Is Seattle's global coffee darling Star-chucking it away?

Brand scoring mechanisms such as YouGov BrandIndex put pure and simple are things of beauty. They go a long way to help undercover the perceived value of brands via measuring word of mouth and public perception and help expose the impact bad decision making can have on a brands long term value. Case in point this week is Starbucks UK and its declining brand value following… well let’s just say some interesting tax discrepancies.

http://www.bbc.co.uk/news/business-21219823

Many found it miraculous that a company can make $4.8 billion in sales in 14 years in the UK market and yet only pay $13.8 million in tax? Whereas The Brand Avenger does not earn a wage for keeping the world safe from bad ass brand baddies or fending off questionable marketing content I am quite sure the average % tax rate for those citizens who do work isn’t 0.002%! The revelation was no doubt shocking but the big question was if this type of injustice would be lost on the coffee-drinking customer who for so long has had a strong, loyal and loving relationship with Starbucks?

Well as it turns out that answer to that question might depend on which part of the world you live in. If we look at the UK market for example it is clear Starbuck’s tax avoidance is beginning to have some sort of impact on brand value. Marketing Week covers the impact on Starbucks in a great piece on brand auditing of Starbucks in the UK. There are some key themes in the content of this article that clearly demonstrate the Starbucks UK brand has suffered; take for example Starbucks perception measures via BrandIndex been below the levels where they were several years ago.

http://www.marketingweek.co.uk/news/brand-audit-starbucks/4006280.article

Whereas The Brand Avenger would agree that Starbucks has become somewhat of a scapegoat in the tax scandal due to its prominent presence on the high street (especially when compared to other implicated online companies) this was always going to be a complication the company risked taking when it decided to act out this controversial tax strategy. Starbucks has paid the price for unethical business practice through diminishing brand value, which as Marketing Week suggests is taking longer to fix than it did to break. One might even argue that the prolonged bout of discounting Starbucks are currently offering on products such as the Monday morning latte isn’t a viable long term tactic to support a strong and sound brand strategy moving forward. Whereas it may take some pressure of the bottom line in the short term it also gives Starbucks competitors a vital opportunity to build their own brands.

So how have the competitors reacted? In order to determine this we should take a look at one of the other big coffee chains in the UK, notably Costa. You can see from the BrandIndex scoring in the Marketing Week article that Costa has enjoyed a steadily inclining brand perception whilst the Starbucks coffee bean empire has faltered. However is it accurate to suggest that Costa coffee has only benefited due to the tax avoidance issues Starbuck’s has experienced? The Brand Avenger feels this is unfair especially when you consider some of the other measures Costa has taken over the last 6 months to grow the brand.

http://www.marketingmagazine.co.uk/news/rss/1163715/Costa-says-Starbucks-taken-knock/

The fact that Costa has become one of the only high street coffee chains to begin to actively embrace app technology to encourage consumers engagement in its brand as well as investing in a television advertising to create brand awareness is evidence that Costa has benefited from an integrated contact strategy. This combined with other factors now leaves them with a prime opportunity to build a strong brand perception off the back of the Starbucks con-tax-versey (I crack myself up). However the coffee chain will also know they will need to be careful before they decide to write Starbucks off and will continue to look over its shoulders as they know the big green lady from Seattle won’t just disappear into the night.

So what helps Starbucks maintain such a strong position even in the face of adversity? Well for one thing the negative brand perception in the UK isn’t an issue shared across its global markets, especially in its home market of the USA. And if Starbucks begins to build some momentum and take some tips from its US facing operation it could have its UK consumers swooning once again in no time.

One may wonder how Starbucks has gotten itself in this state of confused cross-cultural identity? Can it be possible for Starbucks to enjoy unparalleled growth and successes in the US market while at the same time suffer for its sins in the UK? It is of course no surprise that even in today’s information age where knowledge spreads in a matter of minutes it is still possible for this to happen. Starbucks appear to have got it right in the US through carefully managing sticky PR situations and adapting a strategy of winning its customers loyalty via reward mechanisms as opposed to discounting. This is especially important when you consider Starbucks US appear to be prospering in a market which some have suggested is in overall decline.

http://www.huffingtonpost.com/2013/03/07/starbucks-brand-loyalty_n_2830372.html

These factors combined with Starbucks worldwide results maybe why Howard Schultz was all smiles at the Annual Meeting of Shareholders in Seattle at March. Looking closely at the results you could say there was plenty for him and his Starbucks family in the US to smile about. Highlights include but of course are not restricted to

Ø $13.3 billion record revenues

Ø 38% total shareholder return

Ø 14% revenue growth

http://news.starbucks.com/article_display.cfm?article_id=763

There is no doubt Starbucks has paid a hefty price for its dirty tax tactics in the UK. However, fortunately for a global brand the size of Starbucks there are ample opportunities for the brand to make mistakes, learn from them and recover the lost brand equity then there would be for its smaller, local competitors had the counterparts made similar mistakes. It is also clear Starbucks now more than ever need to apply the tools, techniques and mechanics that make its brand so strong in the US to the UK market to strengthen its position. If they can do this it should ensure they continue to gain advantage over competitors and continue to make the big Star bucks as opposed to becoming Grade A Star muck.