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STARBUCKS- A CUP EVOLUTION 1




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                            TABLE OF CONTENTS


INTRODUCTION                                     3

OPPORTUNITIES FOR IMPROVEMENT                    4

PART I: PROPOSED PLAN                            6

PART II: STAKEHOLDERS ANALYSIS                  10

EMPLOYEES                                       11
CUSTOMER SAFETY AND PRODUCT QUALITY             13
CUSTOMER SATISFACTION                           14
ENVIRONMENT AND COMMUNITY                       15
SHAREHOLDERS’ BENEFITS                          17

UNRESOLVED ISSUES                               18

CONCLUSION AND RECOMMENDATIONS                  19

BIBLIOGRAPHY                                    21




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                           Starbucks - A Cup Evolution
Introduction

       While it’s clear that Starbucks Coffee Company did not invent coffee, Starbucks did

invent a new coffee drinking experience when it reshaped a simple cup of coffee into a luxury

product (Clark, 2007). Gone are the days when regular or decaf are the only choices in coffee.

Starbucks has successfully produced a personalized luxury coffee experience that has created a

coffee-drinking phenomenon worldwide. Today, Starbucks is a public icon in the coffee world;

and its success and visibility invite scrutiny, which has resulted in greater expectations from the

public for Starbucks to become more socially and globally responsible (Fellner, 2008). While

progress has been made on the ethical sourcing of its coffee beans, Starbucks still has large

strides to make towards becoming a greener company. One of the obstacles Starbucks must

address is the volume of waste generated by the paper beverage cups, a dilemma currently

weighing down the company’s reputation as a socially responsible business. We believe that

Starbucks can lessen its negative future impact on company stakeholders and the environment if

the company supplements its usage of paper cups with the usage of reusable cups.

       Starbucks’ mission has always been to “inspire and nurture the human spirit – one

person, one cup, and one neighborhood at a time” (Shultz, 2011). Given its mission, Starbucks

sees itself as an integral part of each community in which it is located. It is not surprising that

Corporate Social Responsibility (CSR), which is the notion that a corporation should enhance

society and be accountable for its actions that affect society (D’Amato, Henderson, & Florence,

2009), would play an important role in the Starbucks business model. Starbucks currently has

programs that are focused on ethical sourcing of coffee beans, recycling, energy efficiency, water

conservation, green building, climate change, and community outreach (Schultz, 2011). In all of



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4   STARBUCKS- A CUP EVOLUTION

these cases, Starbucks has made notable progress toward stated goals (Aston, 2012); however,

while impressive progress has been made, one of the challenges that Starbucks has struggled to

address is the volume of waste generated by paper beverage cups.


Opportunities for Improvement:

       Currently, Starbucks’ paper cups cannot be recycled because there is no available

infrastructure to recycle a paper cup that also contains plastic. The cost and complexity of

removing the plastic lining from the paper cup is simply too high for most recycling plants to

undertake (Lariviere, 2010). Unfortunately for Starbucks, a plastic lining is a necessary evil

because it prevents the hot liquid from seeping into the seams of the paper (Aston, 2012).

Because the paper cups cannot be recycled, customers have no other option than to throw them

into the trash, amounting to an estimated three billion paper Starbucks cups disposed of in

landfills each year worldwide (Kamenetz, 2010). When paper cups amass in landfills, the

environmental impacts are substantial. Paper cups and plastic lids can take hundreds of years to

decompose and during the decomposition process, the plastic lining in the cups can emit

environmentally harmful greenhouse gases such as methane, carbon dioxide, and other

carcinogenic chemicals (Bouchard, 2010). The production of Starbucks’ paper cups has also

contributed to the deforestation of the planet – with over three billion paper cups being made for

Starbucks consumers each year, over one million trees are being harvested in the process

(Spitzer, 2009). Deforestation has negative consequences impacting Starbucks’ stakeholders but

the most dramatic effect is a detriment to the environment, specifically the loss of habitat for

millions of animal species (Lugo, Parrotta, & Brown, 1993).

       Recently, Starbucks has attempted to address the environmental impacts of its paper cups

by holding multiple “Cup Summits”; a colloquium of Starbucks assembled scientists and



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industry leaders positioned to develop recycling solutions (Kuruvilla, Norton, & Gee, 2012). One

dilemma discussed, was the absence of recycling facilities capable of breaking down Starbucks’

used paper cups. As a result, Starbucks hatched a pilot project, now being developed in Chicago,

requiring a chain of stores to facilitate the recycling of Starbucks’ plastic lined paper cups. The

recycled cups will be shipped to a manufacturing facility in the state of Wisconsin, where the

cups will be broken down and turned into napkins to be used in Starbucks stores

(www.starbucks.com). Starbucks’ efforts to recycle its paper cup waste are commendable;

however, we believe this is not the best solution to the problem. To start with, the recycling

process can be extremely expensive, as it requires Starbucks to absorb the cost for the

transportation of waste cups from various Starbucks stores to the recycling facility. If expanded,

reproducing the recycling facilities funded by Starbucks on a world-scale will be very difficult to

implement with the varying laws and regulations in each country. Additionally, the recycling

process has negative environmental impacts; for example, toxic chemicals are released into the

environment after they are used to remove colored dye from paper (Sharma, 2010).

       Starbucks acknowledges its responsibility to address and resolve the negative impacts

that paper cups have, on not only the environment, but also on Starbucks stakeholders. Howard

Shultz, Starbucks’ Chairman and CEO, recognizes that “no business can do well for its

shareholders without first doing well by all the people its business touches” (Shultz, 2011). The

key stakeholders impacted by measures to reduce the waste, amassed by Starbucks’ paper cups,

include: Starbucks shareholders, employees, customers, product suppliers and manufacturers,

and society, as affected by the environment.

       Shultz has requested that JANSaS Consulting Company analyze the issue of excessive

waste, generated by disposable paper cups, with respect to various stakeholder interests and help




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Starbucks identify creative solutions. In Part I of this report, we propose a solution that will

significantly reduce waste and reliance on non-renewable resources while at the same time

increase revenues for different lines of business, enhance loyalty, build on an already strong

reputation and ultimately increase bottom line performance. In Part II, this report will address the

benefits of our recommended solutions to company stakeholders and to the environment as these

impacts pertain to the guiding principles outlined in the Starbucks mission statement. In Part III,

our report will discuss unresolved issues that may affect company’s stakeholders.



Part I: Creating a Cup Evolution

       JANSaS Consulting Company proposes to re-introduce a reusable to-go cup program at

Starbucks. This program will be called the StarCup Loyalty Program. A JANSaS Consulting

Company investigator interviewed Starbucks customers and employees to gauge opinions

regarding a re-usable cup program. Shift manager, John, at the Piedmont, California Starbucks

location, explained that numerous measures have been attempted by Starbucks to reduce waste

associated with paper cups. He recounted that about six to seven years ago, Starbucks tried to

encourage reusable to-go cups but the idea “didn’t take” with customers. In a separate email

interview, a former Starbucks employee explained that Starbucks implemented its “Get Mugged”

campaign in Noe Valley, California, in which the current ten-cent discount for bringing a

reusable cup was increased to 35 cents. A ten-percent rise in the use of reusable cups was noted

for a few days; however, the increase in reusable cups was short-lived and the Starbucks stores in

the Noe Valley area returned to the original ten-cent discount (J. Hulbert, personal

communication, October 10, 2012). Further, an anonymous customer at the Piedmont Starbucks

validated John’s statements by explaining, “if Starbucks expects me to hold onto and return a

dirty cup to be used again, I would want a price cut.” A price cut is exactly what Starbucks


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customers received through the “Get Mugged” campaign and yet that price cut alone was not

enough to transform consumer behavior.

       Based on our interviews and review of past programs, it is clear that shifting consumer

behavior needs to be the key focus of the program. In our plan, we highlight four key strategies

that will shift behavior away from paper cup usage to that of reusable cups. We propose

embedding the StarCups into the existing loyalty program, building off of a current Starbucks

strength. We recommend charging customers more for using paper cups, while at the same time,

providing a free upgrade for those who adopt the StarCup Loyalty Program. We also propose

leveraging social media applications to engage consumers at a grassroots level. If implemented

successfully, the plan will result in greater customer loyalty, more highly engaged and satisfied

employees, improved revenues in the form of additional lines of business, increased social

marketing conversion rates, positive brand image associations, and increased customer retention.

The plan will also likely garner support and dedication from environmental groups who will laud

the reduced paper waste. Finally, this plan has the potential to create an entirely new marketplace

for innovative, reusable cups to address unique customer needs. With these strategies, our firm

believes a large number of consumers will make the change from using paper cups to using the

StarCup.


Strategy #1: Embed the StarCup into the existing loyalty program

       Starbucks can change consumer behavior by linking customer loyalty programs to the use

of reusable cups. Starbucks already has a robust loyalty program and frequent customers use the

loyalty cards extensively. However, we assert that Starbucks should take that program one step

further in order to increase the customer base using reusable cups by linking the existing loyalty

program directly to customer wants beyond an occasional free coffee. We recommend that



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Starbucks introduce a new feature of its loyalty program that we call the StarCup Loyalty

Program. Starbucks already sells reusable cups. All Starbucks needs to do is print a Quick

Response (QR) code, a specialized barcode, on each cup and associate that cup with a customer,

via an online customer account. Upon purchase of a StarCup customers will receive their next

three beverage purchases for free, provided they continue to use their StarCup. Customers will

also receive every tenth beverage, ordered with the StarCup, for free. When the customer makes

a purchase, the QR code on the cup is scanned and the customer receives credit for using the

StarCup. The customer’s credit card is debited at purchase, should the customer wish to link the

StarCup to a debit account. Not only does this process streamline the transaction but additionally

customers will accumulate loyalty points, in addition to free beverages, to be redeemed for

discounted retail or food and beverage purchases.


Strategy #2 - Charge the Customer

       Instead of just providing a discount for using a StarCup or other reusable cup, we suggest

charging customers an additional amount for using a paper cup. Author and contributing editor at

Fortune magazine, Marc Gunther, writes that research done in behavior economics highlights,

“people tend to work harder to avoid losses [the 10-cent charge for a paper cup] than they do to

pursue gains [the 10-cent discount for bringing in a mug]” (Gunther, 2012). Proof of this theory

can be seen in Dublin, Ireland, in 2002, where Irish stores reduced the use of plastic bags by 90

percent after a fee equivalent to 10-cents per bag was added (Ritch, Brennan, & MacLeod,

2009). Simply, by charging more for using a paper cup instead of providing a discount for the

reusable cup, Starbucks would likely experience a notable change in behavior. That said,

JANSaS Consulting Company does not believe that this step, on its own, would be enough to

change consumer behavior and it is vital that it is paired with the incentives noted in the other



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parts of our plan.



Strategy #3: Upgrade the Coffee Purchase for Free

         We believe that one of the best ways to incentivize customers to switch from using paper

cups to using reusable cups is to give the customers something that they will instantly benefit

from. If you allow the customers to upgrade for free when using a reusable cup, customers will

experience instant gratification. Upgrading the customer’s cup one size, e.g. Short to Tall, Tall to

Grande, and Grande to Venti, the cost of the additional coffee being used is minimal. According

to the Seattle Times, Starbucks paid, on average, $1.43 for a pound of coffee (Allison, 2008).

With prices this low for coffee, the cost of the size upgrade will easily be offset by the savings of

not having to produce a paper cup (paper cup - $.08, sleeves - $.05, and cup lid $.07)(Williams,

2011).


Strategy #4: Socialize it

         The fourth and final strategy is for Starbucks to leverage its already strong, industry-

leading presence in social media by simply enabling customers to link their purchases at

Starbucks with social media sites, such as Facebook. Customers can elect to share with their

friends every time a purchase is made using the StarCup. Recent research on effective use of

social networking sites suggests that that the ‘pull’ approach is much more successful than the

‘push’ approach (Diffley, Kearns, Bennett, & Kawalek, 2011). Instead of telling customers they

should be environmentally friendly and use reusable cups or telling customers about Starbucks

environmental initiatives, Starbucks should enable customers to easily broadcast the use of their

StarCup. Leveraging social media will empower customers to proudly share their decision to use

a reusable cup, while providing free marketing, which will help identify the brand as being



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environmentally friendly. Furthermore, social media are disproportionally used by younger

customers (Brenner, 2012). Linking purchases to social media sites will increase the likelihood

of customers becoming loyal to the Starbucks brand at an earlier age.


Part II: Stakeholder Impacts

    To successfully implement this plan, it is vital that the plan firmly fits Starbucks’ strategy,

mission, and values. To that end, further detail on the implementation of the plan will be

discussed in the context of the six guiding principles of the Starbucks mission statement (Fellner,

2008).

         Six Guiding Principles – Starbucks:
             1. To provide a great work environment and treat others with respect and
                 dignity.
             2. To embrace diversity as an essential component in the way we do
                 business.
             3. To apply the highest standards of excellence to the purchasing, roasting
                 and fresh delivery of our coffee.
             4. To develop enthusiastically satisfied customers all of the time.
             5. Contribute positively to our communities and our environment.
             6. To recognize that profitability is essential to our future success.

         As noted previously, there are various key stakeholders that will be impacted by the

implementation of the StarCup Loyalty Program. JANSaS Consulting Company understands the

stakeholder interests to be as follows: 1) Starbucks employees have an interest in maintaining

reasonable expectations of themselves by employers at work and in being fulfilled by their

employment with Starbucks; 2) Starbucks customers have an interest in receiving the high

quality product they have come to expect from Starbucks; 3) Starbucks suppliers and

manufacturers have an interest in maintaining their contracts with Starbucks; 4) Starbucks

shareholders have an interest in the short and long-term profitability of the company; 5) all of

humanity and the biosphere, of which we are apart, have an interest in reducing the burden of



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commerce on the planet. The impacts of the StarCup Loyalty Program on each of the key

stakeholders are outlined as aligned to the Starbucks’ mission.


Guiding Principles One and Two: Employee Satisfaction

“To provide a great work environment and treat others with respect and dignity. To

embrace diversity as an essential component in the way we do business.”

          The first two guiding principles of the Starbucks mission statement focus on the

employee’s experience at Starbucks. For the StarCup Loyalty Program to be successful, it is vital

that employees are brought into it. We recommend that the StarCup Loyalty Program be paired

with an employee incentives program designed to help Starbucks employees achieve personal

goals while working at Starbucks. As previously noted, a JANSaS Investigator corresponded via

email with a former Starbucks employee, Julie Hurlbert, revealing a past Starbucks reusable cup

program, “Get Mugged”, which failed largely due to the lack of employee incentive to

continually promote the program (J. Hulbert, personal communication, October 10, 2012).

Hurlbert explained that Starbucks baristas already have a lot that they are required to say at the

register and must attempt to upsell one item to every customer. Hulbert states, “Telling

customers about for-here ware or the cup discount falls off the radar” (J. Hulbert, personal

communication, October 10, 2012). However, through the StarCup Loyalty Program, promoting

a reusable cup program is no longer an additional thing to remember. The StarCup Loyalty

Program provides an opportunity for baristas to promote and sell the StarCup as their required

upsell.

          At JANSaS Consulting, we think that Hulbert had the right idea by trying to change

consumer behaviors and encouraging employees to promote the effort. However, Hulbert’s

program did not exhibit the proper follow-through, which can be easily created by incentivizing


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the baristas responsible for promotions. The StarCup Loyalty Program will be initiated along

with barista incentive programs specifically designed to fit the needs of individual employees.

The basic model of the incentives program involves a program in which a barista is required to

sell a set number of StarCups within a specified time. If the goal is met, the employee receives a

reward for hitting the sales mark. The length of the program is designed to extend the promotion

of the StarCup at the counter, in an effort to strengthen the lasting impact that the program will

have on consumers. The idea being that a customer who declines to purchase a StarCup initially

may purchase a StarCup a month or so later when the customer sees others in the community

taking advantage of the program.

       At Starbucks, efficiency is key. At peak hours of the day, lines can be long, and if there is

anything that will inhibit the flow of customers receiving coffee, fewer purchases will be made.

It is important to note that in most cases the StarCup Loyalty Program will not extend the

interaction time at the register, and if used optimally by a consumer, the StarCup will expedite

checkout. The StarCup has space for the barista to write the customers order on the side of the

cup, in washable marker, so no extra time is expended trying to find another method of

conveying the order to the barista. As addressed earlier, the StarCup barcode can be linked to an

online account that can be preloaded with money. Therefore, if used properly, a customer simply

needs to hand over their StarCup, dictate their order, and walk away while receipts are posted to

their online account, further reducing paper waste. These timesavings can eliminate time

fumbling for payment tender at the register and will also help increase line efficiency and help

increase sales during busy times of the day.

