Starbucks
Starbucks Corporation is an American multinational chain of coffeehouses and roastery reserves headquartered in Seattle, Washington. As the largest coffeehouse in the world, Starbucks is seen to be the main representation of the United States' second wave of coffee culture.[5][6] Since the 2000s, third wave coffee makers have targeted quality-minded coffee drinkers with hand-made coffee based on lighter roasts, while Starbucks nowadays uses automatic espresso machines for efficiency. The company operates 30,000 locations worldwide in over 77 countries, as of early 2020. Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea products, Evolution Fresh juices, Frappuccino beverages, La Boulange pastries, and snacks including items such as chips and crackers; some offerings (including their annual fall launch of the Pumpkin Spice Latte) are seasonal or specific to the locality of the store.
Headquartered in the Starbucks Center, the company was founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker in the Pike Place Market. During the early 1980s, they sold the company to Howard Schultz who – after a business trip to Milan, Italy – decided to make the coffee bean store a coffeeshop serving espresso-based drinks. Schultz first tenure as chief executive, from 1986 to 2000, led to an aggressive expansion of the franchise, first in Seattle, then across the West Coast. Despite an initial economic downturn with its expansion into the Midwest and British Columbia, the company experienced revitalized prosperity with its entry into California in the early 1990s through a series of highly-publicized coffee wars. Schultz was succeeded by Orin Smith who ran the company for five years, positioning Starbucks as a large player in fair trade coffee and grew sales to $5 billion. Jim Donald, served as chief executive from 2005 to 2008, orchestrating a large-scale earnings expansion. Schultz returned as CEO in the middle of the 2008 financial crisis and spent the succeeding decade growing its market share, expanding its offerings, and reorienting itself around corporate social responsibility. Kevin Johnson took over from Schultz in 2017, and continues to serve as the firm's chief executive.
Many stores sell pre-packaged food items, hot and cold sandwiches, and drinkware including mugs and tumblers; select "Starbucks Evenings" locations offer beer, wine, and appetizers. Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold at grocery stores. In 2010, the company began its Starbucks Reserve program for single-origin coffees and high-end coffee shops. Starbucks operates six roasteries with tasting rooms and 43 coffee bars as part of the program. In November 2019, the world's largest Starbucks opened in Chicago on the Magnificent Mile as the sixth roastery location. Starbucks has received significant and sustained criticism about its business practices, corporate affairs, and role in society. Conversely, its franchise has commanded substantial brand loyalty, market share, and company value.
Founding
The first Starbucks was opened in Seattle, Washington, on March 31, 1971,[7] by three partners who met while they were students at the University of San Francisco:[8] English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker were inspired to sell high-quality coffee beans and equipment by coffee roasting entrepreneur Alfred Peet after he taught them his style of roasting beans.[9] Bowker recalls that Terry Heckler, with whom Bowker owned an advertising agency, thought words beginning with "st" were powerful. The founders brainstormed a list of words beginning with "st," and eventually landed on "Starbo," a mining town in the Cascade Range. From there, the group remembered "Starbuck," the name of the chief mate in the book Moby-Dick.[10] Bowker said, "Moby-Dick didn't have anything to do with Starbucks directly; it was only coincidental that the sound seemed to make sense."[10][11]
The first Starbucks store was located in Seattle at 2000 Western Avenue from 1971–1976. This cafe was later moved to 1912 Pike Place.[12] During this time, the company only sold roasted whole coffee beans and did not yet brew coffee to sell.[13] During their first year of operation, they purchased green coffee beans from Peet's,[14] then began buying directly from growers.
