The coffee house industry is one among the many thriving industries in the U.S, generating around 40 billion in revenue in 2015 and growing at 4.6% during the period 2011-’16 and employing around 700,000 people . Coffee drinking culture is deep rooted among the Americans, which is quantitatively proved by the fact that U.S is the second largest coffee consuming geography in the world behind the European Union . Tea, especially the green tea is fast gaining popularity, particularly among the youth in the U.S, but still has a long way to go to touch coffee. Capitalizing on this love for coffee, hundreds of business houses have entered into this highly lucrative cafeteria market in the past and continues to do so even today. The ones who have innovatively differentiated themselves from the scores of competitors have survived the test of time and still continues to be the favorite hunting grounds and hangout places for the millions of coffee lovers across the U.S. Starbucks is one such star, which after opening its first store in 1971 , continues to charm its loyal customers even today. And it is not just the U.S, the company has opened its store in almost all the major economies in the world spanning across continents and continues its successful saga at these foreign locations as well. At the end of 2013, Starbucks was the market leader in the U.S, with a market share of 36.7%, followed by Dunkin Brands at 24.6% . Other competitors such as McDonald’s, Costa Coffee etc. make up for the rest of the market share. Together, Starbucks and Dunkin Brands control over 60 percent of the market which gives them considerable control over the market.
This essay will focus on Starbucks, understand its history, success stories, challenges faced and current business overview. The following section will provide the company overview, followed by company history and conclusion sections.
Company Overview
The company began its operations in 1971 with a single store in Seattle selling whole bean and ground coffee, spices and tea. From this humble beginning, the company has now grown into the position of a multinational retail coffee house chain operating over 23,000 stores that include company operated stores, licensed stores, food service operations and consumer packaged goods stores in 70 countries as of September 27, 2015 and employing over 238,000 resources . The total revenue of the company rose by 17% in 2015 to reach $ 19.2 billion compared to $ 16.4 billion in 2014 . The company manages its operations through four reportable operating segments- Americas comprising the U.S, Canada and Latin America, China and APAC (CAP) that comprises of China and the Asia-Pacific nations, Europe, Middle East and Africa and Channel Development. Americas segment contribute approximately 69% of the total revenues, followed by CAP at 13% . The other two segments contribute around 6 and 9 percent respectively to the company’s overall revenue. Americas as a whole and U.S, in particular operates the maximum number of stores at 8,671 and 7,559 respectively .
The company’s stores are located typically in prime high visibility locations. The size of the stores vary depending on the location and the company has multiple formats including Drive-Thru stores which are selected based on the location and the category of customers that the store is intended to serve. Starbucks outlets across the world offers a great variety of beverages and snack offerings including coffee and tea beverages, premium coffee and tea, packaged roasted coffee in bean and ground forms, ready to serve coffee and tea, juice items, other refreshment drinks, bottled water, fresh food and snacks. All their offerings focus on nutritional value and flavor and are made only from selected high-quality ingredients . In addition to this, all the company operated stores across the world offer free wireless internet access for their customers.
Starbucks is also a pioneer in adopting information technology to streamline its operations in an efficient way. The company has made significant investments to develop applications and products to serve their operations, administrative functions, point-of-sale processing services, online payment management, supply chain and logistics management, and reward and loyalty programs. In addition to this, the company is also betting heavily on mobile technology and has applications in place to perform mobile payments, ordering applications, re-loads and other processes.
Company History
As mentioned earlier, Starbucks was started off in the year 1971 by two teachers- Jerry Baldwin, Zev Siegel and a writer- Gordon Bowker who were inexperienced in running any business and inspired by Pete’s coffee and tea. For the next 13 years, i.e. till 1984, the company never sold any coffee or tea as a beverage. Instead, the focus was on sales of coffee beans, grounded coffee powder and coffee making equipment. The name Starbucks was coined after the first mate of the Pequod; a ship in the book Moby-Dick.
The company continued to operate as a small coffee store, growing organically up until 1982, when Howard Schulz joined the company as its Director of retail operations and marketing . That year, the company started supplying coffee to restaurants and coffee bars. The real turning point for the company happened in 1983, when Schulz on his trip to Italy got impressed with the idea of espresso bars he saw there and proposed the idea of opening similar stores in the U.S to the founders. Subsequently, the very first store of Starbucks offering Café Latte was opened in downtown Seattle in 1984 . Later in 1985, Schultz founds II Giornale, a café restaurant offering espressos and lattes that are made using the coffee beans supplied by Starbucks. II Giornale went on to become a hit and Schultz garnered enough money to buy Starbucks from its founder-owners in 1987 .
The new company post acquisition was named as Starbucks Corporation and Schultz primary task was to open stores outside Seattle and expand. The first store outside the U.S. was started in Vancouver, Canada in 1987 and the total number of outlets stood at 17 during this year . In 1988, the company rolled out health insurance to all eligible full and part time employees and the company unveiled its mission statement in 1990 . In 1991, the company became the first privately owned business house in the U.S that started offering stock option programs to its employees . The company went public in 1992 and opened its first drive-thru store in 1994 . In 1996, the company moved out of North America for the first time when it opened stores in Japan and Singapore. From then on till date, the company has witnessed exponential growth branching out to multiple countries and continued growing organically as well as inorganically. During this period, a Starbucks store was getting opened almost every day at some parts of the world. In 2008, the company adopted its new mission statement and in 2010, started offering free unlimited Wi-Fi at its stores for the customers. Along with the acquisitions made in different countries, the company also started focusing on tea products and tea-based drinks. As of 2015, the number of stores worldwide stands at 22,519 . The company also reached the milestone of 99% ethically sourced coffee in 2015.
Conclusion
Since starting operations in 1971, Starbucks has built a formidable global reputation for catering to their customers with high quality products and services. The company also focuses on maintaining consistency in delivering excellent customer experience and is equally committed in devising and implementing several corporate social responsibility programs. In recognition of the high standards and benchmarks maintained in multiple fields, the company has received a host of awards and recognitions from several reputed global houses over all these years of its operation. Today, the brand is well known and respected across the world. This reputation has been built over years of hard work and sincerity, and this has taken Starbucks to the top position in the coffee house business across the global markets.
References
Bashore, M. (2013, July 30). All Great Businesses Started Small - The Story of Starbucks. Retrieved from Shopventory: https://shopventory.com/blog/all-great-businesses-started-small-the-story-of-starbucks
Geereddy, N. (2014). Strategic Analysis of Starbucks Corporation. Retrieved from harvard.edu: http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf
IBIS World. (2016, January). Coffee & Snack Shops in the US : Market Research Report. Retrieved from IBIS World: http://www.ibisworld.com/industry/default.aspx?indid=1973
McCarthy, N. (2015, February 26). Younger Americans Are Ditching Coffee For Tea . Retrieved from Forbes: http://www.forbes.com/sites/niallmccarthy/2015/02/26/younger-americans-are-ditching-coffee-for-tea-infographic/#782cfa4d60b0
Starbucks. (2016). Company Information. Retrieved from starbucks.com: http://www.starbucks.com/about-us/company-information
Starbucks. (2016). Starbucks Company Timeline. Retrieved from starbucks.com: http://www.starbucks.com/about-us/company-information/starbucks-company-timeline
Starbucks Corporation. (2015, September 27). Form 10-K. Retrieved from investor.starbucks.com: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsAnnual
