Friday, January 18, 2013
HOW STARBUCKS WILL MAKE MILLIONS OFF ITS NEW, REUSABLE CUP
Starbucks‘ recent introduction of a reusable cup has already gleaned the company a grande dose of positive publicity and brisk sales. But the advantages of this new program are just getting rolling.
Besides winning Starbucks points with some environmentally minded consumers and possibly keeping tons of paper waste out of landfills, the program offers Starbucks a number of opportunities to grow sales:
Sell cups. The cups cost $1. When customers lose them, accidentally sit on and crush them, or forget to bring them back, that’s another $1. When they wear out — reports are they’re good for maybe a month if you don’t run them through the dishwasher — that’s another $1.
How many bucks might that add up to? Many stores reported they were selling out of the cups, and a YouGov Omnibus snap poll taken at the beginning of the month showed 28 percent of Americans had purchased or planned to purchase one. There are 233 million Americans old enough to drink coffee, so that’s about $65 million dollars if each of those consumers only buys a reusable cup once. Given how well we all remember to bring our reusable grocery bags back to the store, Starbucks could easily see repeat sales of the cup and even more revenue.
Save on supplies & trash-hauling. Instead of having to provide customers with a free, disposable cup it must purchase, Starbucks now gets to sell customers a semi-permanent cup. Less trash may also lower trash-removal charges at stores. Way to cut the overhead!
Free advertising. This initiative will unleash millions of Starbucks logos that customers will see in their cars and kitchens. Talk about product placement! No billboard could do as good a job of being near the customer.
Drive repeat business. Customers save 10 cents by refilling their reusable cup, so they can earn back the price of the cup if they keep coming back to Starbucks. And they’ve got that visual reminder sitting in the car of where they should go for coffee. Can you say “drives customer loyalty“?
Unlock Starbucks card money. Here’s how pre-loaded gift cards work in terms of the balance sheet: Starbucks doesn’t report the money loaded onto them as income until someone comes in and orders a latte with their card. Until then, it’s considered deferred revenue. Last year, under $66 million of the $570 million that was loaded onto Starbucks cards was redeemed, leaving more than $500 million of potential revenue unclaimed. If the reusable cups can bring more repeat visits from card-holding customers, Starbucks could claim more of its card revenue sooner.
The program’s environmental benefit is a question mark, as the cups’ #5 plastic is not easy to recycle — many curbside recycling programs won’t accept it. Maybe Starbucks will encourage more outlets to accept it, which would be a real plus. Knowing Starbucks, they’ll improve the program as they go, so a switch to a more easily recyclable material is also a future possibility.
But even if not, expect this program to inspire a slew of competitors, once Dunkin’ Donuts and other competitors get a look at how going “green” is helping Starbucks rake in the other kind of green: money. When its second-quarter results come out (the company’s fiscal year ends Sept. 30), we’ll get a closer look at how the reusable-cup program might be boosting Starbucks’ revenue.