Business Strategy, Marketing, Innovation, Technology, New Product Management

Starbucks New Product Development

Apr 26th, 2007 | By Gene A. Wright | Category: General, New Product Management

Suggested by Marc R, an MSOE,MSEM student is an article from MSN and NBC on Starbuck’s new product development. Specifically, the development of Dulce De Leche Latte. The development took over one year. The link includes a video

The article “Birth of a New Coffee Drink” starts out “Starbucks’ newest beverage offering isn’t just a creamy, caffeinated confection. At 570 calories for a Venti with whipped cream, the Dulce De Leche Latte is a breakfast in a cup — and a darned tasty one at that.”

So, did you think that it would take a year? What struck you about the process? When will the growth subside?

Gene A. Wright

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  1. Took a year to develop and it’ll be gone in the Fall. But, as they stated, they’re in the experience business. They HAVE to keep changing (for the better) the Starbuck’s experience. Case in point. Paul McCartney signed a one year exclusive record distribution deal with Starbucks. So when his next album is released, you’ll be able to enjoy you’re De Leche Latte while humming along – only at Starbucks.

    They may need to offer a Starbuck’s treadmill if they keep inventing drinks in excess of 500 calories.

  2. The product they came up with it not that ground breaking, as it is seems to be very similar to their other offerings.
    I agree though that they are constantly challenged to “change it up” or they will lose customers. I personally drink plain, black Starbucks because
    I simply like the taste of it. I choose it because everywhere I look, on convenient corners, I find a Starbucks.

  3. A year in development seems like a long time for one coffee drink. But I agree with the comments above. It isn’t just about the coffee. At a recent stop at a local Starbucks, there were young moms, teenagers and a book club meeting in progress. BTW I was there to meet with a study group member. Their experience and product offerings obviously have a wide appeal.

  4. Seems like every customer in line ahead of me has their own recipe…”I’d like a carmel machiatto…but put the carmel on the bottom, heavy on the whipped cream and make it with luke warm water – oh – I need two sugars, world peace, and could you shake it twice and double cup it.”

    Maybe they need to log every variety the public is buying and look for patterns…maybe the next great recipe is in line at starbucks.

  5. I was surprised to learn that it took that long to introduce a new (if you can call it that) beverage. As for the 570 calories, I would call that more than breakfast. I wonder what the fat content is. That information was left out for a reason.

    As for the process, in order to stay ahead of the curve, they must have a process that identifies new product flavors. After all, competition if heavy.

    I think the gorwth will subside when the next ‘new’ beverage is intorduced. Life a fad, it won’t be the flavor of the day for long.

  6. I am surprise that it takes a year to develop a new drink that won’t be around all that long. The key to continued growth is ongoing innovation and speed to market. Starbucks seems to be good at the innovation part, but may need to make improvements on speed to market.

  7. When you want to sell a cup of coffee for $4/it needs lots of work before you introduce to the market. I feel it is just media hype. Yes, it must be a great experience for many people to go to Starbucks and have a cup of coffee. I believe in making my coffee at home and have the coffee for one whole month at the cost of Starbuck’s two cups of coffee.If I feel like having Starbucks experience at home, I might play music—music of my choice. After reading my comment, it is easy for anyone to figure it out that I am in charge of Money Deaprment somewhere—————–

  8. I have never been a fan of Starbucks coffee. It is bitter and I just don’t care for it. But I like the sweet stuff they add to it and that is how they attract so many youthful customers. My daughter has to have the carmel filled coffee thing what ever they call it.

    I am however a fan of their marketing and focus on brand. A year in the making of this new product is a long time for a cup of Joe, but they go to great efforts not to have products that flop…it hurts their brand…so they spend a lot of time and money researching its potential success and acceptance by consumers.

    I think the growth will subside. Its inevitable…at some point you hit saturation…maybe in the US first and then elsewhere, but elsewhere is a big place. The success of Starbucks invites competition and that puts the squeeze on the coffee bean $$.

    I prefer Caribou for the coffee and the atmosphere.

  9. I agree with RJD. The first place I literally had a Starbucks was in China. Never really been into $4 cups of coffee. Dulce is a latin drink, is Starbucks targeting a different demographic with this drink or am I missing something? Dulce does not seem that ground breaking to me, and I guess I am not the person Starbucks is targeting. Their growth plan is pretty aggressive though, tripling the number of stores around the world in 5 years? I question Starbuck’s ability to sustain that growth. Either way, I have never really been a customer of Starbucks and I can’t see that ever changing. The whole “experience” of Starbucks just doesn’t twist my piston.

  10. From their website…its a Latin America’s traditional milk caramel that is blended with coffee for a truly unique Latte and Frappuccino® blended coffee.

  11. Launching Starbucks Dulce De Leche Latte took more than a year? That’s crazy. It’s coffee. I’ve never gone to Starbucks because of one specific drink. Perhaps, I’m in the minority. Why is it leaving in 6 months. Our coffee is now as trendy as our fashion?

