people who are living life to the fullest. This is a great companion for doing that.”

And rounding out the trio of treat and jolt is the third need state that Starbucks markets to: a companion, something to help customers maintain a rhythm, and that’s their Iced Coffee, offered in a tall, slinky silver can wrapped with dawn-shaded bands of orange or blue. “Iced Coffee is a slightly older target, 30-49,” says Wirtanen. “This is more of a light, refreshing way to experience coffee. It’s kind of the one that consumers go to when they’re looking for a companion throughout their day.”

3. Make line extensions count: be more responsive to the core customer.

When you have a small stable of blockbuster revenue-producers, it makes sense to keep riffing on them in the most targeted ways possible. Bottled Frappuccino now exists in flavors including coffee, mocha, caramel, and vanilla, plus a decaf variant, and there’s even an option for customers who want the core experience without the coffee: the Strawberries & Crème Frappuccino. “That’s a great example of how we borrow from the learnings of the store,” says Wirtanen. “Strawberries & Crème in Starbucks retail stores is a very popular flavor.”


And there’s still more surprise and delight, this time in flavor innovation. In September the company introduced two new dark-chocolate Frappuccino flavors: Dark Chocolate Peppermint Mocha (for the holidays, natch!) and a permanent Dark Chocolate Mocha offering that will launch in March 2008. No one can claim that Starbucks RTD is about nutrition – “These are not health-and-wellness products,” Doucette quips – but dark chocolate, which periodically gets media buzz for its healthful properties, is an example of how public nutrition-consciousness can filter into the company’s R&D here and there. “We definitely learn from trends that are happening in the marketplace, and the antioxidant value of dark chocolate helped to get it on our radar screen,” says Wirtanen. “But it’s also just a fabulous flavor.”

Another flavor variation on an existing product is a possible change in the roast used for Starbucks canned Iced Coffee, currently made with Italian Roast. Starbucks Breakfast Blend could be an option, as could Gazebo – both ultra-refreshing tastes that Gerry Lopez says could, for example, provide a more “summer-driven” offering. Again, it’s about the coffee.

A different kind of revision is in diet only products. DoubleShot, Iced Coffee, and one bottled Frappuccino have come out in Light versions and some analysts say that, with only 1/3 fewer calories, the Frappuccino
extensions may not be light – or responsive – enough. “We wonder if Starbucks should reintroduce the Light version and this time ‘go all the way’ with calories,” wrote analyst Palmer about light Frappuccinos. “If Starbucks
is going to remind consumers of the calories in the beverage, the chain should try to remove more than a
third of them.”

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There are currently 1 comments on this article
On 5/2/2008, scum1 said:

Shock Coffee Triple mocha is a much better RTD than Frappuccino. It has better natural ingredients, better taste, and 3 shots of espresso per 8 oz can. It is just like Red Bull dominates by name recognition and distribution. Starbucks name is huge so 99% of the time your average person buys based on name. Try a Shock Triple mocha and get back to me.

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