Starbucks signed a deal with Madison Square Garden and Radio City Music Hall, both in New York City, to be the official coffee of both venues. Financial terms of the multi-year agreement were not disclosed, although an observer estimated the deal would fall in the $1 million to $5 million range.
"Starbucks has really [bought into] the whole process of incorporating what we do, which is sell tickets to various events at both facilities, and taken it to the next level," said Neil Davis, senior VP-advertising, Madison Square Garden. "They're actually taking this to retail and promoting it at the retail level."
The deal includes marketing and advertising by Starbucks related to sports and events taking place at MSG and Radio City.
"The exclusivity is there, and this was right for us in this particular situation," said Alan Hilowitz, regional marketing manager for Starbucks.
Pouring-rights deals are not necessarily Starbucks' modus operandi, as it is with such companies as Coca-Cola Co., PepsiCo, Anheuser-Busch Co. and Miller Brewing Co., who look to place their products at stadiums and arenas with exclusive agreements that shut out the respective competition.
Gary Hemphill, senior VP of consulting firm Beverage Marketing Corp., New York, said, "It probably gives them great visibility and also allows the venue to bring what people generally think of as a higher quality product to their audience. In terms of sheer volume of coffee consumed, it probably doesn't compare to soft drinks or beer but it certainly makes sense. People are willing to pay a little more for a product that's better."
The coffee company has tasted success with its first few exclusive deals with venues such as New York's Jones Beach, the Statue of Liberty and the Botanical Gardens. Last year, Starbucks signed deals to be the exclusive coffee supplier to Key Arena, Safeco Field and the University of Washington's Husky Field, all located in Seattle. Not surprising: Seattle is not only Starbucks' corporate headquarters, it's also where CEO Howard Schultz lives and owns the NBA's Seattle SuperSonics, who play at Key Arena. Starbucks could look to parlay its deals in those two cities into exclusive pouring rights at other venues.
"It's a case by case basis," Mr. Hilowitz said. "It's not a company strategy right now but, yeah, we'll look at it market by market."