  12. I bet if someone did the research, it takes McDonalds about a year to roll out a new product too.
    Just the planning, advertising, exact recipe, etc alone logistically takes a long time.

  13. Having completed a little bit of research on Starbucks earlier last year(!), it’s not too surprising that they took a year to perfect the taste and enter the market with this particular product. McDonalds does in fact take as long or longer on some products by also taking part in extensive internal tasting programs. With Starbucks, maybe they spent a year confirming that the Latin American population is in fact one of the most rapidly growing segments in the U.S, Starbucks largest market. It is an experience but at somepoint, I have to think even the most die-hard customers have to ask themselves, “why am I spending $4 on a cup of coffee?”

    I prefer their Tazo Tea.

  14. dmf1972,

    Do you purchase the Tazo Tea at the store or do you opt to buy it at Starbucks (with the huge “convenient” markup)?

  15. I am in the process of “experience” at my place of employment. The research all leads back to customer loyalty. If Americans are willing to pay $4 for coffee, they can take their time to introduce new products with the loyalty metrics they produce.

  16. Like dmfl972 Starbucks was the topic of a research effort last year for me as well. I find the concept of a 1-year development cycle ridiculous. In my view Starbucks could serve Folgers in their cup and people would still buy it. Starbucks is not about the coffee – the business has thrived due to the experience. Unfortunately business isn’t thriving anymore (before people get argumentative look at the numbers). Quit a bit of market cap lost in the last 12 months.

    Anyway, it looks like Starbucks will have to compete like the rest of us in the world – high quality products, great service and ongoing innovation. Hey, how many drive through windows does Starbucks have now???

  17. A year to develop a coffee drink? That seems a little long to me. I wonder what kind of tests they were doing? Its kind of hard to argue their techniques though considering the company’s Revenue. And, since it has 570 calories I’m sure it tastes very good. But I don’t understand how someone can spend $4.50 and consume 570 calories for a coffee before before 8:00am.

  18. I buy at Pick n Save, comparable price to the other brands. Never in Starbucks, I’m somewhat bright, not too bright, but somewhat. Must be the end of the semester.

    And kudos to JAB on his comments. Of course I’m biased though. Their financial performance has sufferred as of late. Not sure what’s better, the expensive coffee or the $2 slice of bread!

  19. One year for a drink development definately doesn’t seem like world class business. I mean, add a shot of expresso and some other ingredients. Since they are in the eatertainment business, it is hard to say where they should be focusing their efforts. Drinks, or everything else they have their hands into.

  20. I too am surprised that it takes a year to develop a new drink that won’t be around all that long. We can introduce a new Faucet in that amount of time and it could consist of 70 manufactured or purchased parts. One should not be too critical of the percieved long time for new product introduction without knowing what their competition’s average time to market is.

    There is a common measurement in industry for New Products called the Vitality index. It measures the amount of sales (as a % of the total) you generate each year that comes from product introduced in the prior 3 years. Good innovative companies run over 30%. I wonder what Starbucks number is?

  21. I am sure the product was designed in a day, but the marketing launch took a year !

    Innovation is key for Starbucks so they need to bring out more drinks to sell to existing customers.

    To justify the price tag, this had best be one satisfying coffee experience !

  22. For the number of stores it will be offered in, I think a years research is reasonable before you offer a product. Just to get it in the stores before a single cup is sold your looking at millions of dollars being spent. The research is expensive but it is a lot cheaper than putting a lot of product out their that isn’t going to sell. I think it is the best way to determine whether or not a product stands a chance. If it doesn’t succeed in test markets it shouldn’t be offered.

  23. I agree with BT’s comments in #21. I am sure the development of the “taste” is not what took the year. The year probably encompasses everything from “gee we need a new drink”, to market testing, to full national/international release. Marketing campaign generation, pricing and initial product role out, I would guess is what consumed the better part of the year. As for the coffee drink in the article it is still on their menu today and my guess if it goes away it will be back, I frequently stop at Starbucks on my way to work and all winter it seemed like every other person was ordering a dolce latte (and the Starbucks I stop at usually has a long line at 6 am). Lastly, Starbucks must have been listening to the calorie and fat comments since last night I saw on the news they will be replacing 2% milk for whole milk for the “default” drink; they said this was in response to the demand for low/nonfat drink orders worldwide. I guess now it won’t be as bad when they screw up my double tall nonfat no-whip one pump mocha.