       The incentives program linked to the StarCup Loyalty Program is an opportunity to

motivate baristas toward promoting reusable cup usage without requiring additional work. The



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StarCup Loyalty Program, in turn, will help Starbucks create a great working environment by

taking into account the diverse needs of its employees and incorporating business success with

employees’ personal success.



Guiding Principle Three: Customer Safety and Product Quality

“To apply the highest standards of excellence to the purchasing, roasting, and fresh

delivery of our coffee.”

       Starbucks ensures the highest standards in acquisition of the best, ethically sourced coffee

beans, which are roasted to perfection. The StarCup Loyalty Program will have no impact on

these already polished business practices; however, Starbucks’ ability to deliver the freshest

coffee may be questioned by some based on the sanitation implications of implementing a

reusable cup program. Starbucks guidelines already inhibit employees from touching the lids of

reusable cups; a guideline aimed to avoid the cross contamination of virgin cups with germs

from a reusable cup (J. Hulbert, personal communication, October 10, 2012). Customers will be

encouraged to return with a clean StarCup, but in the event that a dirty cup is presented to the

barista, the employee currently has facilities to empty and rinse a soiled cup (J. Hulbert, personal

communication, October 10, 2012). The StarCup Loyalty Program will be implemented under

current health safety guidelines but will include provisions by which an employee may choose

whether or not to rinse and refill a soiled StarCup based on the time availability to clean an

individual cup and based on the potential for cross-contamination from an extremely dirty or

moldy cup. In the event that a barista refuses to refill a soiled StarCup, the patron will receive a

regular paper cup at the original price, as the paper cup fee targets consumers opting out of the

StarCup Loyalty Program. Therefore, the increased use of reusable cups at Starbucks, based on



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the success of the StarCup Loyalty Program, will not increase the risk of cross-contamination at

Starbucks, maintaining the quality of the coffee and the safety of Starbucks patrons.



Guiding Principle Four: Customer Satisfaction

“To develop enthusiastically satisfied customers all of the time.”

       The StarCup Loyalty Program, while designed to reduce waste associated with paper

cups, is specifically targeted toward engaging its customers for the long-term through financial

incentives. Foremost, the StarCup Loyalty Program provides considerable price cuts to

customers who choose to be earth conscious. With the upfront purchase of one of many StarCup

choices, consumers will have access to an online account linked directly to their StarCup QR

code, preloaded with three free drinks. Customers on-the-go can preload their StarCup account,

which will enable a quick turnaround time at the register when they uses the StarCup. As stated

in Part I, each beverage purchase made with the StarCup, after the initial complementary

beverages, will be registered and applied toward a free tenth beverage with additional StarPoints

accrued in the customer’s account to be applied toward the discounted purchase of retail items.

       Beyond the financial incentives, the StarCup Loyalty Program provides customers an

avenue for social activism through popular social media. When StarCup purchases are made,

customers must activate their QR code-linked account via the Internet, at which time, customers

will be invited to link their account to the Facebook social media platform. Subsequently, when a

Facebook-linked StarCup is scanned at the register; an automatic post will be made on the user’s

Facebook wall stating that this person used his/her StarCup at Starbucks. The post will be linked

to the Starbucks website, which will explain the StarCup Loyalty Program. In this way, just

drinking coffee doubles as environmental activism.



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Guiding Principle Five: Environmental Impact

“To contribute positively to our communities and our environment.”

       The StarCup Loyalty Program has the potential through its links to social media to

promote environmental awareness issues to a wide range of individuals on the Internet. Based on

the ubiquitous distribution and frequent patronization of Starbucks, there is a good chance that

many of the listed friends on the average Facebook users’ page will purchase a beverage at

Starbucks everyday. If just one of these friends happens to use a StarCup linked to Facebook, a

message about the Starbucks brand with a positive association with waste reduction is delivered

to hundreds, if not thousands, of people who are much more likely to listen to a friend rather than

a corporation.

       By encouraging large numbers of consumers to adopt the StarCup Loyalty Program,

Starbucks will significantly reduce paper waste. The initial implementation of the ten-cent

discount, provided to customers for bringing a reusable cup, resulted in the reduction of paper

cup waste by 674,000 pounds in the United States and Canada (J. Hulbert, personal

communication, October 10, 2012). The expected success of the StarCup Loyalty Program

should result in numbers exponentially higher than past programs. The process to manufacture a

paper cup requires harvesting and converting trees into wood chips, which are mashed with

water into pulp. The pulp is pressed while dried to make paper, which is bleached, coated in

polystyrene to retain heat inside the cup, and finally printed with a Starbucks logo (Alliance for

Environmental Innovation, 2000). According to a study from the Environmental Defense Fund,

the manufacturing and shipping of a single sixteen-ounce paper cup with a sleeve results in the

emissions of 0.25 pounds of carbon dioxide, the disappearance 0.93ft 2 of natural habitat, and the



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loss of 0.6 pounds of plant and animal life (Alliance for Environmental Innovation, 2000).

Further, Starbucks paper cups go into landfills, which release methane, a greenhouse gas with 23

times the heat-trapping power of carbon dioxide (Alliance for Environmental Innovation, 2000).

       Reusable cups are composed of various materials: plastic, ceramic, glass, aluminum,

steel, etc. The use of a reusable cup at Starbucks has resulted in a significant reduction of

landfill-fated waste. However, the energy to produce a reusable cup is significantly larger than

the energy required to produce a paper cup: a factor of seventy separates the amount of energy

required to produce a ceramic cup versus a paper cup (Hocking, 1994). For the use of a reusable

cup to benefit the environment a ceramic cup must be used 39 times, a plastic cup must be used

17 times, and a glass bottle must be used 16 times before energy savings accrue (Hocking, 1994).

Given that a reusable cup may be used approximately 1,000 times or more the environmental

benefits of using reusable cups in terms of reduced energy use, air and water pollution, and solid

waste can be tremendous (Alliance for Environmental Innovation, 2000). A Starbucks Company

and Alliance for Environmental Innovation Research group, formed in 2000, gathered the

following statistics related to the environmental benefits of using reusable serve ware in place of

paper goods. In reference to the effect that the production and the continued use of ceramic cups

have on water pollution and usage, air pollution, and solid waste it was noted that ceramic cups

cut water usage by 64 percent, reduced the amount of air particulates by 86 percent and

greenhouse gases by 29 percent, and reduced solid waste by 86 percent by weight (Alliance for

Environmental Innovation, 2000). Functionally, Starbucks already produces and sells the

StarCup, minus the specific QR barcode; thus, the initiation of the StarCup Loyalty Program will

not negatively impact the environment. When the program ramps up and more StarCups need to

be manufactured to keep up with demand, the statistics show that the production and the



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continued use of the reusable cup is better for the environment than that of disposable paper

cups.



Guiding Principle Six: Shareholder Benefits

“To recognize that profitability is essential to our future success.”

        Although the costs of adopting the StarCup Loyalty Program for Starbucks may appear

high, we expect the costs associated with that program to be nominal. Additionally, the increased

customer loyalty resulting from the program will offset any upfront expenditures, including: 1)

the cost to add QR codes to currently manufactured travel cups; 2) the minimal cost of free

beverages and upgrades; 3) the costs associated with the employee incentives program; and 4)

the general cost associated with advertising a new product line. However, the fundamental

strategy of the StarCup Loyalty Program to alter consumer behavior has the potential to

significantly benefit Starbucks’ bottom line through increased loyalty, improved brand

recognition, and free marketing on social networking sites. Additionally, even if a customer

purchases a StarCup, at the average retail price of $12.95 per cup, and never brings it back,

Starbucks still makes that initial sale and never has to give away any complementary beverages.

In the worst-case scenario the StarCups do not sell, but due to the minimal program startup costs

we think the benefits outweigh the risks.

        It is important to also note that Starbucks will make an increased profit from the fee

imposed on paper cups purchased by the customers opting out of the StarCup Loyalty Program.

While this increase in prices to customers refusing the StarCup could initially incite anger, we

expect that the price increase will function similarly to the plastic bag programs described

earlier. Should management or the Board have concerns about being viewed as greedy or “green-



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washing”, Starbucks could donate the revenue from these price increases to an environmental

organization or promise to use the proceeds to further pursue green options within Starbucks (P.

