Starbucks’ Strategy in the Specialty Coffee Industry
In 2008, Starbucks was the world’s leading specialty coffee retailer, with more than 11,000 stores
in the United States and approximately 4,500 stores in 43 other countries. Since 2000. The
company’s sales of ready to drink coffee, coffee beans, coffee flavored products, pastries, and
coffee accessories had grown by more than 20 percent annually to reach $9.4 billion in 2007. Its
net earnings had increased from $95 million in 2000 to $672 million in 2007.
The company’s success and dramatic growth were attributable to its superior execution of an
excellent strategy. Starbucks’ business strategy was made up of the following elements:
Expand the number of Starbucks stores domestically by blanketing metropolitan areas,
then adding stores on the city’s perimeter. Starbucks also made its locations readily
available to consumers by entering into licensing agreements with food service vendors
operation in airports, universities, hospitals, and other places where people congregated.
Make Starbucks a global brand by opening stores in an increasing number of foreign
locations. The international expansion effort involved opening company owned and
operated stores in some foreign countries, while entering into licensing agreements with
reputable and capable local companies in other countries.
View each store as a billboard for the company and as a contributor to building for the
company’s brand and image. Each detail was scrutinized to enhanc3e the mood and
ambience of the store, to make sure everything signaled best of class and reflected the
personality of the community and the neighborhood. The thesis was “Everything
matters.” The company went to great lengths to make sure the store fixtures, the
merchandise displays, the colors, the artwork, the banners, the music, and the aromas all
blended to crate a consistent, inviting, stimulating environment that evoked the romance
of coffee, that signaled the company’s passion for coffee, and that rewarded customer
with ceremony, stories and surprise.
Broaden in store product offerings. Starbucks stores went beyond coffee to include coffee
flavored ice cream, Frappucino, teas, fresh pastries and other food items, candy, juice
drinks, music CDs, coffee mugs, and coffee accessories.
Fully exploit the growing power of the Starbucks name and brand image with out of store
sales. Example of such out of store sales included the sale of ground coffee and coffee
beans in U.S. grocery stores. Starbucks also sold Frappuccino in U.S. grocery and