  24. I cannot believe that it took Starbucks a year to develop the Dulce de Leche drink. I wonder if all of their drinks take that long to perfect. If you watch the clerk at Starbucks make the drink, it’s typically no more than steamed milk, a few shots of espresso, and some syrup for flavor. I would think it has to be the actual syrup that took a year to create then deciding whether to add ginger, caramel, or cinnamon on top of the whipped cream. A lot of people who have responded to this seem surprised by the fat content and calories in this drink. Starbucks offers different low fat options. You have your choice between whole, skim or soy milk. The syrup for many of the drinks has the regular sugar option, or the sugar-free option. When you get an Venti (20 oz.) Dulce de Leche Latte with skim milk and no whipped cream, there are only 390 calories and 0 grams of fat, but without a sugar-free syrup, there are 70 grams of sugar, ( Compare this with a Pepsi, 20 oz. packs in 250 calories and 70 grams of sugar, (

    Ultimately, a Starbucks coffee isn’t much worse than a regualr soda, and at least you are getting milk without carbonation. Most people only have one Starbucks coffee a day, where as many people have several sodas a day becuase they are so easilly accessible. As you can probably tell, I go to Starbucks on a regular basis. I feel that they are doing an excellent job in all areas, they have positioned themselves in every major city in multiple locations, they have a large loyal customer base, they sell products such as groud coffee for your coffee maker at home in several stores, and they have a large range of options on their menu.

  25. I agree that a year seems like a long time to develop a ‘new’ coffee drink. What surprised me more was the process – or at least how it was portrayed in the video. Just a few women out strolling the grocery stores looking for new foods to incorporate into a drink. I doubt that it really happens like that – although, if it does, I think I’d like that job. It is obvious that Starbucks had a certain consumer in mind with this Latin American drink, I can only assume that new products start in a boardroom after an in-depth market analysis and the actual creation of the drink is only a small part of the process.

  26. I think a year to develop a new product is really reasonable when you take into account all the necessary stages of the new product development process. Starbucks is all about the customer experience and they need to continue to develop new products and “experiences” to keep people interested. I think many people get bored pretty easily so it’s smart that they develop new flavors for their existing customers and to potentially bring in new customers that may be intruiged my a new “foo-foo” drink. :)

  27. I would have thought that a company as large and as successful as Starbucks would have been quicker to market than a year. I wonder how long it will take for another company to enter the marketplace that is much faster with their new product releases and as good as Starbucks with their marketing strategy.

  28. I think for me it seems slow getting to market one drink per year however it is the branding this case what has matter the most. Consumers are really not looking into more innovative drinks. But 570 Calories definitely rings a bell in my mind, especially with recently healthcare policies getting so strict, more awareness around the health sooner or later it would hit even the target market that Starbuck is serving to, unless they learn this quickly and change their game plan and become more cautious towards heath.

  29. A year in development probably isn’t that bad, especially if it is considered to be a short-run product. You have to recognize that the R&D team at Starbucks is probably working on the next 3-4 similar product offerings at the same time, as well as developing alternatives to this one, and various iterations of this one leading up to the final release. It takes time.

    Focus groups were used to provide feedback, and one would imagine that several of them were used in multiple regions of the country and the world. These different areas may have different taste preferences which need to be accounted for. So you are looking at a LOT of data to analyze and draw conclusions from. The article did not say if Starbucks has different variants for different markets for this flavor – if so, then there is more time spent on developing those. They can then leverage the marketing campaign for all of those markets, even if the poduct is slightly different.

    570 calories? Ay Caramba! One hopes that consumers are aware of that – it sounds like a heart attack in the making. I think I’ll stick with Guinness – it’s got less than 100 (less than Miller Lite).

  30. It is interesting to know about how long it takes Starbucks to develop their new product; one-year development did not surprise me, what impresses me is how Starbucks developed a market need for a new product and the smart idea of “Breakfast in a Cup”.
    I think Starbucks innovation is not limited to satisfying different tastes, levels or generations, they do not need people to think about different place of coffee.

  31. I wasn’t surprised that it took a year to develop. Starbuck’s track record with introduction of new drinks or flavors has been astoundingly successful. With each success, the expectations increase. To introduce a new drink without a high degree of certainty for success would be risky.

    I like their process. I suspect it’ll get more challenging for them though. As their brand recognition continues to increase and as the new successful drinks become more popular, customer expectations rise. Finding unbiased opinions becomes more difficult.

    When their growth will slow down is anybody’s guess. The competition is increasing and some are following business strategies similar to those that catapulted Starbuck’s. I suspect that their continued success will be in terms of new product offerings to keep customers from having a reason to try the place next door. Staying flexible on “make to order” philosophy will help too.

  32. One year for making a coffee drink? It takes Apple one/two years to create the next version of Ipod. How much fine tuning can there be for 570 calorie coffee? Plus, this coffee drink is not all that different from other coffee drinks they make. I think focus groups are important for anything new, especially if you want to get it right.

    I think coffee is here to stay but there appears to be a lot of people that will refuse to go to a Starbucks just like they are against Walmart. Onless people’s diets change Starbucks will continue to grow, more internationally than locally though.

  33. I was not really amazed at the process of coming up with the next great flavor, nor the time it takes. If it was easy to come up with a new flavor someone else would have done it. Starbucks needs to keep coming up with new ideas to keep things fresh. Coffee drinking has become a style for a lot of people. I think it is here to stay, but will Starbucks’ name stay on top. Competition gets tougher and tougher each year, time will only tell if Starbucks can stay fresh with new ideas and stay on top.

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