• University of Malaysia Sabah

• SOCIAL SCI AS10103

Case Study 2: Starbucks Philippines: Brewing a Filipino-American Experience Monali Hota and David Newlands Why the Philippines The Starbucks group is a premium coffee roaster and retailer. While travelling in Italy in 1983, Starbucks’ marketing director, Howard Shultz, visited a coffee house. Until this trip, the business model had been to sell roasting and grinding machines for home use. Shultz recognized people want coffee on the go and understood that Starbuck’s future lay in retailing gourmet coffee by the cup but with the unique blend of Italian elegance and American informality. Howard Schultz became president of Starbucks in 1987. He set about by recreating the brand’s image. The aim thereafter was rapid growth. Starting with 17 coffee shops in Seattle in 1987, the group has grown to over 21,000 outlets in 60 plus countries today. To achieve this internationalization, the company had to start to expand outside of the US. Their market penetration in North America had become significant. Faced with diminishing new market opportunities, the group decided to expand into the Asia-Pacific region. Starbucks’ former International President, Howard Behar, already had overseen the introduction of the brand in Japan and Singapore. Starbucks Coffee International opened in Philippines with a local licensee Rustan Coffee Corporation. M. Hota (*) Department of Marketing, Institut d’Economie Scientifique Et de Gestion (IESEG) School of Management, Puteaux, France e-mail: [email protected] D. Newlands Department of Operations Management, IESEG School of Management, Puteaux, France # Springer International Publishing Switzerland 2017 S.K. Roy et al. (eds.), Services Marketing Cases in Emerging Markets, DOI 10.1007/978-3-319-32970-3_3 17 This study source was downloaded by 100000874405579 from CourseHero.com on 11-23-2023 00:23:14 GMT Starbucks’s Entry into the Philippines The partnership of Rustan with Starbucks began in 1996 when the chair of Rustan Group of Companies Ambassador Bienvenido Tantoco and his grandsons Donnie Tantoco and Anton Huang were visiting Seattle. They asked for a meeting with Howard Behar, then president of the Starbucks Coffee North America and Starbucks Coffee International. Behar had introduced the Starbucks brand to Japan and Singapore that year. Howard then took the much criticized decision to set-up Starbucks franchises in the Philippines as the Tantocos convinced him of their impressive business background, especially in the retail sector. His colleagues considered the market to have only a limited wealthy segment. A significant proportion of the population lived on less than half the price of a coffee per day. Despite the doubts, he was convinced that Philippines should be the third Pacific region country where Starbucks was to expand into. In 1996, it seemed counter intuitive, risky and outside the ‘premium brand’ image to set up in a country where less than half the population was part of the upper middle an