Starbucks Company Profile

The Starbucks Story

Our story began in 1971. Back then we were a roaster and retailer of whole bean and ground
coffee, tea and spices with a single store in Seattle’s Pike Place Market.

Today, we are privileged to connect with millions of customers every day with exceptional
products and more than 30,000 retail stores in 80 markets.

Folklore

Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also
inspired by the sea – featuring a twin-tailed siren from Greek mythology.

Starbucks Mission

Our mission: to inspire and nurture the human spirit – one person, one cup and one
neighborhood at a time.

Our Coffee

We’ve always believed in serving the best coffee possible. It's our goal for all of our coffee to
be grown under the highest standards of quality, using ethical sourcing practices. Our coffee
buyers personally travel to coffee farms in Latin America, Africa and Asia to select high
quality beans. And our master roasters bring out the balance and rich flavor of the beans
through the signature Starbucks Roast.

Our Stores

Our stores are a neighborhood gathering place for meeting friends and family. Our customers
enjoy quality service, an inviting atmosphere and an exceptional beverage.

Total stores: 30,000 across 80 markets (as of June 30, 2019)

Our Partners

We offer some of the finest coffees in the world, grown, prepared and served by the finest
people. Our employees, who we call partners, are at the heart of the Starbucks Experience.

We believe in treating our partners with respect and dignity. We are proud to offer several
landmark programs for our partners, including comprehensive health coverage for eligible
full- and part-time partners, access to full college tuition coverage through the Starbucks
College Achievement Plan, and equity in the company through Bean Stock.

Our Products
Starbucks offers a range of exceptional products that customers enjoy in our stores, at home,
and on the go.

Coffee: More than 30 blends and single-origin premium coffees.

Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Iced Coffee,
Cold Brew, Nitro, Frappuccino® coffee and non-coffee blended beverages, Starbucks
Refreshers® beverages, and Teavana® teas.

Merchandise: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods,
books and gifts.

Fresh Food: Baked pastries, cold and hot sandwiches, salads, salad and grain bowls,
oatmeal, yogurt parfaits and fruit cups.

Consumer products available where groceries are sold

 Coffee and Tea: Whole bean and ground coffee (Starbucks and Seattle’s Best Coffee
brands), Starbucks VIA® Instant, Starbucks espresso capsules available on the
Nespresso and Nescafé Dolce Gusto systems, Starbucks® Coffee K-Cup® pods,
Starbucks® and Teavana® Verismo® pods.
 Ready-to-Drink (RTD): Starbucks® bottled Frappuccino® coffee drinks, Starbucks
Iced Latte, Single Serve Cold Brew, Doubleshot® Coffee Smoothies, Teavana Craft
Iced Teas, Teavana Sparkling Craft Iced Teas, Starbucks Discoveries® chilled cup
coffees, Starbucks Discoveries Iced Café Favorites®, Starbucks Iced Coffee,
Starbucks Doubleshot® espresso drinks, Starbucks Doubleshot® Energy Coffee
drinks; Starbucks Refreshers® beverages, Evolution Fresh™ bottled juices.

Brand Portfolio

Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and
Torrefazione Italia Coffee.

Investor Information

 Starbucks went public on June 26, 1992 at a price of $17 per share (or $0.53 per
share, adjusted for subsequent stock splits) and closed trading that first day at $21.50
per share.
 Starbucks was incorporated under the laws of the State of Washington, in Olympia,
Washington, on Nov. 4, 1985.
 Starbucks Corporation's common stock is listed on NASDAQ, under the trading
symbol SBUX.
 For more information, please visit Starbucks Investor Relations

 
Being a Responsible Company

At Starbucks, we have always believed in the importance of building a great, enduring

company that strikes a balance between profitability and a social conscience.

It started with our early travels to the places where our coffee is grown, understanding that
our future is inextricably tied to the futures of farmers and their families. We nurtured
personal relationships and built a global network of support to create a new way to produce
coffee: one that is sustainable, transparent and good for people and the planet. As the threats
of climate change have grown, we have been working to help coffee farms adapt and find
innovative solutions in how we build and operate our stores, while reducing the
environmental impact of our cups, straws and lids.

Our stores are often the heart of a neighborhood, and we strive to make each one a
welcoming and inclusive Third Place. As we have grown, so too has our opportunity to make
a positive impact, from alleviating hunger through our food donation program to making
investments in local partnerships and coffee- and tea-origin communities through The
Starbucks Foundation.

Stitching all these efforts together is a common thread – a green thread – one that is woven in
the fabric of our company by the more than 300,000 men and women who proudly wear the
green apron. We are dedicated to making our partners proud, providing pay equity and
investing in their success. And we are working to hire veterans and military spouses,
refugees, Opportunity Youth and those formerly incarcerated, and helping them build their
futures once they are with us.

As it has been from the beginning, our purpose goes far beyond profit. We believe in the
pursuit of doing good.
Starbucks Company Timeline
1971
Starbucks opens first store in Seattle’s Pike Place Market.

1982
Howard Schultz joins Starbucks as director of retail operations and marketing. Starbucks
begins providing coffee to fine restaurants and espresso bars.