Sale and expansion
In 1984, the original owners of Starbucks, led by Jerry Baldwin, purchased Peet's.[15] During the 1980s, total sales of coffee in the US were falling, but sales of specialty coffee increased, forming 10% of the market in 1989, compared with 3% in 1983.[16] By 1986, the company operated six stores in Seattle[16] and had only just begun to sell espresso coffee.[17] In 1987, the original owners sold the Starbucks chain to former manager Howard Schultz, who rebranded his Il Giornale coffee outlets as Starbucks and quickly began to expand.[18] In the same year, Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois.[19] By 1989, 46 stores existed across the Northwest and Midwest, and annually Starbucks was roasting over 2,000,000 pounds (907,185 kg) of coffee.[16] At the time of its initial public offering (IPO) on the stock market in June 1992, Starbucks had 140 outlets, with revenue of US$73.5 million, up from US$1.3 million in 1987. The company's market value was US$271 million by this time. The 12% portion of the company that was sold raised around US$25 million for the company, which facilitated a doubling of the number of stores over the next two years.[20] By September 1992, Starbucks's share price had risen by 70% to over 100 times the earnings per share of the previous year.[13] In July 2013, over 10% of in-store purchases were made on customer's mobile devices using the Starbucks app.[21]
The company once again utilized the mobile platform when it launched the "Tweet-a-Coffee" promotion in October 2013. On this occasion, the promotion also involved Twitter and customers were able to purchase a US$5 gift card for a friend by entering both "@tweetacoffee" and the friend's handle in a tweet. Research firm Keyhole monitored the progress of the campaign and a December 6, 2013, media article reported that the firm had found that 27,000 people had participated and US$180,000 of purchases were made to date.[22][23] As of 2018, Starbucks is ranked 132nd on the Fortune 500 list of the largest United States corporations by revenue.[24] In July 2019, Starbucks reported "fiscal third-quarter net income of $1.37 billion, or $1.12 per share, up from $852.5 million, or 61 cents per share, a year earlier." The company's market value of $110.2 billion increased by 41% in the mid 2019. The earnings per share in quarter three were recorded 78 cents, much more than the forecast of 72 cents
The first Starbucks location outside North America opened in Tokyo, Japan, in 1996.[27] On December 4, 1997, the Philippines became the third market to open outside North America with its first branch in the country located at 6750 Ayala Building in Makati City, Philippines.[28][29] Starbucks entered the U.K. market in 1998 with the $83 million[30] USD acquisition of the then 56-outlet, UK-based Seattle Coffee Company, re-branding all the stores as Starbucks. In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia. After people learned that these restaurants were owned by Starbucks, Starbucks converted the restaurants to Starbucks cafes.[31] Australia's first Starbucks store opened in July 2000 in Sydney.[32] After a massive downturn in 2008, the remaining Australian Starbucks stores were purchased in 2014, with the company planning a more restrained expansion.[33][34] In September 2002, Starbucks opened its first store in Latin America, at Mexico City. Currently, there are over 500 locations in Mexico and there are plans for the opening of up to 850 by 2018.[35] In October 2002, Starbucks established a coffee trading company in Lausanne, Switzerland to handle purchases of green coffee. All other coffee-related business continued to be managed from Seattle.[36]
In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises for $72m. The deal only gained 150 stores for Starbucks, but according to the Seattle Post-Intelligencer, the wholesale business was more significant.[37] In September 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks, escalating a regional coffee war. This sale included the company-owned locations of the Oregon-based Coffee People chain. Starbucks converted the Diedrich Coffee and Coffee People locations to Starbucks, although the Portland International Airport Coffee People locations were excluded from the sale.[38] In August 2003, Starbucks opened its first store in South America in Lima, Peru.[39] In 2007, the company opened its first store in Russia, ten years after first registering a trademark there.[40] In 2008, they purchased the manufacturer of the Clover Brewing System. They began testing the "fresh-pressed" coffee system at several Starbucks locations in Seattle, California, New York, and Boston.[41]
In early 2008, Starbucks started a community website, My Starbucks Idea, designed to collect suggestions and feedback from customers. Other users comment and vote on suggestions. Journalist Jack Schofield noted that "My Starbucks seems to be all sweetness and light at the moment, which I don't think is possible without quite a lot of censorship."[42] In May 2008, a loyalty program was introduced for registered users of the Starbucks Card (previously simply a gift card) offering perks such as free Wi-Fi Internet access, no charge for soy milk and flavored syrups, and free refills on brewed drip coffee, iced coffee, or tea.[43] In 2009, Starbucks began beta testing its mobile app for the Starbucks card, a stored value system in which consumers access pre-paid funds to purchase products at Starbucks.[44] Starbucks released its complete mobile platform on January 11, 2011. On November 14, 2012, Starbucks announced the purchase of Teavana for US$620 million in cash[45] and the deal was formally closed on December 31, 2012.
