Bloomberg News

Starbucks to Air U.K. Latte Ad After Mostly Shunning TV

March 12, 2012

Starbucks Corp. (SBUX) will air television ads in the U.K., reaching people in a way the world’s largest coffee-shop operator has mostly shunned in the past.

The commercials, which start running tomorrow, are part of Starbucks’ largest-ever advertising investment across its Europe, Middle East and Africa segment, Michelle Gass, president of the region, said in an interview last week. In some European nations “we’ve been too silent,” she said.

“We need to tell people what we’re all about,” said Gass, who declined to say how much the company will spend on its so- called Renaissance Plan in the region, which makes up about 9 percent of revenue.

Unlike other restaurant chains, Starbucks has rarely used television -- in the U.S. or abroad -- to tout its brand, relying instead on word-of-mouth, social media and its cafes to market beverages and food. Recently Starbucks has moved beyond its traditional coffee business into areas including juice, single-cup beverages and a coffee brewer. Some of these are sold in grocery stores and may benefit from TV advertising.

“Historically, TV has not played much of a role in their advertising strategy,” Bart Glenn, an analyst at D.A. Davidson & Co. in Lake Oswego, Oregon, said in an interview. This is a sign that “over time TV will represent a larger portion of the ad budget,” he said.

Starbucks doesn’t spend as much on ads as a percentage of sales as McDonald’s Corp. (MCD) and Dunkin’ Brands Group Inc (DNKN)., said Glenn, who advises buying Starbucks shares.

Cut Advertising

The Seattle-based brewer cut its advertising spending 20 percent to $141.4 million in the year ended Oct. 2, according to a company filing.

The U.K. TV commercial shows a latte being served and emphasizes the chain’s push to be more personal by using customers’ names: “From now on, we won’t refer to you as a latte or a mocha, but instead as your folks intended, by your name,” the ad says. In the U.K., Starbucks baristas will begin wearing name tags this week.

Starbucks fell 1.4 percent to $51.11 at the close in New York. The shares have gained 40 percent in the past 52 weeks.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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