Comments From the Peanut Gallery

Up to this point, I’ve done a lot of hemming and hawing about the recruiting environment, but I haven’t actually shared my opinion on any marketing topics. Well that ends now. Today’s topic? Caribou Coffee.

Caribou is a gourmet coffeehouse operator primarily concentrated in the Midwest with over 500 retail outlets. It trades on the NASDAQ under the symbol CBOU and has a current market cap of $135 million. And to my point, Caribou’s marketing is a hot mess.

There are two main problems with Caribou’s tag line “Life is short. Stay awake for it.” First, it seems to be entirely detached from the mountain lodge feel of its retail outlets. What exactly is the connection between staying awake and relaxing in a mountain lodge? Second, and more importantly, Caribou is effectively positioning itself in the “coffee as fuel” category. Unfortunately for them, Dunkin’ got there first – “American Runs on Dunkin” anyone? And Dunkin’ has been taking names and generally kicking ass as the “coffee as fuel” brand. Going head to head with Dunkin’ in this capacity is a losing proposition and yet that is exactly what Caribou is currently doing.

What exactly does the Caribou brand stand for? To most consumers, Caribou is simply the coffee place that is not Starbucks. And that sort of brand association is not going to help Caribou gain any market share. I think that Caribou’s real points of differentiation are free wi-fi and community. By community, I am referring to the fact that most Caribou locations have a room that can used for anything from book club gatherings to meetings of the local Boy Scout chapter – bet you didn’t know that. And that’s the problem.

Why doesn’t Caribou position itself as the coffee place where communities can come together? The mountain lodge design of its retail stores would support this type of community positioning as mountain lodges are inviting and comfortable places where people typically gather and relax. This positioning is not the same as that of Starbucks; Starbucks’ “Third Place” speaks to the individual (who spends time at home, work, and Starbucks) and not the community. In addition, free wi-fi is a natural tie-in to the community positioning that I am proposing because modern communities need to be digitally connected.

Caribou has an advantage over brands that do not have any retail outlets because it can tell its brand story exactly how it wants it told. However, this advantage is negated if Caribou’s story does not resonate with consumers. In that case, Caribou simply has significantly higher overhead expenses compared with those of its competitors in the grocery aisle. Caribou would realize a substantial ROI by clarifying its positioning to establish a more robust brand. Caribou’s coffeehouses represent 90% of net sales; once the retail outlets have been effectively leveraged, Caribou will enjoy a halo effect on the commercial and franchise business segments, which currently comprise approximately 10% of net sales.

But hey, what do I know?