Melhus, personal communication, September 13, 2012).

       The company and its shareholders will benefit from the greater long-term profits

promised through the StarCup Loyalty Program. When the StarCup Loyalty Program is

successful, Starbucks has the ability to exponentially increase the amount of data collected about

consumer behaviors. That data can then be used to inform the best marketing decisions, the most

efficient product purchasing, and accurately targeted advertising. All of these outcomes from

increased consumer intelligence will enable Starbucks to operate more efficiently and return

greater value to shareholders.


Part III: Unresolved issues

       While we have discussed the benefit of this program for many of the current stakeholders

such as consumers, employees, shareholders and the environment, we have not discussed the

impact on current paper cup manufacturers. It is our view that the transition would be gradual,

enabling many paper cup manufacturers to adjust their business models and potentially come up

with creative reusable StarCup solutions. There will be some vendors who are unable to adjust to

Starbucks changed purchasing habits. Business with Starbucks’ current suppliers and

manufacturers of reusable cups will remain the same. QR codes will need to be printed on the

already manufactured reusable cups but the QR codes can be printed post-manufacturing.

       A possible unintended consequence of this StarCup Loyalty Program and specifically

linking it to social networking sites is that it could be perceived as marketing an addictive

substance to under age consumers. Because Starbucks loses some degree of control over the

marketing of its products when social networking sites are utilized, it is possible that Starbucks


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could encounter some bad press.

       It will also be important to longitudinally analyze whether the implementation of the

StarCup Loyalty Program will continue to be the best Starbucks effort to reduce its negative

environmental impact after taking into account future more environmentally friendly paper cups.

A Starbucks representative explained that, “to accurately measure the true environmental impacts

of any of our packaging requires an evaluation of the entire lifecycle”, which includes raw

material extraction, manufacturing energy and resources, customer use and the eventual disposal

at the “cups’ end of life” (J. Hulbert, personal communication, October 10, 2012). If the

environmental impact of producing a StarCup does not offset the negative impact of disposing of

future more environmentally friendly cups a year, then Starbucks may want to reconsider the

StarCup Loyalty Program.


Part IV: Conclusions and Recommendations

       Starbucks has a strong reputation for being socially responsible. However, even after

years of attention, Starbucks continues to be a significant contributor of paper waste. The

StarCup Loyalty Program resolves the issue of paper cup waste by establishing the habitual use

of the StarCup. JANSaS Consulting Company proposes that StarCup Loyalty Program strategies

include linking the use of reusable cups to the current loyalty program and to social networking

sites, providing free products, and imposing a fee on those who use paper cups. The StarCup

Loyalty Program will change consumer behavior resulting in the reduction of paper cup use over

time. The program will also increase employee engagement, create new lines of business,

provide better consumer intelligence, solidify customer loyalty, enhance company reputation,

and benefit the environment. The program achieves all of these aims with minimal cost and risk

to the organization. Nearly all Starbucks’ stakeholders will ultimately benefit from the


   BU784 – Group 2 – Group Project             19
2   STARBUCKS- A CUP EVOLUTION
0

implementation of this program and it directly aligns with Starbucks’ six guiding principles. To

quote former Interface Incorporated CEO and pioneer of sustainable business practices, Ray

Anderson, Starbucks will move much further down the road of “doing well by doing good” if it

adopts the StarCup Loyalty Program (Achbar & Abbot, 2003).




                                          References

Achbar, M. (Producer), & Abbot, J. (Director). (2003) The Corporation [Motion Picture].
      Canada: Zeitgeist Films.


    BU784 – Group 2 – Group Project           20
STARBUCKS- A CUP EVOLUTION 2
                                                                                        1


Alliance for Environmental Innovation. (2000). Report of the Starbucks Coffee Company/
       Alliance for Environmental Innovation Joint Task Force [Project Report]. Retrieved from
       http://business.edf.org/sites/business.edf.org/files/starbucks-report-april2000.pdf

Allison, M. (2008, May 14). Starbucks paid more for coffee in 2007 [Web log]. Retrieved from
       http://seattletimes.com/html/businesstechnology/2004413737_retailreportdigeco
       ffee15.html

Aston, A. (2012) Starbucks’ green scorecard: A few full cups, two half empty [Web blog].
       Retrieved from http://www.adamaston.com/?p=882

Bouchard, M. (2010, May 17). Moving Away from Disposable Paper Cups [Web log].
      Retrieved from http://www.fourgreensteps.com/infozone/sustainability/moving-
      away-from-disposable-paper-cups

Brenner, J. (2012, November 13). Pew Internet: Social Networking (full detail) [Web log].
      Retrieved from
      http://www.pewinternet.org/Commentary/2012/March/Pew-Internet-Social-
      Networking-full-detail.aspx

Clark, T. (2007). Starbucked: a double tall tale of caffeine, commerce, and culture.
       New York: Little, Brown.

D'Amato, A., Henderson, S., & Florence, S. (2009). Introduction. Corporate Social
      Responsibility & Sustainable Business: A Guide To Their Leadership Tasks & Functions,
      1-2. Recieved from http://0web.ebscohost.com.opac.sfsu.edu/ehost/pdfviewer/pdfviewer?
      sid=819964f5-15d2-4313-8b61-a178bb387b86%40sessionmgr110&vid=4&hid=111

Diffley, S., Kearns, J., Bennett, W., & Kawalek, P. (2011). Consumer Behaviour in Social
        Networking Sites: Implications for Marketers. Irish Journal of Management, 30, 47.

Fellner, K. (2008). Wrestling with Starbucks: conscience, capital, cappuccino.
        New Brunswick, N.J.: Rutgers University Press.

Gunther, M. (2012, May 18). Behavioral Economics at Starbucks [Web log].
      Retrieved from
      http://www.marcgunther.com/behavioral-economics-at-starbucks/#more-11398

Hocking, M.B. (1994). Reusable and Disposable Cups: An Energy-Based Evaluation.
      Environmental Management Vol. 18, No. 6, pp. 894. Retrieved from
      http://www.springerlink.com/content/c275588280002wp8/fulltext.pdf?MUD=MP

Kamenetz, A. (2010, October 20). The Stabucks Cup Dilemma [Web log].
     Retrieved from http://operationsroom.wordpress.com/2010/11/16/why-cant-



   BU784 – Group 2 – Group Project             21
2   STARBUCKS- A CUP EVOLUTION
2

       you-recycle-a-starbucks-cup/

Kuruvilla, B., Norton, S., & Gee, M. (2012). Greening the Supply Chain- Trends in Corporate
      America. International Journal of Business and Management Studies, 4, 1-10.

Lariviere, M. (2012, November 16). Why can’t you recycle a Starbucks cup? [Web log].
       Retrieved from http://operationsroom.wordpress.com/2010/11/16/why-cant-
       you-recycle-a-starbucks-cup/

Lugo, A., Parrotta, J., & Brown, S. (1993). Loss in Species Caused by Tropical Deforestation
       and Their Recovery through Management. AMBIO, 22, 106-109.

Ritch, E., Brennan, C., & MacLeod, C. (2009). Plastic bag politics: modifying consumer
        behaviour for sustainable development. International Journal of Consumer Studies,
        33, 168-174.

Schultz, H. (2011). Onward: how Starbucks fought for its life without losing its soul. New York:
       Rodale Press.

