Starbucks’ Distribution Channel

Although coffee is one of the highest in volume of global trading, the coffee market is very fragmented. This has led to a consolidation process where coffee is handed off from farmer to collector, collector to miller, miller to exporter or broker, and finally to importer. The importer or broker then sells the coffee to large mass-market coffee roasters and producers.

Starbucks however, wishes to maintain the quality of its coffee by working back up the supply chain to the actual growers. In doing so the company works on attaining expertise and good relationships with the coffee growers themselves. As mentioned earlier this has resulted in the company attaining its supplies from the actual coffee growers, and thus, effectively bypassing much of the middle market and saving a sufficient amount of funds.

Starbucks uses multiple channels (hybrid) of distribution for its products. This means the company utilizes more than one distribution design. Firstly Starbucks sells its products through a direct retail system in company-owned stores. They import and process coffee and then sell it under their own brand name in their own stores. However, Starbucks also sells its products in supermarkets and shopping centers. Additionally Starbucks has distribution agreements with office coffee suppliers, hotels, and airlines. Using multiple distribution channels allows the company to reach a wider market, however, while doing so Starbucks needs to careful with this approach due to the potential for channel conflict.

In order to properly evaluate the possibility of bringing Starbucks to Finland, I’ve made the assumption that Starbucks would be expanding simultaneously to all of the Nordic countries. I had to make this assumption in order to be able to logically and thoroughly consider transportation and supply costs. Since Finland is located on the outskirts of Europe, Starbucks would most likely never consider entering the Finnish market alone. It would be much more logical for Starbucks to enter all of the Nordic countries at the same time as a joint collaboration. This is however very unlikely taking into consideration that Starbucks has so far only entered new markets one country at a time. The reason why I feel that simultaneously entering Scandinavia would be a smart idea is because it would then be possible to situate a warehouse and the top headquarters in one of the Nordic countries, therefore reducing costs considerably.

Just a quick thought on the practicalities of bringing my favorite coffee brand to Finland :) 

Cheers, Kosti