1983
Schultz travels to Italy, where he’s impressed with the popularity of espresso bars in Milan.
He sees the potential to develop a similar coffeehouse culture in Seattle.

1984
Schultz convinces the founders of Starbucks to test the coffeehouse concept in downtown
Seattle, where the first Starbucks Caffè Latte is served. This successful experiment is the
genesis for a company that Schultz founds in 1985.

1985
Schultz founds Il Giornale, offering brewed coffee and espresso beverages made from
Starbucks® coffee beans.

1987
Il Giornale acquires Starbucks assets with the backing of local investors and changes its
name to Starbucks Corporation. Opens in Chicago and Vancouver, Canada.
Total stores*: 17

*All store counts (except where otherwise noted) reflect the end of the fiscal year. Current
store count includes Starbucks Coffee, Seattle’s Best Coffee, Teavana and Evolution Fresh
retail.

1988
Offers full health benefits to eligible full- and part-time employees, including coverage for
domestic partnerships.
Total stores: 33

1989
Total stores: 55

1990
Starbucks expands headquarters in Seattle.
Unveils Starbucks Mission Statement.
Total stores: 84

1991
Becomes the first privately owned U.S. company to offer a stock option program that
includes part-time employees.
Opens first licensed airport store at Seattle’s Sea-Tac International Airport.
Total stores: 116

1992
Completes initial public offering (IPO).
Total stores: 165

1993
Opens roasting plant in Kent, Wash.
Announces first two-for-one stock split.
Total stores: 272

1994
Opens first drive-thru location.
Total stores: 425

1995
Begins serving Frappuccino® blended beverages.
Opens first LEED-certified store in Hillsboro, Oregon.
Announces second two-for-one stock split.
Opens roasting facility in York, Pa.
Total stores: 677

1996
Begins selling bottled Frappuccino® coffee drink through North American Coffee
Partnership.
Opens stores in: Japan (first store outside of North America) and Singapore.
Total stores: 1,015

1997
Establishes the Starbucks Foundation.
Opens stores in: the Philippines.
Total stores: 1,412

1998
Extends the Starbucks brand into grocery channels across the U.S.
Opens in underserved neighborhoods through joint-venture partnership with Magic
Johnson.
Launches Starbucks.com.
Establishes the CUP Fund emergency financial assistance fund for partners.
Opens stores in: England, Malaysia, New Zealand, Taiwan and Thailand.
Total stores: 1,886

1999
Acquires Tazo Tea.
Partners with Conservation International to promote sustainable coffee-growing practices.
Acquires Hear Music, a San Francisco–based music company.
Announces third two-for-one stock split.
Opens stores in: China, Kuwait, Lebanon and South Korea.
Total stores: 2,498
2000
Establishes licensing agreement with TransFair USA to sell Fairtrade certified coffee in
U.S. and Canada.
Opens stores in: Australia, Bahrain, Hong Kong, Qatar, Saudi Arabia and United Arab
Emirates.
Total stores: 3,501

2001
Introduces ethical coffee-sourcing guidelines developed in partnership with Conservation
International.
Introduces the Starbucks Card.
Announces fourth two-for-one stock split.
Opens stores in: Austria, Scotland, Switzerland and Wales.
Total stores: 4,709

2002
Establishes Starbucks Coffee Trading Company (SCTC) in Lausanne, Switzerland.
Launches Wi-Fi in stores.
Opens stores in: Germany, Greece, Indonesia, Mexico, Oman, Puerto Rico and Spain.
Total stores: 5,886

2003
Acquires Seattle Coffee Company, which includes Seattle’s Best Coffee® and Torrefazione
Italia® coffee.
Opens roasting facilities in Carson Valley, Nev., and Amsterdam, Netherlands.
Opens stores in: Chile, Cyprus, Peru and Turkey.
Total stores: 7,225

2004
Opens first Farmer Support Center in San Jose, Costa Rica.
Introduces Starbucks Coffee Master Program.
Opens stores in: France and Northern Ireland.
Total stores: 8,569

2005
Acquires Ethos Water.
Announces fifth two-for-one stock split.
Opens stores in: Bahamas, Ireland and Jordan.
Total stores: 10,241

2006
Launches the industry’s first paper beverage cup containing post-consumer recycled
fiber.
Opens stores in: Brazil and Egypt.
Total stores: 12,440

2007
Eliminates all artificial trans fat and makes 2 percent milk the new standard for
espresso beverages.
Opens stores in: Denmark, the Netherlands, Romania and Russia.
Total stores: 15,011

2008
Chairman Howard Schultz returns as chief executive officer and begins transformation of
the company.
Acquires Coffee Equipment Company and its Clover® brewing system.
Adopts new Mission Statement “To inspire and nurture the human spirit – one person, one
cup and one neighborhood at a time.”
Launches My Starbucks Idea, Starbucks first online community. Also joins Twitter and
debuts Starbucks Facebook page.
Opens stores in: Argentina, Belgium, Bulgaria, Czech Republic and Portugal.
Total stores: 16,680