Sharma, P. (2010, February 6). Pollution Control in Recycling Industry [Web log]. Retrieved
     from http://saferenvironment.wordpress.com/2010/02/06/pollution-control-in-
     recycling-industry-is-most-essential/

Spitzer, N. (2009, July 30). Paper Cups No More [Web log]. Retrieved from
       http://www.sheknows.com/living/articles/810025/the-impact-of-disposable-
       coffee-cups-on-the-environment

Williams, K. (2011, May 19). Does it cost Starbucks more for the cup their coffee goes in, or
       the actual coffee itself? [Web log]. Retrieved from http://www.quora.com




    BU784 – Group 2 – Group Project            22

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Starbucks Reusable Cup Proposal

  • 1. STARBUCKS- A CUP EVOLUTION 1 BU784 – Group 2 – Group Project 1
  • 2. 2 STARBUCKS- A CUP EVOLUTION TABLE OF CONTENTS INTRODUCTION 3 OPPORTUNITIES FOR IMPROVEMENT 4 PART I: PROPOSED PLAN 6 PART II: STAKEHOLDERS ANALYSIS 10 EMPLOYEES 11 CUSTOMER SAFETY AND PRODUCT QUALITY 13 CUSTOMER SATISFACTION 14 ENVIRONMENT AND COMMUNITY 15 SHAREHOLDERS’ BENEFITS 17 UNRESOLVED ISSUES 18 CONCLUSION AND RECOMMENDATIONS 19 BIBLIOGRAPHY 21 BU784 – Group 2 – Group Project 2
  • 3. STARBUCKS- A CUP EVOLUTION 3 Starbucks - A Cup Evolution Introduction While it’s clear that Starbucks Coffee Company did not invent coffee, Starbucks did invent a new coffee drinking experience when it reshaped a simple cup of coffee into a luxury product (Clark, 2007). Gone are the days when regular or decaf are the only choices in coffee. Starbucks has successfully produced a personalized luxury coffee experience that has created a coffee-drinking phenomenon worldwide. Today, Starbucks is a public icon in the coffee world; and its success and visibility invite scrutiny, which has resulted in greater expectations from the public for Starbucks to become more socially and globally responsible (Fellner, 2008). While progress has been made on the ethical sourcing of its coffee beans, Starbucks still has large strides to make towards becoming a greener company. One of the obstacles Starbucks must address is the volume of waste generated by the paper beverage cups, a dilemma currently weighing down the company’s reputation as a socially responsible business. We believe that Starbucks can lessen its negative future impact on company stakeholders and the environment if the company supplements its usage of paper cups with the usage of reusable cups. Starbucks’ mission has always been to “inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” (Shultz, 2011). Given its mission, Starbucks sees itself as an integral part of each community in which it is located. It is not surprising that Corporate Social Responsibility (CSR), which is the notion that a corporation should enhance society and be accountable for its actions that affect society (D’Amato, Henderson, & Florence, 2009), would play an important role in the Starbucks business model. Starbucks currently has programs that are focused on ethical sourcing of coffee beans, recycling, energy efficiency, water conservation, green building, climate change, and community outreach (Schultz, 2011). In all of BU784 – Group 2 – Group Project 3
  • 4. 4 STARBUCKS- A CUP EVOLUTION these cases, Starbucks has made notable progress toward stated goals (Aston, 2012); however, while impressive progress has been made, one of the challenges that Starbucks has struggled to address is the volume of waste generated by paper beverage cups. Opportunities for Improvement: Currently, Starbucks’ paper cups cannot be recycled because there is no available infrastructure to recycle a paper cup that also contains plastic. The cost and complexity of removing the plastic lining from the paper cup is simply too high for most recycling plants to undertake (Lariviere, 2010). Unfortunately for Starbucks, a plastic lining is a necessary evil because it prevents the hot liquid from seeping into the seams of the paper (Aston, 2012). Because the paper cups cannot be recycled, customers have no other option than to throw them into the trash, amounting to an estimated three billion paper Starbucks cups disposed of in landfills each year worldwide (Kamenetz, 2010). When paper cups amass in landfills, the environmental impacts are substantial. Paper cups and plastic lids can take hundreds of years to decompose and during the decomposition process, the plastic lining in the cups can emit environmentally harmful greenhouse gases such as methane, carbon dioxide, and other carcinogenic chemicals (Bouchard, 2010). The production of Starbucks’ paper cups has also contributed to the deforestation of the planet – with over three billion paper cups being made for Starbucks consumers each year, over one million trees are being harvested in the process (Spitzer, 2009). Deforestation has negative consequences impacting Starbucks’ stakeholders but the most dramatic effect is a detriment to the environment, specifically the loss of habitat for millions of animal species (Lugo, Parrotta, & Brown, 1993). Recently, Starbucks has attempted to address the environmental impacts of its paper cups by holding multiple “Cup Summits”; a colloquium of Starbucks assembled scientists and BU784 – Group 2 – Group Project 4
  • 5. STARBUCKS- A CUP EVOLUTION 5 industry leaders positioned to develop recycling solutions (Kuruvilla, Norton, & Gee, 2012). One dilemma discussed, was the absence of recycling facilities capable of breaking down Starbucks’ used paper cups. As a result, Starbucks hatched a pilot project, now being developed in Chicago, requiring a chain of stores to facilitate the recycling of Starbucks’ plastic lined paper cups. The recycled cups will be shipped to a manufacturing facility in the state of Wisconsin, where the cups will be broken down and turned into napkins to be used in Starbucks stores (www.starbucks.com). Starbucks’ efforts to recycle its paper cup waste are commendable; however, we believe this is not the best solution to the problem. To start with, the recycling process can be extremely expensive, as it requires Starbucks to absorb the cost for the transportation of waste cups from various Starbucks stores to the recycling facility. If expanded, reproducing the recycling facilities funded by Starbucks on a world-scale will be very difficult to implement with the varying laws and regulations in each country. Additionally, the recycling process has negative environmental impacts; for example, toxic chemicals are released into the environment after they are used to remove colored dye from paper (Sharma, 2010). Starbucks acknowledges its responsibility to address and resolve the negative impacts that paper cups have, on not only the environment, but also on Starbucks stakeholders. Howard Shultz, Starbucks’ Chairman and CEO, recognizes that “no business can do well for its shareholders without first doing well by all the people its business touches” (Shultz, 2011). The key stakeholders impacted by measures to reduce the waste, amassed by Starbucks’ paper cups, include: Starbucks shareholders, employees, customers, product suppliers and manufacturers, and society, as affected by the environment. Shultz has requested that JANSaS Consulting Company analyze the issue of excessive waste, generated by disposable paper cups, with respect to various stakeholder interests and help BU784 – Group 2 – Group Project 5
  • 6. 6 STARBUCKS- A CUP EVOLUTION Starbucks identify creative solutions. In Part I of this report, we propose a solution that will significantly reduce waste and reliance on non-renewable resources while at the same time increase revenues for different lines of business, enhance loyalty, build on an already strong reputation and ultimately increase bottom line performance. In Part II, this report will address the benefits of our recommended solutions to company stakeholders and to the environment as these impacts pertain to the guiding principles outlined in the Starbucks mission statement. In Part III, our report will discuss unresolved issues that may affect company’s stakeholders. Part I: Creating a Cup Evolution JANSaS Consulting Company proposes to re-introduce a reusable to-go cup program at Starbucks. This program will be called the StarCup Loyalty Program. A JANSaS Consulting Company investigator interviewed Starbucks customers and employees to gauge opinions regarding a re-usable cup program. Shift manager, John, at the Piedmont, California Starbucks location, explained that numerous measures have been attempted by Starbucks to reduce waste associated with paper cups. He recounted that about six to seven years ago, Starbucks tried to encourage reusable to-go cups but the idea “didn’t take” with customers. In a separate email interview, a former Starbucks employee explained that Starbucks implemented its “Get Mugged” campaign in Noe Valley, California, in which the current ten-cent discount for bringing a reusable cup was increased to 35 cents. A ten-percent rise in the use of reusable cups was noted for a few days; however, the increase in reusable cups was short-lived and the Starbucks stores in the Noe Valley area returned to the original ten-cent discount (J. Hulbert, personal communication, October 10, 2012). Further, an anonymous customer at the Piedmont Starbucks validated John’s statements by explaining, “if Starbucks expects me to hold onto and return a dirty cup to be used again, I would want a price cut.” A price cut is exactly what Starbucks BU784 – Group 2 – Group Project 6
