Starbucks has entered the wine market.
Its first steps have been small, and calculated, but they have landed with resounding force in the wine-purveyor arena. Some see Starbucks entry into the wine market at this time as a way to bolster slowing domestic growth while others see it as a shrewd, opportunistic move in a market with conditions similar to those of the pre-Starbucks coffee market. Regardles of the reason, this formidable market-creator is now in the wine business and has to be accounted for. In this post we will examine Starbucks capabilities and the potential impact of its entry on Orlando-area wine purveyors.
The elements that render Starbucks a feared competitor in the current fragmented wine marketplace are as follows?
- Its demonstrated brand-building capabilities
- Its market-moving potential, given its size and buying power
- Its in-place infrastructure, to include: prominently located stores; name recognition; centralized ordering; centralized information systems; common policies and procedures; and institutionalized training regime.
- The ability to cut across market segments; on-premises, retail
- Its potential to establish a "wine lingo" of its own that will have current players on the outside looking in
- Its potential to capture/create wine newbies.
I attempted to guage the impact of a Starbucks entry into the Orlando wine market by interviewing selected market players on the topic. The most striking aspect of the conversation was that none of the individuals that I spoke to was aware, prior to my introducing the topic, that Starbucks was preparing to compromise their viability. After Adam's-apple-bobbing pauses, they then launched into their feelings on the topic. Only one of the interviewees was entirely enthusiastic about the potential entry of Starbucks into the market (and I still can't understand why). The overwhelming sense among the others was of uncertainty. The general consensus was that it was a good move for Starbucks but would not be helpful for independent wine stores. The feeling was that Starbucks would be able to lock up the product stream of some boutique wineries and marry the buying power of a Total Wine with the demographic, name recognition, distribution chain, and foothold of a Starbucks to the detriment of the independent wine store.
Did consumers benefit when coffee went from 75 cents at the gas station to $5 at a Starbucks. Consumers seemed to think so, because they kept the cash registers ringing at neighborhood stores. Will we see this same type of cost-benefit tradeoff in Starbucks' wine marketing as we move forward? Most likely not because the floor for a glass of wine begins at the ceiling for a cup of Starbucks coffee. It is quite likely that Starbucks will be successful in this venture, however, because of the strengths that it can/will bring to bear on this problem. Independent wine retailers will have to study this problem carefully in order to develop relevant survival/"thrival" strategies.