2009
Launches Starbucks VIA® Instant
Opens Farmer Support Center in Kigali, Rwanda.
Launches My Starbucks Rewards® loyalty program and Starbucks Card mobile payment.
Opens stores in: Aruba and Poland.
Total stores: 16,635

2010
Expands digital offerings for customers with free unlimited Wi-Fi, Starbucks Digital
Network.
Seattle’s Best Coffee reinvents business strategy to extend brand’s reach.
Opens stores in: El Salvador, Hungary and Sweden.
Total stores: 16,858

2011
Launches first annual Global Month of Service to celebrate company’s 40th anniversary.
Opens first Community Stores in Harlem and Crenshaw neighborhoods.
Launches Starbucks® K-Cup® packs.**
Acquires Evolution Fresh.
Opens Farmer Support Center in Mbeya, Tanzania.
Launches Create Jobs for USA to encourage small-business growth.
Opens stores in: Guatemala, Curacao and Morocco.
Total stores: 17,003

** Keurig, K‐Cup, and the K logo are trademarks of Keurig Green Mountain, Inc., used with
permission.

2012
Introduces Starbucks® Blonde Roast.
Opens Farmer Support Centers in Manizales, Colombia and Yunnan, China.
Acquires La Boulange® bakery brand to elevate core food offerings.
Launches Starbucks Refreshers® beverage platform.
Acquires Teavana to transform the tea category.
Opens stores in: Costa Rica, Finland, India and Norway.
Total stores: 18,066
2013
Strengthens ethical sourcing efforts with coffee farming research and development center
in Costa Rica.
Starbucks ceo Howard Schultz reinforces company’s commitment to marriage equality
at company’s Annual Shareholders Meeting.
Come Together petition urges U.S. elected leaders to reopen the government.
Opens stores in: Vietnam and Monaco.
Total stores: 19,767

2014
Enhances iPhone app with shake to pay and digital tipping.
Launches Starbucks College Achievement Plan with Arizona State University to offer
qualifying Starbucks U.S. partners the opportunity to complete a college degree through
ASU’s online degree program.
Announces commitment to hiring 10,000 veterans and military spouses by 2018.
Opens first Starbucks Reserve® Roastery and Tasting Room in Seattle.
Launches Starbucks Mobile Order & Pay.
Hosts first in a series of Partner Open Forums to discuss race relations in America.
Opens stores in: Brunei and Colombia.
Total stores: 21,366

2015
Launches Cold Brew iced coffee and Evolution Fresh™ handcrafted smoothies.
Announces sixth two-for-one stock split.
Commits to hiring 10,000 opportunity youth by 2018.
Expands Starbucks College Achievement Plan to offer full tuition coverage for all four
years of an undergraduate degree for qualifying U.S. Starbucks partners. Commits to 25,000
partners graduating by 2025.
Reaches 99% ethically sourced coffee milestone.
Opens stores in: Panama
Total stores: 22,519 (as of June 28, 2015)
Starbucks Company Recognition
Since the beginning, Starbucks has been a different kind of company. One that is dedicated to
inspiring and nurturing the human spirit. Committed to serving the finest coffee, creating an
exceptional customer experience, and being a great place to work. We are grateful to our
partners (employees) for making us the company that we are. And we are honored to be
acknowledged for their efforts.

Here are some of our recent awards and recognition.

100% Rating on the Disability Equality Index

One of the “World’s Most Admired Companies”

Fortune – 2009-2017

One of the “World’s Most Ethical Companies”

Ethisphere – 2007-2017

100% Rating on the Corporate Equality Index

Human Rights Campaign Foundation – 2015-2017

One of the “Top 10 Millennial Brands”

Adweek – 2017

One of the “World’s Most Valuable Brands”

Forbes – 2013-2017

Named a “Top Growing Global Brand”

Interbrand – 2017

One of the “Top 10 Military Spouse-Friendly Employers”

Victory Media – 2017

Howard Schultz, Starbucks Executive Chairman

One of the “World’s Best CEOs”
Barron’s – 2012-2017

Rosalind Brewer, Starbucks Chief Operating Officer One of the “World’s Most Powerful
Women”
Forbes – 2017

One of the “Most Admired Companies in America”

Fortune – 2003–2015
One of the “World’s Most Ethical Companies”
Ethisphere – 2007-2015

“Employer of the Year”

U.S. Business Leadership Network Annual Leadership Awards – 2014

100% Rating on the Corporate Equality Index

Human Rights Campaign Foundation – 2015

One of the “Top 10 Employers of the Year in China”

Zhaopin.com’s Annual Best Employer Award – 2014

One of the “Best Workplaces in Canada”

Great Place to Work Institute – 2011-2014

“Retailer of the Year”

Visual Merchandising and Store Design – 2013

One of the “World’s 50 Most Innovative Companies”

Fast Company – 2012

Howard Schultz, Starbucks chief executive officer

One of the “Highest Rated CEOs”
Glassdoor – 2014

One of the “World’s 50 Greatest Leaders”

Fortune – 2014

“Business Person of the Year”

Fortune – 2011
An Overview of Starbucks
Starbucks is the world’s largest American coffeehouse chain that operates in 29,324
stores worldwide. It was founded in Seattle, Washington in 1971.

