TheMarketForIdeas

Coffee? What is coffee? A daily ritual enjoyed by billions of people worldwide. For hundreds of years, this magical beverage has forged connections between people, contributing to the exchange and distribution of information. In this era where everything has become digitized, and face-to-face socialization is increasingly rare, coffee inspires people to have discussions, write, read, stimulate their imagination, and encourages people to meet, communicate, have fun, or simply spend time together, becoming a social bond. Cafes have been and continue to be places where people unwind and feel at home, where culture, time, and social barriers merge. And coffee is the second most valuable export of developing countries and an important element of their economies. Its energizing effect has made it the most consumed beverage after water.

The seed

We have all heard that Starbucks is called “the McDonald’s of coffee” because it is one of the largest coffee shop chains globally, with around 21,500 cafes in 64 countries worldwide. Starbucks representatives have stated that their company doesn’t just sell coffee: “We’re a neighborhood gathering place, a part of the daily routine and we couldn’t be happier about it.”

How did it all start? The story of the founding of Starbucks began in 1971 when three friends, passionate about coffee – the English teacher Jerry Baldwin, the history teacher Zev Siegl, and the writer Gordon Bowker – decided to open the first store on March 31, 1971, in Pike Place Market, Seattle, Washington. Initially, they didn’t just serve coffee but also sold coffee beans, tea, spices, coffee machines, and accessories. The initial idea came from a good friend of the three, immigrant Alfred Peet, who was an entrepreneur specializing in importing tea and coffee. He taught his customers how to grind their own coffee to enjoy a fresh and high-quality cup. When choosing the name “Starbucks,” which later became one of the most famous coffee shop chains in the world, the trio drew inspiration from Herman Melville’s novel “Moby Dick,” with Starbucks being a character known for his great love of coffee. Another name idea came from Terry Heckler, who, along with Gordon Bowker, owned an advertising agency. He believed that words starting with “st” had significance and a powerful impact, and the “Starbo” part came from the city’s name.

The stem

Howard Schultz was the president and CEO between 1986 and 2000, and again between 2008 and 2017. In 1983, Howard Schultz visited Italy and was pleasantly impressed by the cafes in Milan, from where he returned with a deep appreciation for cappuccino and latte, which tripled sales the following year. This inspired him to open a cafe with a similar culture to Italy’s in Seattle.

In 1985, Schultz opened a cafe named Il Giornale, serving coffee and espresso drinks made from Starbucks coffee beans. Two years later, the original founders sold the Starbucks business to Schultz, and Il Giornale was transformed into Starbucks, marking the beginning of the business’s development. By 1989, Starbucks had approximately 55 cafes in the United States. In the summer of 1992, the Initial Public Offering (IPO) was completed on the stock market, generating revenues of $73.5 million and a market value of $271 million. Four years later, Starbucks opened its first store outside North America in Tokyo. At this point, Starbucks ranks among the top 500 revenue-generating companies in the United States, with a market value exceeding $100 billion and 32,600 stores worldwide, making it a Fortune 500 company.

The product line-up includes premium quality coffee, teas, spices, and baked goods designed to entice with their unmistakable aroma, always fresh and ready to be enjoyed. Starbucks licenses and markets its brands, distributing them in grocery stores.

The fruit

Starbucks owns over 33,833 coffee shops worldwide, with half of them located in the United States. There is at least one Starbucks in 3,089 cities in the US. The majority of cafes are in New York (188 locations), followed by Chicago with 178 locations. Los Angeles and Las Vegas each have 164 cafes. Howard Schultz achieved an unparalleled feat by opening cafe after cafe with colossal success. In the latter part of 2021, Starbucks grew by 4%, opening an additional 538 cafes, reaching a total of 33,833 locations.

The company has a business and marketing plan that leaves a lasting impression on the global stage, particularly in the coffee industry. Specialty magazines speak of Starbucks as a leader in the coffee industry, willing to pay well above market rates for coffee beans. These rates are mostly negotiated by brokers, leaving farmers with insufficient income in many cases.

In 2013, the company acquired a coffee plantation in Costa Rica to turn it into a research centre, aiming to discover how to produce the highest quality coffee. The company operates according to environmental sustainability standards, collaborating with other farmers to find ways to produce quality coffee despite challenges from climate change and various diseases. Each coffee bean harvested, each load of coffee shipped and distributed around the world, for someone to enjoy with friends, family, or even strangers, must meet the highest standards.

The taste

Starbucks is one of the largest buyers of certified coffee globally, with 90% of its tea and coffee blends being certified organic. Despite half of Starbucks stores being franchises, the company’s highest revenues come from its company-operated stores, representing 81.5% of the total revenue of $22.4 billion. However, recent economic growth has been attributed to licensed stores.

Following an interview with Howard Schultz for YourMoney magazine, where he talks about the construction and development of the brand, providing detailed insights in his book Put Your Heart into It: How Starbucks Built a Company One Cup at a Time. Even though coffee was not his invention, this individual managed to make it well-known and built a true global empire.

All in all, Starbucks cannot be considered just a simple coffee shop. It is an example of business skills, perseverance, and dedication. Starbucks had a clear vision regarding product, brand awareness, easy accessibility, diversity, and customization of the products sold, making it known worldwide. Like in any business, there were ups and downs, but it has remained a leader in the global coffee market to this day, making it a role model in the field of business and personal development – “a strategy many giants swear by”.

Photo source: PxHere.

References:

https://businessmodelanalyst.com/starbucks-business-model/

https://tedxsydney.com/news

https://www.britannica.com/topic/Starbuck

https://www.mappr.co/worlds-best-starbucks

https://www.wall-street.ro