Starbucks Unveils New Seattle's Best Coffee

New brand identity, expanded distribution will make it "more accessible"

SEATTLE -- Seattle's Best Coffee, part of Starbucks Corp., has unveiled a new brand direction as part of a reinvention of the coffee company that was acquired in 2003. The new brand identity, including a new logo, "will play a key role in Seattle's Best Coffee's strategy to redefine the traditional conventions of the coffee category, making high quality coffee more accessible than ever before."

The brand will also be sold in convenience stores, drive-through kiosks, coffee carts, vending machines and mobile trucks. The Wall Street Journal called Starbucks' move "[image-nocss] a counterattack against its lower-priced fast-food rivals."

The new push by Starbucks is a response, said the report, to the invasion of the specialty-coffee market by McDonald's, Dunkin' Donuts and other fast-food chains, which offer espresso-based drinks at lower prices than Starbucks. Especially during the recession, the incursion appeared to hurt Starbucks, which suffered a decline in same-store sales and closed hundreds of stores. In recent years, as McDonald's produced big sales gains inside existing stores, Starbucks has struggled to expand beyond a limited menu and a largely morning clientele.

In a presentation last week to the Starbucks board, executives unveiled a new logo for Seattle's Best, along with a new motto: "Great Coffee Everywhere." The motto reflects the Starbucks theory that the success of McDonald's and others in selling coffee has created a fresh opportunity to sell a mass-market brand, said the Journal

Seattle's Best Coffee's brand transformation is being fueled by significant, high-profile retail relationships and expanded franchising efforts that will increase today's 3,000 points of distribution to more than 30,000 by the end of Starbucks' fiscal year, the company said.

"After decades of experience in the coffee business and providing millions of customers with our distinctive and approachable coffee, we are fully unleashing the power of the Seattle's Best Coffee brand to create the next global coffee brand, inspired by our belief that everyone deserves a great cup of coffee," said Michelle Gass, president of Seattle's Best Coffee. "We are setting out to turn the traditional coffee model on its head with innovative new approaches in every phase of our businesspartnerships, retail and packaged goodsand taking our premium coffee to the places our customers go in their everyday lives."

From cafes and cruise ships to bookstores and grocery aisles, Seattle's Best Coffee's diverse distribution network is rapidly expanding. The brand has reached an agreement with AMC Theatres (AMC) to serve Seattle's Best Coffee at the leading theatrical exhibitor's nearly 300 AMC Theatres nationwide beginning in July, and as previously announced, Seattle's Best Coffee will also be offered at all Burger King restaurants in the United States by September. These new relationships join Seattle's Best Coffee's growing roster of partners, which includes Alaska Airlines, Borders bookstores and Royal Caribbean Cruise Lines, among others.

"The new brand direction will bring a simplified approach to the coffee category in all the ways it will touch the customer," said Gass.

The Seattle's Best Coffee logo's reinterpretation maintains the brand's historic association with its name and the color red while assembling a number of universal coffee symbols, such as a drop and a cup, in an unexpected way.

In the past three years, the percentage of Americans drinking premium coffee has jumped to 35% from 29%, Tom Ehlers, a veteran Starbucks executive who is now vice president of retail for the Seattle's Best unit, told the newspaper. "Regular people have found their way to great coffee."

He likened the Seattle's Best venture to Old Navy, the Gap Inc. discount chain that now rivals the Gap chain in size.

The new strategy carries risks, said the report. Starbucks owns and operates its coffee shops. But despite the challenge of maintaining quality control, it will seek to expand the Seattle's Best coffee-house chain through franchisees operating stores as large as 1,400 square feet and as small as 200 square feet.

Associating Starbucks with a product sold from vending machines could also damage the brand's upscale image. And it could cannibalize Starbucks customers, said the report.

For those who find Starbucks coffee too strong-tasting, Seattle's Best is promoting the "smoothness" of its blend in ads and promotions. For those turned off by the prices and ambiance at Starbucks stores, Seattle's Best is touted as "unpretentious."

Starbucks said its risks are small because it has barely 4% of the U.S. market for brewed coffee, and Seattle's Best's potential rests with consumers of mass-market brands. "The people who always drank a cup of Joe still want just a cup of Joe," Ehlers added. "But nowadays they want it to be good."

David Palmer, an analyst who follows Starbucks for UBS Securities, told the Journal that he believes the strategy makes sense. He noted that no national coffee brand can be found across the U.S. c-store industry, which operates more than 100,000 outlets. By contrast, McDonald's has about 30,000 U.S. restaurants.

Pricing will vary widely, the report said. Like Coca-Cola, which can cost $5 a serving at a resort restaurant or a dollar in a vending machine, the price of Seattle's Best will depend on where it's sold. In grocery stores, Seattle's Best beans will cost consumers less than Starbucks-brand beans but more than conventional brands, Starbucks executives said.

Perhaps the most radical feature of the Starbucks strategy, according to the report, calls for selling Seattle's Best from vending machines. Vending-machine coffee has long been regarded as a last resort, often found in factory cafeterias miles from the nearest fresh brew. But Seattle's Best engineers have developed a coffee-making machine that Starbucks predicts will improve that image.