Starbucks Hopes Changes to K-Cups Will Brew Up Even Bigger Sales

One subtle marketing change may help Starbucks (SBUX) brew up even stronger sales of its lucrative K-Cup pods.

"For a long time there was a set template you had to use on all the Keurig Green Mountain (GMCR) product boxes, so all the products looked the same -- they have recently relaxed that, and in partnership with them we have been able to create much more complete and vibrant-looking products that bring the brand to life," Starbucks president, global channel development Michael Conway told TheStreet at an event in New York City held to showcase the company's latest coffees and teas headed for supermarket shelves.

For example, a K-Cup box for Starbucks' new Tazo chai latte features a large photo of a cup of steaming tea surrounded by the spices that go into creating it. A K-Cup box for hazelnut coffee has photos of hazelnuts and big fall-inspired orange leaves.  

All of the boxes also boast a more sizable Starbucks mermaid logo, otherwise known as the "siren."


Old Starbucks K-Cup box (top) versus new Starbucks K-Cup box (below). 

Conway says the new boxes began to roll-out with Starbucks fall blend K-Cups last year, and the improved designs will now be applied to all of the company's K-Cup products going forward. "They look prettier, the new design will definitely help sales," says Conway.

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Standing out in the competitive coffee aisle in grocery stores -- and ultimately scoring a sale -- all comes down to packaging design. According to marketing expert Marty Neumeier in his book The Brand Gap, "A retail package is the last and best chance to make a sale."  

That little bit of science may explain why several other big-name drinks have recently undergone noticeable changes to their packaging. 

This summer, PepsiCo (PEP) will market soda bottles and cans with yellow emojis in more than 100 global markets, including the U.S. Rival Coca-Cola (KO) has found success with its "Share-A-Coke" packaging promotion, originally launched in 2014, that plastered hundreds of first names and catchphrases on its iconic cans. More recently, Coke has released bottles with an array of funky colors to attract the attention of shoppers.

Despite its rather sterile packaging, Starbucks has still managed to drive huge sales and profits of K-Cups, and the new designs should help sustain that.

Starbucks has amassed about 17% share of the K-Cup market, according to UBS. Sales for Starbucks' channel development segment, which is comprised of K-Cups, bagged coffee and bottled drinks increased 16% to $512.1 million in the first quarter ended Dec. 27. Operating profit margins for the sector rose to 37.7% from 35.6% a year earlier.

Starbucks execs boasted on a call with analysts about being the "number one K-Cup brand" and notching success with a recent introduction of hot cocoa pods. 

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