Starbucks Borrows Strategic Shift from Distillers

For whisky distillers, moving a label or brand up the price point is very difficult. Instead of raising prices for a label, a distiller will launch a new label with an accompanying higher price point. Distillers have relied on such efforts with terms such as single barrel, small batch, etc.

Taking a page from distillers, Starbucks will launch a series single-origin labels this fall. These labels will be available only at retailers, and not Starbucks' outlets. As this article notes, the place decision will provide Starbucks with greater space on the retailer's shelf. Given limited shelf space, a Starbucks competitor will suffer reduced shelf space, and, ultimately, less sales revenue.

The new labels will be priced around $10.50, or $3 more than a regular bag of Starbucks coffee. Retailers should welcome the higher price points coupled with the higher margins while generating some additional foot traffic in the coffee aisle.

This label launch follows Starbucks decision to add a new store format. This outlet will sell only small batch coffees, which sound a lot like small batch whiskies. Like small batch whiskies, expect small batch coffees to command a higher price point than $2.35 for a venti. The 95% or more margin on a cup of coffee would contribute to Starbucks' US gross margin of $737 million.

Possible new Starbucks size: Brocca