With the invigorating vision of Howard Schultz (current Executive Chairman), it became
more than a coffeehouse, a third place between work and home. Kevin Johnson is the
current CEO of Starbucks.

SWOT analysis of Starbucks

The SWOT analysis of Starbucks is as follows:

Starbucks Strengths – Internal Strategic

Factors
1. Strong brand image – Starbucks Corporation is the most popular and strongest brand
in the food and beverage industry. Its size, volume, and the number of loyal customers
have kept growing over time.
2. Strong financial performance – With a market capitalization of $81 billion,
Starbucks has a stable financial position in the market. It increased its number of
stores from 1,886 to 29,324 between 1998 and 2018.
3. Extensive international supply chain – Starbucks is known to have an extensive
global network of suppliers. Starbucks sources its coffee beans from three coffee
producing regions, Latin-America, Africa, and Asia-Pacific. 
4. Acquisitions – Company has acquired top 6 companies including Seattle’s Best
Coffee, Teavana, Tazo, Evolution Fresh, Torrefazione Italia Coffee, and Ethos Water.
These acquisitions have proven quite successful for Starbucks.
5. Moderate diversification – Starbucks has also diversified its business operations by
introducing innovative merchandises and food items. One such example is the
addition of ice cubes made of Coffee which results in a stronger Coffee flavor.
6. Quality, Taste and Standardization – Due to its premium blends and delicious
coffees, Starbucks has extended globally. It offers excellent quality and consistently
standardized products in all the locations.
 7. Efficiency, Strategic Planning, and Reinvestment Strategy – Starbucks reinvests
its profits in expanding its business in different locations. Its efficient operations and
well-planned strategic decisions have produced many advantages for the company.
8. Employee treatment –It treats its employees very well which eventually translates
into happier employees serving customers well. Starbucks has been consistently listed
as one of the Fortune’s Top 100 Places to Work for.

Starbucks Weaknesses – Internal Strategic

Factors
1. High prices – For many middle tiers and working consumers, Starbucks’ offerings
are more costly than McDonald’s and other coffee outlets. Its high prices reduce
affordability for the consumers.
2. Imitability of products – Starbucks doesn’t own the most unique products in the
market. This makes the imitability of products quite easy for other companies. Other
coffee shops and food chains like McDonalds McCafe and Dunkin Donuts offer
almost the same products.
3. Generalized standards for most products – Some of its product offerings are not
aligned with the cultural standards of other markets. For example, in some areas, its
crafted beverages do not associate with the consumer preferences.
4. European Tax avoidance – Due to its tax avoidance in the UK, it faced several
controversies and criticisms. Reuters’ investigation found out that it didn’t pay tax on
its £1.3 billion of sales in three years prior to 2012.
5. Procurement Practices – Many social and environmental activists criticized the
company for their unethical procurement practices. They claimed that it procures
coffee beans from impoverished third world farmers. It has also been accused of
violating “Fair Coffee Trade” principles.
6. Recall of Products – Over the years Starbucks has recalled a lot of in-demand
products. This can negatively affect the brand image of the company and lead to the
loss of customer base.

In March 2016, Starbucks recalled two products. One was the sausage, egg, and cheddar
breakfast sandwich and the other was cheese and fruit bistro box. The reason for recalling
these products was the threat of contamination and allergens.

During routine testing, it was revealed that the facility that manufactured the breakfast
sandwiches had the presence of Listeria Monocytogenes on the contact surface.

The 250 stores in Arkansas, Texas, and Oklahoma that showcased these sandwiches had to
remove them. The cheese and fruit bistro box was recalled because it contained the almonds
found in the box contained traces of undeclared cashew nuts.

There was no warning label that highlighted the presence of cashew nuts. This could be
potentially life-threatening for people with cashew allergies.
SWOT analysis of Starbucks

Starbucks Opportunities – External

Strategic Factors
 1. Expansion in developing markets – Starbucks has coffeehouses mainly in the US.
Global expansion in a few areas like India, China and few regions of Africa can give a
great opportunity to the company.
2. Business diversification and Products Specifications – It can further diversify its
business operations to improve overall revenue growth opportunities. Besides,
developing products as per the customer preferences in the specific target market is
also a profitable opportunity.
3. Introducing new products – As the company is quite popular, introducing new
products and holiday flavors (Peppermint Mocha, Eggnog Latte, Gingerbread Loaf)
under its name would be profitable and welcomed in the markets.
4. Partnerships or alliances with other firms – Co-branding always benefits.
Starbucks has the opportunity to develop partnerships and alliances with major firms.
This would strengthen its presence and market share.

Starbucks Threats – External Strategic

Factors
1. Competition with low-cost coffee sellers – Many coffeehouses offer products at an
affordable rate. This can threaten the future’s stability of Starbucks which offers
higher prices.
2. Competition with big outlets – Aggressive competition with multinational
companies like Dunkin Donuts and McDonald’s can also pose a threat to its market
position.
3. Imitation – Products can be imitated by both new and old rivals.
4. Independent coffeehouse movements – There are many sociocultural threats for
Starbucks. These sociocultural movements support small independent and local
coffeehouse and oppose the expansion of large multinational chains.
5. Controversy on California warning rule – A California judge ruled Starbucks and
other companies in March 2018 to provide warning labels on all their coffee products.
This was about preventing a violation from chemical use that may cause cancer.
6. Philadelphia arrests – Recently, two African-American men were arrested at
Starbucks that caused quite a controversy on social media against Starbucks.
Starbucks employees refused them to use the restroom because they didn’t purchase
anything. The CEO Kevin Johnson issued an apology to both men eventually.

