Starbucks: Version 2013


Seeking Alpha, a website dealing with stock market news & financial analysis, reports that 2013 – without a doubt – is going to be the year of Starbucks. According to them, the financial ratios measuring financial success the previous year were among the highest in the coffee industry and is expected to keep increasing the upcoming year. This increase is based on various reasons: a decline in the price of coffee beans around the world, creating less expenses and greater profits; a new entry of Starbucks into the highly anticipated Vietnamese market; an estimated amount of 250 new branches are planned to be opened in China; and the VERSIMO, Starbuck’s new module of a home-used coffee machine – voted as one of the top investments of the year – will come out as well.

I would like to elaborate on the last reason mentioned for Starbuck’s expected success – the VERSIMO machine. Julian Baggini, a writer for the Aeon Magazine, has recently wrote a fascinating article explaining a change the restaurant industry is currently going through, changing the traditional, hand-crafted coffee served faithfully by the Barista to be produced by state of the art coffee machines. He describes a visit to one of the most famous restaurants in the UK, a gourmet Michelin-starred restaurant serving the coffee to his associates and him only by a press of a button using the Nespresso’s machine. In times when Michelin-starred restaurants feel comfortable serving machine prepared coffee, it’s just a matter of time until the whole industry will follow them through emphasizing the value of entering into the coffee machine market.

On the other hand, as reported on Starbucksgossip blog, the spinning success associated with Starbucks’s has not yet caught up with the VERSIMO. So far revenues are not high as expected to be. “Verismo’s launch borders on being too little too late to enter the single-cup market”, is how SeekingAlpha described the new machine. Lack of holiday promotions demonstrating how the machine operates, limited amount of coffee pods, an additional amount which is needed to be spent on the Starbuck’s special syrups all and an overall pricey purchase contribute to a general feeling among customers to go towards the main competitors: Nespresso and Vertigo.

However, as they continue and explain, the addiction to the Starbucks experience, customer loyalty and its strong brand together with the new App Starbucks launched several months ago, will make up for the recent slow sales of the Versimo. Perhaps with the right marketing tools, which Starbucks is so famous for together with the recent decrease in selling price will bring the Versimo to be an equal competitor in the home-used coffee machines.