Starbucks goes blond for light coffee fans
With the introduction of its lightest roast ever in January, the company is attempting to reach a broader range of coffee drinkers.
Based on its consumer research, Starbucks is offering its Blonde line for the estimated 40% of American coffee drinkers, or 54 million people, who prefer a lighter roast. The new coffees in the Blonde category include several under the Veranda and Willow blend names.
Starbucks' competitors in the specialty-coffee market include McDonald's (MCD), Caribou Coffee (CBOU) and Peet's Coffee (PEET).
See our full analysis for SBUX
With the introduction of Blonde, Starbucks' offerings have expanded to light, medium and dark varieties. Starbucks is attempting to poach customers from competing firms, such as McDonald's and Dunkin' Donuts, that offer milder coffee.
According to Nielsen statistics, more than 70% of total premium coffee sales in grocery sales are in light and medium-roast categories. The statistics show a huge opportunity in the light coffee market. In July, Costa Coffee also launched a new slimmer brand of coffee, called Costa Light, which it said was developed based on customer feedback highlighting a need for a light and indulgent coffee.
We believe the introduction of Blonde shows that Starbucks is keen on innovating new products and is receptive to customer feedback. The firm has also been looking to expand its grocery business and enter the juice business. The new Blonde will 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.
Our price estimate for Starbucks stands at $40, implying some downside to the market price.
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