Recommendations
Starbucks needs to bring some improvements and advancements in the company to keep its
market position stable and strong.

For this, few recommendations are given below:

1. Introduce diversification in products and services offerings. This will help

strengthen their position.
 2. Bring innovation and technological advancements in the company to deal with the
rising competition and imitation.
3. Resolve the issues with the social activists that oppose international market players.
4. Reduce prices of the products to attract more customers and increase the affordability
for all classes of consumers.
5. Implement creative marketing campaigns, promotional activities, and branding
strategies.
6. Contribute to community development, participate in Corporate Social
Responsibility (CSR), and sustainability practices

 Company: Starbucks 
CEO : Kevin Johnson
Year founded : 1971
 Headquarter : Seattle, USA
Number  of Employees (2018): 277,000
Public or Private: Public
Ticker Symbol:  SBUX
Market Cap (2018): $ 81.06 Billion
Annual Revenue (2018) : $ 24.72 Billion 
Profit | Net income (2018): $ 4.52 Billion

Products & Services:   Coffee | Handcrafted Beverages | Fresh food | Non-food items |
Packaged goods | Mugs and accessories | Gifts | 
Competitors: Costa Coffee | McDonalds McCafe | Dunkin Donuts | Café Coffee Day |
McDonalds | KFC |
  

Did you know?

There are 87,000 possible drink combinations at Starbucks.

STARBUCKS SWOT ANALYSIS 2019
August 2, 2019 by Abhijeet Pratap

 INTRODUCTION
 STRENGTHS
 WEAKNESSES
 OPPORTUNITIES
 THREATS
 CONCLUSION

SWOT ANALYSIS OF STARBUCKS COFFEE 2019.

Introduction:

Starbucks is the largest coffee brand of the world. Its revenue has grown steadily over the last
five years. The company also undertook some restructuring during the recent years to bring
focus back upon the core and most profitable businesses. Compared to 2017, its revenue grew
by around 10% in 2018. Apart from that, its financial performance during the first three
quarters of  2019 has also been impressive. At the end of the third quarter of 2019, total net
revenue of the brand was $19.8 billion compared to $18.4 billion during the same period last
year.

Company Starbucks Corp.

Industry Coffee Industry

CEO Howard Schultz.

Founded. 1971

Headquarters. Seattle

Net Revenue. $24.72 Billion.

Net Income. $4.52 Billion

Number of Employees. 2,91,000

Number of Stores. 29,324

Main Market. United States.

 Starbucks is a premium coffee brand led by Howard  Schultz. There are several things that
the brand is well-known for including premium quality coffee, customer service and
organizational culture. Its continuous focus upon product quality and service combined with
international expansion have resulted in accelerating growth rate. 

United States is the largest market for Starbucks coffee. It generates the largest part of
Starbucks’ revenue and the highest number of Starbucks retail stores are also located in U.S.
Over these years, the brand has smartly managed a global supply chain to ensure the
continuous supply of good quality raw materials.

Number of total stores of Starbucks grew higher than 29,300 in 2018 and higher than 30,000
in 2019. Its business model is also a core strength of the brand. Starbucks runs its business
through company operated and licensed stores. The company operated stores generate most
of its revenue.

 Licensed stores contributed just 11% to the total revenue of the brand in 2018. The company
is steadily focusing upon expanding its market share through disciplined global expansion. 
However, it is selectively adding new stores to its international business, opening new ones
only in select areas. 

Learn more about Starbucks, its strengths, weaknesses, opportunities and threats in this
SWOT analysis.

Strengths:
Brand equity :-

As the leading coffee brand of the world, Starbucks enjoys very strong brand equity. Its brand
image has grown stronger with consistent focus upon product quality and customer service.
These are two important strengths of the brand that have helped it build trust and gain brand
recognition. 

In this way, the brand was able to create a strong image without investing a large fortune in
advertising or promotions. Since its foundation, Starbucks did not spend on paid promotions.
(At least, this was the case until a few years ago. Compare it with the other leading beverages
brands like Coca Cola, Pepsi and other FMCG brands and its marketing expenditure is not
even one tenth of theirs.)

 Instead, the entire focus was upon product quality and the customer experience. However, it
was sufficient to build strong brand recognition through publicity and word of mouth. Good
product quality and focus upon sourcing only the best quality raw materials led to higher trust
among customers and resulted in steady growth over the last several years for Starbucks
coffee chain. 

Growing International presence :-

Starbucks revenue from the overseas markets has grown in 2018. Its revenue from the foreign
markets was $5.86 billion in 2017 and grew to $7.3 billion in 2018.

