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How Starbucks won Coffee

The Starbucks Case Study

By Debojeet SahaPublished 3 years ago 6 min read
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Overview

When we think about the biggest coffee chain company "Starbucks" always comes first in our mind. Worldwide, Starbucks has more than 30 thousand retail shops in 78 countries. The USA only has more than 15 thousand coffee shops, which contributes 50% of total coffee shops. The company serves the 2/3 population in the USA who love drinking coffees.

So what is the reason behind Starbucks being so unique and successful? Today in this article I will discuss the mystery behind Starbucks ' success.

The History

The story starts in the 1970s. In Seattle, USA three friends Jerry Baldwin, Zev Siegl, and Gordon Bowker thought of doing something together. All of them liked coffee very much especially Gordon Bowker. Frequently, he used to drive from Seattle to Vancouver to buy good quality coffee, cause for him that coffee was the best in the whole USA. Jerry and Zev also liked that coffee and used to buy coffee from Gordon. From there they decided to start a coffee shop. They saw there was a demand for good quality coffee which was not easily feasible.

Firstly they started a coffee shop in California, for managing the shop they hired the owner of Peets Coffee, Mr. Alfred Peet. He was the one who brought roasted coffee to the USA market. For the next 3-4 months Jerry, Zev, and Gordon learned to do coffee business from Alfred Peet.

Then with 1000 dollars capital, they started the first Starbucks coffee shop in Seattle, USA. Although at first readymade coffee was not served rather they used to sell coffee beans and coffee making equipment. Slowly they started expanding their business and supplied coffee beans to different restaurants. Starbucks' main focus was to supply the best quality coffee beans to the consumers.

CNBC

The Entry of Howard Schultz

In 1980, Zev Siegl left Starbucks. After few days Howard Schultz was appointed as the company's director of Marketing and Sales. He was really fond of Starbucks' coffee but he thought why readymade coffee was not served. Later that year, Schultz was sent to Italy for participating in a trade show. There he went to local coffee shops and was impressed with that. After coming back from Italy, Schultz gave an idea to Jerry and Gordon for expanding their business.

He proposed along with selling coffee beans they should also sell instant-made coffee to lure more customers. Jerry and Gordon didn't like the idea much because at that time their main focus was to sell coffee beans. Schultz didn't want to miss this opportunity so in the year 1986 he resigned from Starbucks to start his own coffee chain.

With the help of some investors, he started his own shop and named it Giornale Coffee. On the other hand in 1986 Gordon Bowker left Starbucks, which made Jerry Baldwin the sole owner of the company. As well he bought Peet's Coffee from Alfred Peet. In 1987, Baldwin decided he will only manage Peets coffee and sell the Starbucks company.

The Business

The same year Howard Schultz bought Starbucks from Baldwin for 3.8 million dollars and merged with Giornale Coffee. When Schultz bought Starbucks that time there were only 6 coffee shops. To expand the company he applied an aggressive expansion strategy and within 2 years managed to launch 46 new coffee shops. In 1992, that number increased to 165, and the company's revenue was 73.5 million dollars. After 4 years the number crossed 1000 with the inclusion of their first international expansion in Japan & Singapore. Within 3 years they also opened their 2000th shop.

In the year 2000, Schultz was made the Executive Chairman of the company. Until then Starbucks has expanded in 12 different countries with more than 3500 coffee shops. That year company's total revenue was 2 billion USD and in 2007 that touched 9 billion USD. But due to the global recession, their growth got a break and the stock price also tanked by 50 percent. At that time Schultz was not directly managing the company. Ultimately he was brought to save the company from the crisis. With the news of Schultz returning the stock price jumped by 9 percent.

Now he shifted his strategy from aggressive growth to customer experience. Schultz dreamed Starbucks should not only be a coffee shop rather customers will experience a homely environment from the shop. He started modifying all the shops and this change in strategy bought a positive result to the company. This led to an increase in the percentage of sales from all the shops.

In 2009, Starbucks' stock price increased by 143%. From 2009-2012 they didn't open any new shops rather worked hard in making the existing shops more profitable. They even have many roasteries known as Starbucks Signature Store. The biggest Roastery is in Chicago, USA. It can hold 1000 customers at a time.

Starbucks is so huge that if we combine the stores owned by competitors like Dunkin Donuts, Costa Coffee, and Tim Hortons still it won't match Starbucks.

Currently, the brand value of Starbucks is 38.4 billion USD.

What Makes Starbucks so successful

Firstly, we have to talk about their smart concept. All the shops are decorated as such that you will not only visit to have coffee, you can also go there to spend some quality time. This has led to a new coffee culture which added to their success. Starbucks aims to give customers a delightful experience. They observe from the eyes of a customer and try to maintain a customer-friendly environment. That is the reason why many freelancers have chosen Starbucks as their office.

Secondly, we have to talk about their creative marketing strategy. In the USA within kilometres, you can find more than one coffee shop. This way they are kind of manipulating customers. If someone wants to have a coffee then the first shop which will catch their attention will always be a Starbucks Shop. This indeed is a good strategy.

If you talk about their service then it is surely one of the best in the world. You will never see any staff behaving rudely with any customers.

Starbucks is also not far behind in the digital space. They have invested heavily in mobile marketing. They have an app where you can purchase products, earn rewards, redeem rewards, pay online, and many more. Starbucks also invests a huge percentage in brand promotions. In 2014 they launched a campaign "Meet me at Starbucks". This was a documentary filmed at the same time in 28 countries in one day, by 39 filmmakers in 39 stores to capture the emotions of the customers across the globe. This campaign was a great success.

Meet Me at Starbucks official video

My Opinion

These are all the reasons why Starbucks is way ahead of the competition and is currently the world's largest coffee chain. The credit for the success of Starbucks goes to Howard Schultz.

If you want to know the in-depth story of Starbucks then you should read the book written by Howard Schultz himself " Pour your Heart Into It".

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About the Creator

Debojeet Saha

Full-time Engineer, Part-time writer. I write articles on different topics like Business Case studies, Finance, Startups, Mindfullness, Podcasts, etc.

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