Coffee Category Sees Evolution And Rivalry

A word that comes up fairly regularly when we are talking with brands is “evolution,” as it is an inescapable reality of doing business with changing consumers at the other end of the transaction.

Brands must continually examine how to stay relevant and grow if they are to stay profitable, or even be around to complain about profits. In a recent Time Magazine article on the changing role of Ronald McDonald the clown, this point was emphasized, symbolic of the change in a brand once centered on children that has fundamentally widened its focus. As Ronald is given an office in the brand basement, McDonald’s continues its march into a more mature market, one not all that in love with clowns.

McDonald’s entry into the coffee category has caught serious traction with adults. Though late to the coffee table, an incredible distribution network and getting to a good strategy has to be giving Starbuck’s the jitters, as the McCafes sent revenue growth records in six out of the past seven quarters to a high of $24 billion in sales last year.

However, Starbucks same store sales are up 7% for end of fiscal year 2010, as it continues its bounce back from a tough 2009 when the chain was down 6%. As Starbucks CEO Howard Schultz said to the brand’s employees in a year-end message, “We must continue to earn our success every day.”

Starbucks, a rare brand that revolutionized an entire category with its approach to what many marketers once claimed was an unchangeable landscape, knows better than anyone how things can morph. “What a difference two years makes,” said Mr. Schultz in that same message, determined to both celebrate the brand’s resurgence but not take its success for granted. The category continues to shift, as we see in our metrics.

As 2011 began, the top three US coffee brands, when it comes to their own customer’s report of their degree of brand loyalty and engagement, are:

1. Dunkin Donuts,
2. Starbucks
3. McDonalds

Mr. Schultz’s new book, “Pour Your Heart into It,” tells his story of how the brand was built “one cup at a time.” We could not agree more with that sentiment, as every brand comes to thrive by a buildup of individual positive transactions. As brand engagement and loyalty specialists, we’ve seen too many brands take consumers for granted once the stores are in place –the old “if you build it they will come” strategy that offers no guarantees.

Without knowing exactly what’s making loyalty happen, brands may experience a Venti-size jolt that wakes them up, but it may be one that leaves them with the shakes.

Contributed to BSI by Robert Passikoff, Brand Keys

Sponsored By: The Brand Positioning Workshop