Starbucks Corporation
Managing a High Growth Brand
Overview
• In 2002, had 5,400 stores in North America,
Latin America, the Pacific Rim. Europe and
the Middle East
• Growth:
– open one store per day (average)
– revenue 2001=$2.1 billion
– Licensing partnerships
Creating the Transformation
• Opened 1971 in Seattle’s Pike Place Market
with European coffee in a coffee
consumption declining U.S.
• Howard Schultz – CEO 1982 – preserve core
values and expose new customers
• Coffeehouse model – elegance of European
coffeehouse culture but familiar enough for
broad appeal
– Italian feel with American casual warmth
– Wanted it to be the “Third Place” for people
The Starbucks Team
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Recruited management from other areas
State of the art facilities
Flavor Lock bags
Training of employees emphasized
Employees: insurance & stock options
“Do whatever it takes to please the customer
as long as it is moral, ethical and legal”
Growth Plan
• Phase 1: Pacific Northwest & Chicago, LA,
San Francisco, NY and DC
• Phase 2: Boston & Atlanta (regional prefs)
• Phase 3: Florida & Hawaii (warm climates)
• Phase 4: International (Tokyo)
• All owned and operated by company (no
franchises) to control the brand
• Hub markets & spoke markets
Joint Ventures and Partnerships
• Host Marriott – airports, hotel lobbies, malls
and convention centers
• United Airlines – 2200 daily flights
• Others: Nordstrom, ITT/Sheraton, Westin,
Holland American Cruiselines, Barnes &
Nobles and Albertson’s.
• Pepsi (Frappuccino) and Dryers (ice cream)
• Kraft for supermarket distribution
Other Partnerships
• Johnson (as in Magic) Development Corporation –
Urban Coffee Opportunities
• Alliance for Environmental Innovation – less wasteful
carryout cup
• Conservation International – Shade Grown Mexican
coffee
• Fair Trade certified coffee – pressure from organization
• Starbucks Foundation charity – literacy programs &
Starbucks Holiday Angels
Initial Growth Results
• 1990s – customers averaged 18 store
visits/month with expenditure of $3.50 a
visit.
• One a day latte plus scone - $1400/year
• Annual growth rate of sales and profits
exceeding 50% through the 1990s.
• And then it slowed down – sales flattened
and new store openings fell behind schedule,
ice cream and Frap did not meet sales
expectations. Now What??
The Plan
• Core business
– Wider scope of food and drinks
– Tazo Teas
– Joe Magazine
• Global Expansion
• Internet Developments
– Direct mail catalog
– Oxygen media for women
Results
• Investors felt the internet strategy was to far
from core business and diluted focus. Stock
price dropped. So they revised the web
strategy to focus on “products” rather than
creating a community
• Joe failed and was scrapped
• Same store sales picked up
Challenges
• What are the keys to Starbucks’ brand equity?
• Did they go too far with product extensions?
Not far enough?
• Evaluate their strategies, especially the growth
strategies.