  • 7. STARBUCKS- A CUP EVOLUTION 7 customers received through the “Get Mugged” campaign and yet that price cut alone was not enough to transform consumer behavior. Based on our interviews and review of past programs, it is clear that shifting consumer behavior needs to be the key focus of the program. In our plan, we highlight four key strategies that will shift behavior away from paper cup usage to that of reusable cups. We propose embedding the StarCups into the existing loyalty program, building off of a current Starbucks strength. We recommend charging customers more for using paper cups, while at the same time, providing a free upgrade for those who adopt the StarCup Loyalty Program. We also propose leveraging social media applications to engage consumers at a grassroots level. If implemented successfully, the plan will result in greater customer loyalty, more highly engaged and satisfied employees, improved revenues in the form of additional lines of business, increased social marketing conversion rates, positive brand image associations, and increased customer retention. The plan will also likely garner support and dedication from environmental groups who will laud the reduced paper waste. Finally, this plan has the potential to create an entirely new marketplace for innovative, reusable cups to address unique customer needs. With these strategies, our firm believes a large number of consumers will make the change from using paper cups to using the StarCup. Strategy #1: Embed the StarCup into the existing loyalty program Starbucks can change consumer behavior by linking customer loyalty programs to the use of reusable cups. Starbucks already has a robust loyalty program and frequent customers use the loyalty cards extensively. However, we assert that Starbucks should take that program one step further in order to increase the customer base using reusable cups by linking the existing loyalty program directly to customer wants beyond an occasional free coffee. We recommend that BU784 – Group 2 – Group Project 7
  • 8. 8 STARBUCKS- A CUP EVOLUTION Starbucks introduce a new feature of its loyalty program that we call the StarCup Loyalty Program. Starbucks already sells reusable cups. All Starbucks needs to do is print a Quick Response (QR) code, a specialized barcode, on each cup and associate that cup with a customer, via an online customer account. Upon purchase of a StarCup customers will receive their next three beverage purchases for free, provided they continue to use their StarCup. Customers will also receive every tenth beverage, ordered with the StarCup, for free. When the customer makes a purchase, the QR code on the cup is scanned and the customer receives credit for using the StarCup. The customer’s credit card is debited at purchase, should the customer wish to link the StarCup to a debit account. Not only does this process streamline the transaction but additionally customers will accumulate loyalty points, in addition to free beverages, to be redeemed for discounted retail or food and beverage purchases. Strategy #2 - Charge the Customer Instead of just providing a discount for using a StarCup or other reusable cup, we suggest charging customers an additional amount for using a paper cup. Author and contributing editor at Fortune magazine, Marc Gunther, writes that research done in behavior economics highlights, “people tend to work harder to avoid losses [the 10-cent charge for a paper cup] than they do to pursue gains [the 10-cent discount for bringing in a mug]” (Gunther, 2012). Proof of this theory can be seen in Dublin, Ireland, in 2002, where Irish stores reduced the use of plastic bags by 90 percent after a fee equivalent to 10-cents per bag was added (Ritch, Brennan, & MacLeod, 2009). Simply, by charging more for using a paper cup instead of providing a discount for the reusable cup, Starbucks would likely experience a notable change in behavior. That said, JANSaS Consulting Company does not believe that this step, on its own, would be enough to change consumer behavior and it is vital that it is paired with the incentives noted in the other BU784 – Group 2 – Group Project 8
  • 9. STARBUCKS- A CUP EVOLUTION 9 parts of our plan. Strategy #3: Upgrade the Coffee Purchase for Free We believe that one of the best ways to incentivize customers to switch from using paper cups to using reusable cups is to give the customers something that they will instantly benefit from. If you allow the customers to upgrade for free when using a reusable cup, customers will experience instant gratification. Upgrading the customer’s cup one size, e.g. Short to Tall, Tall to Grande, and Grande to Venti, the cost of the additional coffee being used is minimal. According to the Seattle Times, Starbucks paid, on average, $1.43 for a pound of coffee (Allison, 2008). With prices this low for coffee, the cost of the size upgrade will easily be offset by the savings of not having to produce a paper cup (paper cup - $.08, sleeves - $.05, and cup lid $.07)(Williams, 2011). Strategy #4: Socialize it The fourth and final strategy is for Starbucks to leverage its already strong, industry- leading presence in social media by simply enabling customers to link their purchases at Starbucks with social media sites, such as Facebook. Customers can elect to share with their friends every time a purchase is made using the StarCup. Recent research on effective use of social networking sites suggests that that the ‘pull’ approach is much more successful than the ‘push’ approach (Diffley, Kearns, Bennett, & Kawalek, 2011). Instead of telling customers they should be environmentally friendly and use reusable cups or telling customers about Starbucks environmental initiatives, Starbucks should enable customers to easily broadcast the use of their StarCup. Leveraging social media will empower customers to proudly share their decision to use a reusable cup, while providing free marketing, which will help identify the brand as being BU784 – Group 2 – Group Project 9
  • 10. 1 STARBUCKS- A CUP EVOLUTION 0 environmentally friendly. Furthermore, social media are disproportionally used by younger customers (Brenner, 2012). Linking purchases to social media sites will increase the likelihood of customers becoming loyal to the Starbucks brand at an earlier age. Part II: Stakeholder Impacts To successfully implement this plan, it is vital that the plan firmly fits Starbucks’ strategy, mission, and values. To that end, further detail on the implementation of the plan will be discussed in the context of the six guiding principles of the Starbucks mission statement (Fellner, 2008). Six Guiding Principles – Starbucks: 1. To provide a great work environment and treat others with respect and dignity. 2. To embrace diversity as an essential component in the way we do business. 3. To apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4. To develop enthusiastically satisfied customers all of the time. 5. Contribute positively to our communities and our environment. 6. To recognize that profitability is essential to our future success. As noted previously, there are various key stakeholders that will be impacted by the implementation of the StarCup Loyalty Program. JANSaS Consulting Company understands the stakeholder interests to be as follows: 1) Starbucks employees have an interest in maintaining reasonable expectations of themselves by employers at work and in being fulfilled by their employment with Starbucks; 2) Starbucks customers have an interest in receiving the high quality product they have come to expect from Starbucks; 3) Starbucks suppliers and manufacturers have an interest in maintaining their contracts with Starbucks; 4) Starbucks shareholders have an interest in the short and long-term profitability of the company; 5) all of humanity and the biosphere, of which we are apart, have an interest in reducing the burden of BU784 – Group 2 – Group Project 10
  • 11. STARBUCKS- A CUP EVOLUTION 1 1 commerce on the planet. The impacts of the StarCup Loyalty Program on each of the key stakeholders are outlined as aligned to the Starbucks’ mission. Guiding Principles One and Two: Employee Satisfaction “To provide a great work environment and treat others with respect and dignity. To embrace diversity as an essential component in the way we do business.” The first two guiding principles of the Starbucks mission statement focus on the employee’s experience at Starbucks. For the StarCup Loyalty Program to be successful, it is vital that employees are brought into it. We recommend that the StarCup Loyalty Program be paired with an employee incentives program designed to help Starbucks employees achieve personal goals while working at Starbucks. As previously noted, a JANSaS Investigator corresponded via email with a former Starbucks employee, Julie Hurlbert, revealing a past Starbucks reusable cup program, “Get Mugged”, which failed largely due to the lack of employee incentive to continually promote the program (J. Hulbert, personal communication, October 10, 2012). Hurlbert explained that Starbucks baristas already have a lot that they are required to say at the register and must attempt to upsell one item to every customer. Hulbert states, “Telling customers about for-here ware or the cup discount falls off the radar” (J. Hulbert, personal communication, October 10, 2012). However, through the StarCup Loyalty Program, promoting a reusable cup program is no longer an additional thing to remember. The StarCup Loyalty Program provides an opportunity for baristas to promote and sell the StarCup as their required upsell. At JANSaS Consulting, we think that Hulbert had the right idea by trying to change consumer behaviors and encouraging employees to promote the effort. However, Hulbert’s program did not exhibit the proper follow-through, which can be easily created by incentivizing BU784 – Group 2 – Group Project 11