 China is the second leading market for Starbucks and the company has invested in growing
its footprint faster in the Chinese market in recent years. The company had announced in
2017 to acquire the remaining 50% of its business in East China which was operated through
joint ventures with local firms UPEC and PCSC. The acquisition was completed in 2018. 

Now, Starbucks business in China is run entirely through company owned stores. This
required the company to close down 1,396 licensed stores operational in China in 2017. The
total number of company run stores in the China market has grown to 3,521. The ownership
of total 1,477 stores was transferred to Starbucks as a part of the acquisition which includes
1,396 licensed stores operational in 2017, 84 new ones opened in 2018 and 3 that it closed in
2018. The company also opened 528 new company owned stores in China in 2018 and closed
down 24. As of 2018, Starbucks added net 1,981 new stores to its existing 1,540 company
operated stores in China.  East China has a special strategic importance for Starbucks.

  In many other overseas markets, including Japan, Canada, Malaysia and Mexico, the
number of Starbucks stores has grown in 2018. The Japan market has only company owned
stores whose number stood at 1,218 in 2017. In 2018, the company opened 84 new stores and
closed down 16. Now, the number of Starbucks stores in Japan stands at 1,286 all of which
the company owns. Mexico, on the other hand has only licensed stores, where the number of
stores grew to 708 in 2018 from 632 in 2017 with the opening of 76 new stores. Canada had
1,109 company owned and 409 licensed ones as of the end of fiscal 2018. 
Organisational culture & HRM:-

The organisational culture of Starbucks has remained the centre of attraction for several
years. Its unique organisational culture whose core focus is customer experience has been
acclaimed widely. While customers are at the centre of everything that Starbucks does, the
company culture is equally unique in terms of employee focus and employee engagement.

 Employees at Starbucks receive special customer service training and the company maintains
a very cordial environment inside its stores. Moreover, the brand has featured among top 100
in several of Forbes’ lists including ‘World’s Best Employers’ for 2019 and ‘Best Employers
for Women’ 2019. It has also been recognised for its efforts to create an inclusive work
environment that values diversity and inclusion. It ranks at number 35 in Forbes list of
‘World’s Most Valuable Brands’. Forbes also ranked it 31st in its list of the ‘Best Brands for
Women in 2019’. 

The organizational culture at Starbucks is one of the most fundamental drivers of

organizational productivity and performance. It has built a culture of coffee and respect.
However, Starbucks has also been recognized for its focus on ethics and equality. In this way,
the culture of Starbucks sets it apart from the huge crowd of beverages brands. 

Cultural excellence has been recognised to be a fundamental driver of HR performance in the

21st century. The leadership at Starbucks ensures that the staff remain committed to ethics
and equality in all the regions of the world where the company operates.

Number of employees at Starbucks, as of September 2018 was 2,91,000. In United States, it

employed 1,91,000 people and approximately 1,00,000 outside U.S. The company focuses on
employee engagement throughout its global operations. It has created several rewards to
maximise work satisfaction.

Product quality :-

A strong supply chain that spans several regions of the world is also a fundamental strength
of Starbucks coffee. Its supply chain plays a central role in maintaining the quality standards.
As a coffee brand, Starbucks has always brought the best coffee flavors for its customers to
the stores.

 Premium product quality is not just a driver of revenue but also a part of the company’s
positioning strategy. It has also helped the brand earn a distinct place for itself in the market
and far above all the competitors. Strong commitment to product quality has turned Starbucks
into the world’s most renowned premium coffee brand. 

To maintain its quality standards and offer its customers the best coffee in the world,
Starbucks sources from select suppliers that produce the best quality Arabica coffee. The
company has adopted C.A.F.E. practices which is an extensive checklist to determine the
right suppliers and the right produce. It is committed to sourcing 100% of its coffee ethically.

 The company purchased more than 600 million pounds of green Arabica Coffee in 2016,
99% of which had passed the CAFE Practices checklist. The brand is also investing in
policies and practices that empower the community of coffee growing farmers including its
own suppliers located around the world. By forming long term and strong relationships with
its suppliers, the company has been able to ensure continuous supply of good quality coffee
beans. 

Business model :-

Starbucks has a strong business model which is as profitable as it is stable. In the recent
years, the brand has also undertaken some restructuring and made changes that would help it
focus on its core and most profitable offerings. 

At the core of its business model is a premium coffee experience and a distinct culture that
makes Starbucks and its business unique. This business model has helped the coffee brand
acquire faster growth. 

With time, customer trends have changed and to maintain the profitability of its business, the
company has focused on its core and most profitable business segments. For this purpose, it
has done a lot of restructuring and optimization of its store mix. In some leading geographic
markets, its business is now run fully through company owned stores and in others only
through licensed or through a mix of both. This allows Starbucks greater control on its
business and profitability.  

The business of Starbucks is divided into five reportable segments including the three leading
geographical segments – Americas, China/Asia Pacific (CAP) and EMEA (Europe, Middle
East & Africa). Americas are the largest operating segment on the basis of revenue followed
by CAP. The other two reportable segments include channel development and corporate and
others. Revenue distribution for 2018 was as follows :  Americas (68%), CAP (18%), EMEA
(4%), Channel Development (9%) and Corporate and Other (1%).

