Starbucks Goes Blonde to Attract Light Coffee Drinkers

by Trefis Team
-2.58%
Downside
77.81
Market
75.81
Trefis
SBUX
Starbucks
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Starbucks (NASDAQ:SBUX) plans to launch lighter roast coffees to attract customers who prefer milder coffee. According to Starbucks’ own consumer research, it is offering light-bodied coffee to meet the needs of 40 percent of American coffee drinkers, representing  54 million people. [1] The new coffees in the blonde category would include Starbucks Veranda Blend, Starbucks Willow Blend, Decaf Starbucks Willow Blend and Starbucks VIA Ready Brew Veranda Blend. Starbucks’ competitors in the broader market for specialty coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Peet’s Coffee (NASDAQ:PEET).

See our full analysis for SBUX

Blonde Coffee to Drive Sales

With the introduction of blonde coffee, Starbucks offerings have expanded, consisting of Blonde, Medium and Dark varieties. Starbucks plans to poach customers from competing firms like McDonald’s and Dunkin’ Donuts, who are known to offer milder coffee to their customers. The milder version of coffee would be available in stores from January 2012.

According to Nielsen statistics, more than 70 percent of total premium coffee sales in grocery sales are in light and medium roast categories. [2] The statistics surely show a huge opportunity in the light coffee market. In July, Costa Coffee also launched a new slimmer brand of coffee, called Costa Light. Costa developed Costa Light on the basis of customer feedback which highlighted a need for a light and indulgent coffee. [3]

We believe the introduction of blonde coffee shows that Starbucks is keen on innovating new products and is receptive to customer feedback. The firm has also been looking to expand grocery business and enter juice business. We believe introduction of blonde coffee would surely lead to surge in sales at Starbucks. However, it is still to be seen how successful it would be in capturing market share in the light coffee industry vis-a-vis competing firms like McDonald’s and Dunkin’ Donuts.

Our price estimate for Starbucks stands at $40, implying some downside to the market price.

See our full analysis for Starbucks stock here

Notes:
  1. See: Starbucks Launches Lighter Roast ‘Blonde’ Coffee’, Yahoo News []
  2. See: Starbucks Launches Lighter Roast ‘Blonde’ Coffee’, Yahoo News []
  3. See: Costa Coffee Launch New ‘Costa Light’ Range, Foodepedia []
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