  • 12. 1 STARBUCKS- A CUP EVOLUTION 2 the baristas responsible for promotions. The StarCup Loyalty Program will be initiated along with barista incentive programs specifically designed to fit the needs of individual employees. The basic model of the incentives program involves a program in which a barista is required to sell a set number of StarCups within a specified time. If the goal is met, the employee receives a reward for hitting the sales mark. The length of the program is designed to extend the promotion of the StarCup at the counter, in an effort to strengthen the lasting impact that the program will have on consumers. The idea being that a customer who declines to purchase a StarCup initially may purchase a StarCup a month or so later when the customer sees others in the community taking advantage of the program. At Starbucks, efficiency is key. At peak hours of the day, lines can be long, and if there is anything that will inhibit the flow of customers receiving coffee, fewer purchases will be made. It is important to note that in most cases the StarCup Loyalty Program will not extend the interaction time at the register, and if used optimally by a consumer, the StarCup will expedite checkout. The StarCup has space for the barista to write the customers order on the side of the cup, in washable marker, so no extra time is expended trying to find another method of conveying the order to the barista. As addressed earlier, the StarCup barcode can be linked to an online account that can be preloaded with money. Therefore, if used properly, a customer simply needs to hand over their StarCup, dictate their order, and walk away while receipts are posted to their online account, further reducing paper waste. These timesavings can eliminate time fumbling for payment tender at the register and will also help increase line efficiency and help increase sales during busy times of the day. The incentives program linked to the StarCup Loyalty Program is an opportunity to motivate baristas toward promoting reusable cup usage without requiring additional work. The BU784 – Group 2 – Group Project 12
  • 13. STARBUCKS- A CUP EVOLUTION 1 3 StarCup Loyalty Program, in turn, will help Starbucks create a great working environment by taking into account the diverse needs of its employees and incorporating business success with employees’ personal success. Guiding Principle Three: Customer Safety and Product Quality “To apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee.” Starbucks ensures the highest standards in acquisition of the best, ethically sourced coffee beans, which are roasted to perfection. The StarCup Loyalty Program will have no impact on these already polished business practices; however, Starbucks’ ability to deliver the freshest coffee may be questioned by some based on the sanitation implications of implementing a reusable cup program. Starbucks guidelines already inhibit employees from touching the lids of reusable cups; a guideline aimed to avoid the cross contamination of virgin cups with germs from a reusable cup (J. Hulbert, personal communication, October 10, 2012). Customers will be encouraged to return with a clean StarCup, but in the event that a dirty cup is presented to the barista, the employee currently has facilities to empty and rinse a soiled cup (J. Hulbert, personal communication, October 10, 2012). The StarCup Loyalty Program will be implemented under current health safety guidelines but will include provisions by which an employee may choose whether or not to rinse and refill a soiled StarCup based on the time availability to clean an individual cup and based on the potential for cross-contamination from an extremely dirty or moldy cup. In the event that a barista refuses to refill a soiled StarCup, the patron will receive a regular paper cup at the original price, as the paper cup fee targets consumers opting out of the StarCup Loyalty Program. Therefore, the increased use of reusable cups at Starbucks, based on BU784 – Group 2 – Group Project 13
  • 14. 1 STARBUCKS- A CUP EVOLUTION 4 the success of the StarCup Loyalty Program, will not increase the risk of cross-contamination at Starbucks, maintaining the quality of the coffee and the safety of Starbucks patrons. Guiding Principle Four: Customer Satisfaction “To develop enthusiastically satisfied customers all of the time.” The StarCup Loyalty Program, while designed to reduce waste associated with paper cups, is specifically targeted toward engaging its customers for the long-term through financial incentives. Foremost, the StarCup Loyalty Program provides considerable price cuts to customers who choose to be earth conscious. With the upfront purchase of one of many StarCup choices, consumers will have access to an online account linked directly to their StarCup QR code, preloaded with three free drinks. Customers on-the-go can preload their StarCup account, which will enable a quick turnaround time at the register when they uses the StarCup. As stated in Part I, each beverage purchase made with the StarCup, after the initial complementary beverages, will be registered and applied toward a free tenth beverage with additional StarPoints accrued in the customer’s account to be applied toward the discounted purchase of retail items. Beyond the financial incentives, the StarCup Loyalty Program provides customers an avenue for social activism through popular social media. When StarCup purchases are made, customers must activate their QR code-linked account via the Internet, at which time, customers will be invited to link their account to the Facebook social media platform. Subsequently, when a Facebook-linked StarCup is scanned at the register; an automatic post will be made on the user’s Facebook wall stating that this person used his/her StarCup at Starbucks. The post will be linked to the Starbucks website, which will explain the StarCup Loyalty Program. In this way, just drinking coffee doubles as environmental activism. BU784 – Group 2 – Group Project 14
  • 15. STARBUCKS- A CUP EVOLUTION 1 5 Guiding Principle Five: Environmental Impact “To contribute positively to our communities and our environment.” The StarCup Loyalty Program has the potential through its links to social media to promote environmental awareness issues to a wide range of individuals on the Internet. Based on the ubiquitous distribution and frequent patronization of Starbucks, there is a good chance that many of the listed friends on the average Facebook users’ page will purchase a beverage at Starbucks everyday. If just one of these friends happens to use a StarCup linked to Facebook, a message about the Starbucks brand with a positive association with waste reduction is delivered to hundreds, if not thousands, of people who are much more likely to listen to a friend rather than a corporation. By encouraging large numbers of consumers to adopt the StarCup Loyalty Program, Starbucks will significantly reduce paper waste. The initial implementation of the ten-cent discount, provided to customers for bringing a reusable cup, resulted in the reduction of paper cup waste by 674,000 pounds in the United States and Canada (J. Hulbert, personal communication, October 10, 2012). The expected success of the StarCup Loyalty Program should result in numbers exponentially higher than past programs. The process to manufacture a paper cup requires harvesting and converting trees into wood chips, which are mashed with water into pulp. The pulp is pressed while dried to make paper, which is bleached, coated in polystyrene to retain heat inside the cup, and finally printed with a Starbucks logo (Alliance for Environmental Innovation, 2000). According to a study from the Environmental Defense Fund, the manufacturing and shipping of a single sixteen-ounce paper cup with a sleeve results in the emissions of 0.25 pounds of carbon dioxide, the disappearance 0.93ft 2 of natural habitat, and the BU784 – Group 2 – Group Project 15
  • 16. 1 STARBUCKS- A CUP EVOLUTION 6 loss of 0.6 pounds of plant and animal life (Alliance for Environmental Innovation, 2000). Further, Starbucks paper cups go into landfills, which release methane, a greenhouse gas with 23 times the heat-trapping power of carbon dioxide (Alliance for Environmental Innovation, 2000). Reusable cups are composed of various materials: plastic, ceramic, glass, aluminum, steel, etc. The use of a reusable cup at Starbucks has resulted in a significant reduction of landfill-fated waste. However, the energy to produce a reusable cup is significantly larger than the energy required to produce a paper cup: a factor of seventy separates the amount of energy required to produce a ceramic cup versus a paper cup (Hocking, 1994). For the use of a reusable cup to benefit the environment a ceramic cup must be used 39 times, a plastic cup must be used 17 times, and a glass bottle must be used 16 times before energy savings accrue (Hocking, 1994). Given that a reusable cup may be used approximately 1,000 times or more the environmental benefits of using reusable cups in terms of reduced energy use, air and water pollution, and solid waste can be tremendous (Alliance for Environmental Innovation, 2000). A Starbucks Company and Alliance for Environmental Innovation Research group, formed in 2000, gathered the following statistics related to the environmental benefits of using reusable serve ware in place of paper goods. In reference to the effect that the production and the continued use of ceramic cups have on water pollution and usage, air pollution, and solid waste it was noted that ceramic cups cut water usage by 64 percent, reduced the amount of air particulates by 86 percent and greenhouse gases by 29 percent, and reduced solid waste by 86 percent by weight (Alliance for Environmental Innovation, 2000). Functionally, Starbucks already produces and sells the StarCup, minus the specific QR barcode; thus, the initiation of the StarCup Loyalty Program will not negatively impact the environment. When the program ramps up and more StarCups need to be manufactured to keep up with demand, the statistics show that the production and the BU784 – Group 2 – Group Project 16
