By Jamie Barrie A s with a lot of successful brands, Starbucks’s rich history in the coffee industry began some 47 years ago with just one Seattle cafe which has grown into the largest coffeehouse company in the world with 27,339 retail locations worth approximately $80- billion (US) as of the first quarter of 2018. Starbucks is well ahead of the pack with coffee shop chains, Dunkin Donuts with about 10,000 restaurants, Tim Hortons with 4,300 outlets, and Costa Coffee with nearly 1,700 stores worldwide. Even with over 27,000 cafes globally, Starbucks is still having trouble getting U.S. customers in the door as often as they’d like. Sales are good, but customer visits per day are dropping and same-store sales dropped this year. Starbucks did show a fourth-quarter sales increase of 4 percent however, most of that increase came from increased prices not more units sold. Howard Schultz, CEO until 2000, pushed Starbucks to expand in the 1980s and 90s, and when it went public in 1992, it had 165 stores. By 1996, it boasted 1,000 locations, including ones in Japan and Singapore. Two years after that, Starbucks was up to 2000 stores internationally. Now Starbucks has over 14,000 locations in the U.S. and over 1,500 Starbucks in Canada, where they are the second largest coffee chain, behind Tim Hortons. More locations are not always a good thing as the expansion has actually hurt its sales and they are expected to close 150 locations in 2019 that are performing below expectations.
As consumer preferences change so do Starbucks products, as coffee only represents approximately 50 percent of its sales with cold beverages like teas, Starbucks Refreshers energy drinks and cold-brew coffee making up the other half of their beverage sales. Starbuck’s mobile app has been a huge success with increasing the number of loyalty members. It is good news for the coffee chain, which also recently announced a new U.S. delivery partnership with Uber Eats. Starbucks’ strategy also includes their Reserve Roasteries — massive 20,000-square-foot stores that are designed to be tourist destinations. Starbucks plans to experiment with different brewing methods in these stores. Starbucks is also looking at its coffee alliance with Nestle in the coming years to push the company beyond the $80- billian mark, but only time will tell how that all filters out.
Markets today are not like they used to be when it comes to brand and product loyalty as consumer prefer- ences are changing faster than most coffee chains can change a filter. Plus customers are becoming more health aware and no longer grabbing the sugary staples that were once brands like Coco-Cola and Starbucks’ claim to fame.
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JANUARY 2019 • SPOTLIGHT ON BUSINESS MAGAZINE
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