1) Starbucks attempts to win over Italy, opening a roastery in Milan.

What happened

  • Thirty-five years ago—long before becoming Starbucks’ CEO—Howard Schultz, then a marketing director for the brand, visited Milan and returned transfixed by the idea of bringing the Italian espresso bar back to the U.S. Now Starbucks is bringing a “reserve roastery” to Milan that will sell alcoholic beverages in the Italian tradition of aperitivo, pizza and pastries made in a wood-fired brick oven, and affogato, featuring ice cream made with liquid nitrogen. There will be no frappuccinos on site.
  • Starbucks has 25,000 stores in 78 countries—the company opens a new coffee shop every four hours, and continues to expand its footprint abroad, even as it closes stores in the U.S. But so far, it only has a roastery in two other cities—Seattle and Shanghai—with plans to bring a similar concept to New York City, as well as Tokyo and Chicago in 2019.

Why it matters

  • Starbucks remains a big player in an increasingly competitive coffee industry. Since 2012, the holding company JAB has acquired Peet’s (which Starbucks used to own), Panera Bread, Krispy Kreme, Dr Pepper, Stumptown, Intelligentsia and Pret a Manger, and began distributing Starbucks and other coffee brands in the K-cups sold for its Keurig coffee maker. Its competitor Nestlé is fighting back with acquisitions like Chameleon Cold-Brew and a new stake in Blue Bottle Coffee. At the end of August, Coca-Cola Co. even announced it will buy Costa, a British coffee shop chain.
  • In the midst of this change, Starbucks’ business has been frustrated by sluggish domestic sales. This, in large part, informs its push abroad, particularly in China. But this drive isn’t just about selling Starbucks products abroad—it’s about selling an experience. The company says its Milan roastery is “as much about theater as coffee,” but it will have to keep in mind that coffee culture varies drastically from country to country. Starbucks’ “sit-down” atmosphere may not appeal to Italian clientele accustomed to crowded espresso bars, and neither will its prices—more than three times higher than a typical 1 Euro espresso. As the company bets on Milan—it also plans to open regular storefronts in the city by the end of 2018—it seems destined to appeal more to tourists used to ordering their tall, grande or venti, even if Milan residents trickle into the roastery for a novel experience.

2) Ritual, a multivitamin startup, fails to live up to its transparency claims—but it’s just the tip of the iceberg for the vitamins and supplements market.

What happened

  • Ritual, a direct-to-consumer startup that began selling multivitamins for women in 2015 through a monthly subscription, sought to stand out among an increasingly saturated market by placing transparency and science at the forefront. On its site, the company lists the ingredients found in its vegan and gluten-free products, identifying their origin and manufacturer—even the pills come in clear capsules
  • But Ritual’s attempts to lead with accountability have crumpled with the news that the company has paid for articles and then manipulated quotes and falsely attributed endorsements from these materials for its own advertising purposes. In particular, Ritual’s Facebook and Instagram ads have miscited CNN, the New York Times and Vogue as promoters of the brand, when these outlets simply mentioned Ritual in their reporting.

Why it matters

  • Though Ritual has sought to highlight the science behind its products in a time when pop wellness trends continue to flourish, transparency needs to extend to all parts of the business. The same goes for a company like Goop, which just last week agreed to pay $145,000 in civil penalties after an investigation by the California Food, Drug and Medical Device Task Force determined that some of its products are not backed by scientific evidence, despite being marketed as such.
  • Still, despite the fact that Ritual takes the moral high ground, a gaffe like its advertising scandal could severely hurt the company, while continued outcries about Goop from the scientific community and consumers alike don’t seem to be scratching the brand, its sales or its growth. Ritual has raised $15.5 million to Goop’s $75 million (it’s most recent raise in March 2018 rounded out to $50 million alone) and Gwyneth Paltrow’s presence will continue to buffer her brand from PR scandals. Ritual, a younger brand without a celebrity at its helm, may not be so lucky.
  • Regardless, the vitamins and supplements market is growing—in 2017, industry sales in the U.S. amounted to $20.7 billion, up from $16.4 billion in 2012. At the same time, supplements evade FDA regulations based on a 1994 law that stipulates brands can advertise product benefits as long as they don’t claim to “treat, diagnose, prevent or cure diseases.” Presuming Ritual patches up its advertising blunder, it may continue to do the right thing, but have to watch Goop and its jade eggs thrive far ahead.