  • 17. STARBUCKS- A CUP EVOLUTION 1 7 continued use of the reusable cup is better for the environment than that of disposable paper cups. Guiding Principle Six: Shareholder Benefits “To recognize that profitability is essential to our future success.” Although the costs of adopting the StarCup Loyalty Program for Starbucks may appear high, we expect the costs associated with that program to be nominal. Additionally, the increased customer loyalty resulting from the program will offset any upfront expenditures, including: 1) the cost to add QR codes to currently manufactured travel cups; 2) the minimal cost of free beverages and upgrades; 3) the costs associated with the employee incentives program; and 4) the general cost associated with advertising a new product line. However, the fundamental strategy of the StarCup Loyalty Program to alter consumer behavior has the potential to significantly benefit Starbucks’ bottom line through increased loyalty, improved brand recognition, and free marketing on social networking sites. Additionally, even if a customer purchases a StarCup, at the average retail price of $12.95 per cup, and never brings it back, Starbucks still makes that initial sale and never has to give away any complementary beverages. In the worst-case scenario the StarCups do not sell, but due to the minimal program startup costs we think the benefits outweigh the risks. It is important to also note that Starbucks will make an increased profit from the fee imposed on paper cups purchased by the customers opting out of the StarCup Loyalty Program. While this increase in prices to customers refusing the StarCup could initially incite anger, we expect that the price increase will function similarly to the plastic bag programs described earlier. Should management or the Board have concerns about being viewed as greedy or “green- BU784 – Group 2 – Group Project 17
  • 18. 1 STARBUCKS- A CUP EVOLUTION 8 washing”, Starbucks could donate the revenue from these price increases to an environmental organization or promise to use the proceeds to further pursue green options within Starbucks (P. Melhus, personal communication, September 13, 2012). The company and its shareholders will benefit from the greater long-term profits promised through the StarCup Loyalty Program. When the StarCup Loyalty Program is successful, Starbucks has the ability to exponentially increase the amount of data collected about consumer behaviors. That data can then be used to inform the best marketing decisions, the most efficient product purchasing, and accurately targeted advertising. All of these outcomes from increased consumer intelligence will enable Starbucks to operate more efficiently and return greater value to shareholders. Part III: Unresolved issues While we have discussed the benefit of this program for many of the current stakeholders such as consumers, employees, shareholders and the environment, we have not discussed the impact on current paper cup manufacturers. It is our view that the transition would be gradual, enabling many paper cup manufacturers to adjust their business models and potentially come up with creative reusable StarCup solutions. There will be some vendors who are unable to adjust to Starbucks changed purchasing habits. Business with Starbucks’ current suppliers and manufacturers of reusable cups will remain the same. QR codes will need to be printed on the already manufactured reusable cups but the QR codes can be printed post-manufacturing. A possible unintended consequence of this StarCup Loyalty Program and specifically linking it to social networking sites is that it could be perceived as marketing an addictive substance to under age consumers. Because Starbucks loses some degree of control over the marketing of its products when social networking sites are utilized, it is possible that Starbucks BU784 – Group 2 – Group Project 18
  • 19. STARBUCKS- A CUP EVOLUTION 1 9 could encounter some bad press. It will also be important to longitudinally analyze whether the implementation of the StarCup Loyalty Program will continue to be the best Starbucks effort to reduce its negative environmental impact after taking into account future more environmentally friendly paper cups. A Starbucks representative explained that, “to accurately measure the true environmental impacts of any of our packaging requires an evaluation of the entire lifecycle”, which includes raw material extraction, manufacturing energy and resources, customer use and the eventual disposal at the “cups’ end of life” (J. Hulbert, personal communication, October 10, 2012). If the environmental impact of producing a StarCup does not offset the negative impact of disposing of future more environmentally friendly cups a year, then Starbucks may want to reconsider the StarCup Loyalty Program. Part IV: Conclusions and Recommendations Starbucks has a strong reputation for being socially responsible. However, even after years of attention, Starbucks continues to be a significant contributor of paper waste. The StarCup Loyalty Program resolves the issue of paper cup waste by establishing the habitual use of the StarCup. JANSaS Consulting Company proposes that StarCup Loyalty Program strategies include linking the use of reusable cups to the current loyalty program and to social networking sites, providing free products, and imposing a fee on those who use paper cups. The StarCup Loyalty Program will change consumer behavior resulting in the reduction of paper cup use over time. The program will also increase employee engagement, create new lines of business, provide better consumer intelligence, solidify customer loyalty, enhance company reputation, and benefit the environment. The program achieves all of these aims with minimal cost and risk to the organization. Nearly all Starbucks’ stakeholders will ultimately benefit from the BU784 – Group 2 – Group Project 19
  • 20. 2 STARBUCKS- A CUP EVOLUTION 0 implementation of this program and it directly aligns with Starbucks’ six guiding principles. To quote former Interface Incorporated CEO and pioneer of sustainable business practices, Ray Anderson, Starbucks will move much further down the road of “doing well by doing good” if it adopts the StarCup Loyalty Program (Achbar & Abbot, 2003). References Achbar, M. (Producer), & Abbot, J. (Director). (2003) The Corporation [Motion Picture]. Canada: Zeitgeist Films. BU784 – Group 2 – Group Project 20
  • 21. STARBUCKS- A CUP EVOLUTION 2 1 Alliance for Environmental Innovation. (2000). Report of the Starbucks Coffee Company/ Alliance for Environmental Innovation Joint Task Force [Project Report]. Retrieved from http://business.edf.org/sites/business.edf.org/files/starbucks-report-april2000.pdf Allison, M. (2008, May 14). Starbucks paid more for coffee in 2007 [Web log]. Retrieved from http://seattletimes.com/html/businesstechnology/2004413737_retailreportdigeco ffee15.html Aston, A. (2012) Starbucks’ green scorecard: A few full cups, two half empty [Web blog]. Retrieved from http://www.adamaston.com/?p=882 Bouchard, M. (2010, May 17). Moving Away from Disposable Paper Cups [Web log]. Retrieved from http://www.fourgreensteps.com/infozone/sustainability/moving- away-from-disposable-paper-cups Brenner, J. (2012, November 13). Pew Internet: Social Networking (full detail) [Web log]. Retrieved from http://www.pewinternet.org/Commentary/2012/March/Pew-Internet-Social- Networking-full-detail.aspx Clark, T. (2007). Starbucked: a double tall tale of caffeine, commerce, and culture. New York: Little, Brown. D'Amato, A., Henderson, S., & Florence, S. (2009). Introduction. Corporate Social Responsibility & Sustainable Business: A Guide To Their Leadership Tasks & Functions, 1-2. Recieved from http://0web.ebscohost.com.opac.sfsu.edu/ehost/pdfviewer/pdfviewer? sid=819964f5-15d2-4313-8b61-a178bb387b86%40sessionmgr110&vid=4&hid=111 Diffley, S., Kearns, J., Bennett, W., & Kawalek, P. (2011). Consumer Behaviour in Social Networking Sites: Implications for Marketers. Irish Journal of Management, 30, 47. Fellner, K. (2008). Wrestling with Starbucks: conscience, capital, cappuccino. New Brunswick, N.J.: Rutgers University Press. Gunther, M. (2012, May 18). Behavioral Economics at Starbucks [Web log]. Retrieved from http://www.marcgunther.com/behavioral-economics-at-starbucks/#more-11398 Hocking, M.B. (1994). Reusable and Disposable Cups: An Energy-Based Evaluation. Environmental Management Vol. 18, No. 6, pp. 894. Retrieved from http://www.springerlink.com/content/c275588280002wp8/fulltext.pdf?MUD=MP Kamenetz, A. (2010, October 20). The Stabucks Cup Dilemma [Web log]. Retrieved from http://operationsroom.wordpress.com/2010/11/16/why-cant- BU784 – Group 2 – Group Project 21
  • 22. 2 STARBUCKS- A CUP EVOLUTION 2 you-recycle-a-starbucks-cup/ Kuruvilla, B., Norton, S., & Gee, M. (2012). Greening the Supply Chain- Trends in Corporate America. International Journal of Business and Management Studies, 4, 1-10. Lariviere, M. (2012, November 16). Why can’t you recycle a Starbucks cup? [Web log]. Retrieved from http://operationsroom.wordpress.com/2010/11/16/why-cant- you-recycle-a-starbucks-cup/ Lugo, A., Parrotta, J., & Brown, S. (1993). Loss in Species Caused by Tropical Deforestation and Their Recovery through Management. AMBIO, 22, 106-109. Ritch, E., Brennan, C., & MacLeod, C. (2009). Plastic bag politics: modifying consumer behaviour for sustainable development. International Journal of Consumer Studies, 33, 168-174. Schultz, H. (2011). Onward: how Starbucks fought for its life without losing its soul. New York: Rodale Press. Sharma, P. (2010, February 6). Pollution Control in Recycling Industry [Web log]. Retrieved from http://saferenvironment.wordpress.com/2010/02/06/pollution-control-in- recycling-industry-is-most-essential/ Spitzer, N. (2009, July 30). Paper Cups No More [Web log]. Retrieved from http://www.sheknows.com/living/articles/810025/the-impact-of-disposable- coffee-cups-on-the-environment Williams, K. (2011, May 19). Does it cost Starbucks more for the cup their coffee goes in, or the actual coffee itself? [Web log]. Retrieved from http://www.quora.com BU784 – Group 2 – Group Project 22