Strong financial performance :-

The financial performance of Starbucks has steadily improved over the last several years. 

Net revenue of the brand rose by more than 2 billion from fiscal 2017 to fiscal 2018. Total
net revenue for 2018 grew to $24.72 billion from $22.4 billion in 2017.

 In 2018, net earnings attributable to Starbucks reached $4.5 billion or 18.3% of the net
revenue of the brand, rising from $2.9 billion in 2017 or 12.9% of the net revenue of the
company. 

Earnings per share grew to $3.24 in 2018 from $1.97 in 2017.   

The bottom line of Starbucks coffee is strong and there are several factors behind it. Its
business model, international growth and quality as well as HRM, all have helped Starbucks
sustain its growth momentum.  

Net Revenues of Starbucks grew from both its domestic and overseas markets during 2018. 

Revenue from overseas market grew driven mainly by growth in China market. 

U.S. revenue of Starbucks also rose to $ 17,409.4 million compared to $16,527.1 million in
2017. 
Revenue from the foreign markets grew to $7310.1 million in 2018 from $5,859.7 million in
2017. 

Overall, the brand also saw its net sales growing for all product categories excluding
packaged & single serve coffees and teas.

Well Managed Manufacturing distribution and supply chain:

A well managed manufacturing and distribution chain is also among the leading strengths of
the brand which sources from suppliers located in various corners of the world. The company
has 14 leading manufacturing, roasting, warehousing and distribution plants. Apart from
these, the company has leased spaces in various corners of the world for warehousing and
distribution. 

Starbucks roasting, manufacturing and distribution plants. img src=Starbucks Annual Report 2018.

Starbucks has also partnered with other leading brands for sales, marketing and distribution
of its products including Nestle and Pepsi. Pepsi has been a partner since 2015 and in 2018,
Starbucks formed the Global Coffee Alliance with Nestle.

Weaknesses :-

Dependence on the U.S. market :-

The U.S. market is the core market for Starbucks coffee. It accounted for more than 70% of
the company’s revenue in 2018. While Starbucks net sales are growing from overseas
markets, still the brand depends heavily on the U.S. segment. 

To reduce its dependence upon U.S., the company would need to achieve enormous growth
in the Asian markets and specifically China. 

The number of Starbucks stores is also the highest in U.S. As of end fiscal 2018, there were
8,575  total company operated stores in United States and 6,031 licensed stores. 
On the one hand, it is good for the bottom line, since U.S. is also the largest market for coffee
brands, on the other economic fluctuations and other changes in this market could have a
severe impact upon the revenues and profit margins.

Operational expenses :-

Starbucks is committed to quality. However, this has also resulted in higher operational
expenses for Starbucks.

 Total operating expenses  of Starbucks grew to $21.14 billion in 2018 or 85.5% of total net
revenues for the year. 

In a single year, the operating expenses of the brand have grown by around $2.5 billion
whereas revenue grew by only around $2.3 billion. 2017 operating expenses of Starbucks
were $18.64 billion. 

Cost of sales including occupancy costs as well as store operating expenses increased
significantly for Starbucks in 2018 compared to the previous year. The growth in operating
expenses was driven to a large extent by the opening of more company owned stores in the
China market as well as higher restructuring and impairment costs. Growth in other expenses
including employee salaries and benefits also caused growth in operating expenses.  

Operating margin as well as consolidated operating income of Starbucks were also lower in
2018 compared to 2017. Operating margin declined to 15.7% in 2018 from 18.5% in 2017.
Consolidated operating income of Starbucks also came down to $3.9 billion in 2018 from
$4.1 billion in 2017.

Premium pricing :-

Starbucks sells only premium products including beverages and snacks.  The premium
pricing strategy of Starbucks on the one hand is good for profit margins, on the other, it limits
the customer base to only the higher end of the market. Starbucks is now focusing on the
Asian market. However, growing its customer base faster would have been easier, if the
brand had used a more competitive pricing strategy.

 The situation can become all the more challenging in times of economic fluctuation. 
However, maintaining its premium pricing is important to maintain the premium image of the
brand. Increased promotional expenses and operating expenses have shrunk its profit margins
in 2018.

 Faster growth in the Asian markets requires prices to be more competitive. Starbucks sources
the best quality Arabica beans from suppliers in various corners of the world. Store operating
expenses of the brand are also high because of the premium customer experience it offers. 

 Starbucks could add more customers from middle class by following a competitive pricing
strategy. There are other related challenges too which originate from higher prices and affect
the bottom line including taxes, employee expenses and maintaining a premium brand image.

Opportunities :-
International expansion : –

The U.S. market still holds a lot of potential. In the recent years, the coffee industry has
enjoyed impressive growth rate in America. As per research by Allegra, the U.S. coffee
market has grown to a total valuation of $45.4 billion in 2018 and number of total coffee
outlets in U.S. to 35,616. Industry leaders are positive about growth in U.S. and expect the
number of outlets to grow to 40,800 by 2023 with a 5 years CAGR growth rate of 2.8%. 