On February 1, 2013, Starbucks opened its first store in Ho Chi Minh City, Vietnam,[47][48][49] and this was followed by an announcement in late August 2013 that the retailer will be opening its inaugural store in Colombia. The Colombian announcement was delivered at a press conference in Bogota, where the company's CEO explained, "Starbucks has always admired and respected Colombia's distinguished coffee tradition."[50] In May 2014, the Starbucks operations in South Korea launched a mobile ordering system named Siren Order, which is accessible through a local version of Starbucks smartphone application.[51][52] Starbucks in the U.S. later launched a similar system named Mobile Order & Pay, starting with Portland, Oregon in December 2015.[53] The service have since expanded nationwide, and in late March 2018, the company opened the system (previously available to Starbucks Rewards members only) to all customers.[54][55] In August 2014, Starbucks opened their first store in Williamsburg, Brooklyn. This location will be one of 30 Starbucks stores that will serve beer and wine.[56] In September 2014, it was revealed that Starbucks would acquire the remaining 60.5 percent stake in Starbuck Coffee Japan that it does not already own, at a price of $913.5 million.[57] In August 2015, Starbucks announced that it will enter Cambodia, its 16th market in the China/Asia Pacific region. The first location will open in the capital city of Phnom Penh by the end of 2015.[58]
In February 2016, Starbucks announced that it will enter Italy, its 24th market in Europe. The first location will open in Milan by 2018.[59] In August, startup company FluxPort introduced Qi inductive charging pads at select locations in Germany.[60][61][62] In September 2016, Starbucks announced a debut of its first-ever original content series called "Upstanders" which aims to inspire Americans with stories of compassion, citizenship, and civility. The series features podcasts, written word, and video, and will be distributed via the Starbucks mobile app, online, and through the company's in-store digital network.[63] On July 27, 2017, Starbucks acquired the remaining 50% stake in their Chinese venture from long-term joint venture partners Uni-President Enterprises Corporation (UPEC) and President Chain Store Corporation (PCSC).[64]
On March 21, 2018, Starbucks announced that it is considering the use of blockchain technology with an idea to connect coffee drinkers with coffee farmers who eventually can take advantage of new financial opportunities. The pilot program is going to start with farmers in Costa Rica, Colombia and Rwanda in order to develop a new way to track the bean to cup journey.[65] On June 19, 2018, Starbucks announced the closing of 150 locations in 2019, this is three times the number the corporation typically closes in a single year. The closings will happen in urban areas that already have dense clusters of stores.[66] In 2018, Starbucks expanded its partnership with Uber Eats to bring its beverages to U.S. customers' doorsteps, as it had already done for some time in China.[67] In November 2019, Starbucks opened its biggest store ever on Michigan Avenue, Chicago. The store is open seven days a week and has 200 employees.[68] On 20 March 2020, due to the COVID-19 pandemic, Starbucks decided to close all the cafe-only stores in the United States for two weeks. During that time, only drive-thru- and delivery-only will function. According to the company representatives, all workers will be paid for the next 30 days whether they go to work or stay home.[69] COVID-19 lockdowns caused Starbucks to suffer from a general 10% sales decrease and a 50% decrease in China where quarantine measures were especially strict.[70]
Corporate governance
Kevin Johnson, who served as president and chief operating officer from 2015 to 2018, has been the chief executive of Starbucks since June 2018. Myron Ullman became the firm's chairman in June 2018. Both Johnson and Ullman succeeded Howard Schultz who served in both capacities from 2008 to 2017.[71] Orin Smith was President and CEO of Starbucks from 2001 to 2005 after-which Jim Donald took over as CEO until 2008.[72] Since 2018, Schultz has served as the firm's first Chairman emeritus.