3) Mattel launches a film division, hoping to catch up with its toy competitors.

What happened

  • Mattel launched a film division called Mattel Films headed by a new hire, the producer Robbie Brenner. The division will develop movies on Barbie and Hot Wheels, among other popular brands. Already in the docket are plans to develop a live-action movie with Sony Pictures about Barbie, an idea that has been marinating for the past four years.
  • Mattel Films is emerging long after the company’s main competitors—Lego and Hasbro—have entered the media space (Lego with the blockbuster “The Lego Movie,” and Hasbro with the Transformers franchise). While Mattel and Hasbro are on equal footing when it comes to annual revenue, Hasbro’s market valuation is double the size of Mattel’s. In many ways, the business model for these toy retailers is the inversion of Disney’s, a company whose sprawling ecosystem began with media and then seeped into parks, hospitality, merchandise and licensing, all of which feed into and support other parts of the business. (Just this month, Netflix also hired a former Disney executive, to be its head of consumer products and create merch out of its original TV series and films.)

Why it matters

  • For Mattel, creating media that aligns with its products can buoy various projects and create new streams of revenue via licensing and distribution deals, as well as ticket sales. Especially for a brand like Barbie that hasn’t aged very well over time, video content could both spark greater emotional connection with consumers and give the brand a voice to evolve and operate greater control over its image. Ideally, a movie that supports Barbie’s attempted transformation into an inclusivity-minded brand will raise doll sales, thereby spinning the flywheel, much like Disney has used cartoons and movies to fuel merchandise and theme parks, and vice versa.
  • But one question that emerges regarding Mattel Films is whether the company is pliable enough to follow, or at least incorporate parts of Disney’s model. Mattel created a studio, Playground Productions, in 2013, which gave rise to Hot Wheels cartoons, and was then subsumed under Mattel Creations in 2016, which produced an animated series based off of the American Girl doll brand. Throughout this period, Mattel’s teams were juggling both the development and marketing of toys with producing video material, and the company continues to use toy sales as its main metric to judge the business’ health, rather than the myriad ways a brand can make money outside of merchandising.
  • But now with Brenner heading Mattel Films, the division will be focused on making distribution and licensing deals, as well as forging partnerships with studios and writers, rather than housing a studio within the company itself. Freeing up its product and marketing teams to focus on merchandising gives Mattel the potential to grow all sides of its business and create a Disney-like feedback loop that will serve the company well over time.

4) Instagram may launch a separate shopping app, cashing in on pre-existing consumer social media trends.

What happened

  • Instagram is developing a new ecommerce app that would allow consumers to follow vendors, look through their product assortment, and purchase items without being directed to another site. The company began experimenting with an in-app shopping feature in November 2016, letting merchants tag products that users may purchase—it’s also playing a feature that would allow consumers to make purchases from Instagram Stories.
  • The shopping app is the latest in the company’s expanding line of features and products, including Direct, a new messaging app currently under development, and IGTV, a YouTube-like video platform that launched in June 2018. (Notably, Facebook—Instagram’s parent company—tried to establish an ecommerce platform for its site in the past, but it never caught on.)

Why it matters

  • Like other Instagram developments, the shopping app likely leans into what Instagram users are already doing—digital window shopping, and now full-on shopping, which has become a popular activity on the app and helped the company grow its revenue with the help of ads. The company is also poised to capitalize more as an ecommerce platform: Business accounts number more than 25 million, with 2 million advertisers, and 80% of Instagrammers follow at least one business. Today, 55% of consumers have purchased something via social media.
  • Two major question arise regarding the standalone shopping app. First, can Instagram successfully be turned into a digital department store? Though the app certainly has the audience—it hit 1 billion users in June 2018—other past attempts to craft an shopping online experience built around social media browsing have stagnated, including Project September, headed by the former CEO of Gilt Groupe. Any shopping-only app that Instagram creates would basically have to be as streamlined and easy to use as Amazon in order to attract consumers away from other platforms, because people generally go to sites that are the most convenient.
  • There’s also the question of whether Instagrammers will download yet another app specifically for shopping. One million people downloaded the IGTV app in the first week of its existence, but installations quickly slowed. In any case, few details are public about the new shopping app and there are lots of blanks to fill: Would the shopping app move all of the business from the original Instagram platform? What transaction fee will Instagram charge merchants? How would this new app affect Instagram’s advertising business? And finally, is it better to house all of Instagram’s features in one place or unbundle them?