Starbucks holds the lion’s share in U.S. coffee market at 40.1% followed by Dunkin Donuts
and Tim Hortons. Together, the big three hold 68.1% of the total branded coffee market
share. However, while U.S. is an excellent market for coffee brands, opportunities also
abound outside U.S. International expansion can bring much faster growth for Starbucks.

 China as well as several other Asian markets too have a large base of customers. Starbucks
has maintained strong presence in major markets and is investing aggressively in growing its
number of stores while also retaining its focus on core products. Several regions in Asia
Pacific have seen impressive economic growth in the recent period and this can be an
opportunity for leading coffee and beverages brands including Starbucks, Dunkin Donuts and
Tim Hortons.

Digital marketing : –

Traditionally, Starbucks has not  relied upon paid marketing tactics to grow market share and
customer base. If it was not for the increased competition in the market and other challenges
which have grown with time, the brand’s investment in paid advertising would have remained
around zero. In the recent years, it has started investing in advertising but its total advertising
costs are a very small percentage of its total operating expenses. Advertising expenses fell in
2018 compared to the previous year, coming down to $260.3 million from $282.6 million in
2017.  

The world of digital marketing has expanded a lot over the past several years. For fashion,
food and beverages brands there are several low cost opportunities including social media
promotions and blogging as well as video advertising. Social media accounts are one of the
central engagement channels for coffee and beverages brands. Starbucks uses these channels
to grow follower engagement and for promotions as well as seasonal campaigns. 

However, for deeper engagement, it might need to learn from fashion and entertainment
brands and the use of microsites for attracting new customers and familiarizing them with the
company culture as well as the product range. The company has a nice looking blog that
gives the followers a regular glimpse of its culture, supply chain and product mix as well as
ongoing developments in other areas including human resource management and supplier
relationships.

Partnerships with other brands :-

Starbucks partnered Pepsico in 2015 for the sales and marketing of a limited range of its
products in Latin America. The two entered into an agreement for the sales, marketing and
distribution of “Starbucks ready-to-drink (RTD) coffee and energy beverages including
Starbucks Frappuccino chilled coffee drinks, Starbucks Double Shot Espresso and Cream,
and Starbucks Refreshers beverages in Latin American market”. 
 In 2018, Starbucks has entered into an agreement with Nestle for the sales and marketing  of
its consumer packaged goods (“CPG”) and foodservice products. Starbucks also received an
upfront prepaid royalty payment of approximately $7 billion. Such partnerships have helped
Starbucks extend its presence throughout the globe. More of such partnerships will help the
company grow its sales and revenue as well as marketing reach.

Threats : –

Operational costs :-

Growing operational costs are one of the leading challenges before the company. Due to the
growth in operating expenses, operating income of Starbucks is reduced. In 2018, total
operating expenses of Starbucks grew to $21,137.4 million and operating income came down
to $ 3,883.3 million. Operating expenses were higher in 2018 and operating income lower as
compared to 2017. 

In 2017, operating expenses were $18,643.5 million and operating income $ 4,134.7 million
in 2017. In 2019 also the operating expenses of Starbucks have risen and operating income
remained flat. Total operating expenses for the first three quarters has grown to $16,973.1
million compared to $15,702.5  million in the same period last year. Operating margin of the
brand also dropped in 2018 versus the previous year.

Regulational barriers :-

Regulation barriers have grown larger in the food and beverages industry over the last several
years. This has led to a need for focus on compliance and quality in all the markets where
Starbucks operates. On the one hand, these barriers add to the operational costs of the brands,
on the other, they can also reduce growth rate. Higher costs of compliance and higher
operational costs reduce profit margins. Regulational pressures often become barriers to fast
growth.

Customer trends :- 

Changing customer trends can shift the demand patterns. Last year, Starbucks made  several
changes to its product mix. This was in response to the changing consumer trends. People
want more health friendly products. Changes in beverage mix also affected the company’s
operating margins in 2018. Starbucks needs to remain ready for such changes to maintain its
market leading position and retain its customer base. However, a large group of experts
works at Starbucks to take care of new product development. The company regularly
introduces new flavours to delight its customers.

Conclusion:

Starbucks has acquired fast growth in recent years through planned expansion and
partnerships. In 2018, it acquired its East China business and converted the entire Chinese
business into company operated model. It has also continued to optimise its mix of company
owned and licensed stores. In some of its markets, the brand has also adopted a wholly
licensed model. Operating expenses of Starbucks have grown but so have its revenue and
number of stores worldwide. Its partnership with Nestle and Pepsico have helped it expand its
marketing and distribution reach. The U.S. coffee market has experienced impressive growth
during past five years. It is the largest market of Starbucks products. However, Starbucks is
also focusing on the Asian markets which can be a strong source of revenue in coming years.
Digital marketing and customer engagement can also help Starbucks which has traditionally
refrained from investing in marketing. There are challenges ahead for the brand. However, it
can easily sustain with the help of a strong supply chain and distribution network.

Sources:

Starbucks Annual Report 2018.

www.starbucks.com

https://bstrategyhub.com/swot-analysis-of-starbucks-starbucks-swot/

https://notesmatic.com/2019/07/starbucks-swot-analysis-2019/