Analysts have long believed that the firm's corporate governance must determine how to contend with higher materials prices and enhanced competition from lower-priced fast-food chains, including McDonald's and Dunkin' Donuts. In October 2015, Starbucks hired its first chief technology officer, Gerri Martin-Flickinger, to lead its technology team.[73] Starbucks maintains control of production processes by communicating with farmers to secure beans, roasting its own beans, and managing distribution to all retail locations. Additionally, Starbucks's Coffee and Farmer Equity Practices require suppliers to inform Starbucks what portion of wholesale prices paid reaches farmers.[74][75]
Products
In 1994, Starbucks bought The Coffee Connection, gaining the rights to use, make, market, and sell the "Frappuccino" beverage.[76] The beverage was introduced under the Starbucks name in 1995 and as of 2012, Starbucks had annual Frappuccinos sales of over $2 billion.[76] The company began a "skinny" line of drinks in 2008, offering lower-calorie and sugar-free versions of the company's offered drinks that use skim milk, and can be sweetened by a choice of natural sweeteners (such as raw sugar, agave syrup, or honey), artificial sweeteners (such as Sweet'N Low, Splenda, Equal), or one of the company's sugar-free syrup flavors.[77][78] Starbucks stopped using milk originating from rBGH-treated cows in 2007. In June 2009, the company overhauled its menu and began to sell salads and baked goods without high fructose corn syrup or artificial ingredients.[79] This move was expected to attract health- and cost-conscious consumers and will not affect prices.[79]
Starbucks introduced a new line of instant coffee packets, called VIA "Ready Brew," in March 2009. It was first unveiled in New York City with subsequent testing of the product also in Seattle, Chicago, and London. The first two VIA flavors include Italian Roast and Colombia, which were then rolled out in October 2009, across the U.S. and Canada with Starbucks stores promoting the product with a blind "taste challenge" of the instant versus fresh roast, in which many people could not tell the difference between the instant and freshly brewed coffee. Financial analysts speculated that by introducing instant coffee, Starbucks would devalue its own brand.[80] Starbucks began selling beer and wine at some US stores in 2010.[81] In 2011, Starbucks introduced its largest cup size, the Trenta, which can hold 31 US fluid ounces (920 ml).[82] In September 2012, Starbucks announced the Verismo, a consumer-grade single-serve coffee machine that uses sealed plastic cups of coffee grounds, and a "milk pod" for lattes.[83] On November 10, 2011, Starbucks Corporation announced that it had bought juice company Evolution Fresh for $30 million in cash and planned to start a chain of juice bars starting in around the middle of 2012, venturing into territory staked out by Jamba Inc. Its first store released in San Bernardino, California and plans for a store in San Francisco were to be launched in early 2013.[84]
In 2012, Starbucks began selling a line of iced Starbucks Refresher beverages that contain an extract from green arabica coffee beans. The beverages are fruit flavored and contain caffeine but advertised as having no coffee flavor. Starbucks's green coffee extraction process involves soaking the beans in water.[85] On June 25, 2013, Starbucks began to post calorie counts on menus for drinks and pastries in all of their U.S. stores.[86] In 2014, Starbucks began producing their own line of sodas, dubbed "Fizzio."[87] In 2015, Starbucks began serving coconut milk as an alternative to dairy and soy.[88] In March 2017, Starbucks announced the launch of two new limited-edition specialty drinks made from beans aged in whiskey barrels at its Seattle roastery.[89] Starbucks's barrel-aged coffee will be sold with a small batch of unroasted Starbucks Reserve Sulawesi beans, which are then hand-scooped into whiskey barrels from Washington D.C
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