Starbucks + Danone: First heart, then mind

BY Fernando L. Mompó on 09 / 10 / 2014

A year ago, Danone and Starbucks announced a strategic agreement to offer a jointly created and developed selection of new, healthy specialty yogurt products in participating Starbucks stores and in grocery channels. A new portfolio of Evolution Fresh, Inspired by Dannon- branded ready-to-eat Parfait Greek yogurt products would be co-created by Starbucks and Danone for exclusive distribution in the U.S. Starbucks.

A co-innovation process between two companies may be sparked by many different reasons, in some cases the most unexpected ones. In the case of Danone and Starbucks, that was supposed to be the reading of a book. Danone CEO Franck Riboud and Starbuck President and CEO Howard Schultz knew each other in passing for several years, but they first met for a heart-to-heart talk after Mr. Riboud read “Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time”, written by Mr. Schultz. Obviously, there were also a bunch of other more rational reasons besides literature.

“I really wanted to meet Howard because of what he expressed in the book about the management of human resources and the DNA of the Starbucks company,” Mr. Riboud said. “I got the feeling that our DNA was not so far apart when I read about all the social programs of Starbucks, and I asked for an appointment.” Mr. Riboud also declared some other reasons beyond Reason. Yes, it is a new business channel for us, but I wasn’t really looking at it because of business, he said. “I was really looking to Starbucks because I love their community, the 70 million customers who visit their stores each week, and the way they attract and talk and listen to that community.”

A heart-to heart talk, the feeling of sharing two DNAs that are not so far apart besides operating in different markets, “falling in love” after reading someone’s book… The case of Danone and Starbuck case confirms, once more, the importance of personal interrelations and trust as a paramount element for sparking co-innovation and, therefore, one of the main drivers of what we do in Co-Society.

But, if this kind of relationship between decision takers is a more than required trigger for co-innovation, it is not a sufficient one to bring it to life as a successful win-win deal. So it wouldn’t be right to finish this post without highlighting some of the rationale beyond the good feelings…

For Danone…

  • U.S. consumers on average eat a third as much yogurt as Europeans. With a fast-growing but still low penetration of the yogurt category, the U.S. remains a key growth opportunity for Danone.

  • At a time when dairy companies are fighting over limited space on the refrigerated shelves in grocery stores, Danone’s expansion into Starbucks space offers the yogurt company a powerful new sales outlet. In addition to helping Starbucks get a piece of the action in the fast-growing yogurt market, the parfait plan could help build awareness of Evolution Fresh.

For Starbucks…

  • Starbucks is venturing into becoming a house of brands. Starbucks’s grocery business has been expanding faster than its cafe sales. Besides, Starbucks has been working to diversify its traditional coffee business by expanding into more packaged products and food. The deal makes Starbucks grow health and wellness offerings for its customers under the company’s Evolution Fresh brand.

  • Starbucks makes half of its sales before 11AM. Yogurts and some other products on Danone’s portfolio are part of a strategy to entice consumers to come in to Starbucks more evenly and spread sales throughout the day.

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