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STARBUCKS CORPORATION

Synopsis:
According to the official website of Starbucks, every day, they go to work hoping to do two
things: share great coffee with their friends and help make the world a little better. And It was
first established and opened in March 3, !"#! by three partners who met while they were
students at the $niversity of San %rancisco. &nglish teacher 'erry (aldwin, history teacher )ev
Siegl, and writer *ordon (owker. +he three were inspired to sell high,-uality coffee beans and
e-uipment by coffee roasting entrepreneur Alfred .eet after he taught them his style of roasting
beans. /riginally the company was to be called .e-uod but was re0ected by some of the co,
founders. +he business was instead named after the chief mate on the .e-uod, Starbuck.
(efore, the enterprise was a single store in 1 2estern Avenue Seattle3s historic .ike .lace
Market, 2ashington !"#!4!"#5. %rom 0ust a narrow storefront, it offered some of the world3s
finest fresh,roasted whole bean coffees. +his cafe was later moved to !"!1 .ike .lace Market6
never to be relocated again. 7uring this time, the company only sold roasted whole coffee beans
and did not yet brew coffee to sell.+he only brewed coffee served in the store were free samples.
7uring their first year of operation, they purchased green coffee beans from .eet8s, then began
buying directly from growers.
Moby 7ick inspired the name after a whaling ship , evoked the romance of the high seas and the
seafaring tradition of the early coffee traders.
In !"9!, :oward Schult; <Starbucks chairman, president and chief e=ecutive officer> had first
walked into a Starbucks store. %rom his first cup of Sumatra, :oward was drawn into Starbucks
and 0oined a year later.
+wo years later, :oward traveled to Italy and became captivated with Italian coffee bars and the
romance of the coffee e=perience. :e had a vision to bring the Italian coffeehouse tradition back
to the $nited States. A place for conversation and a sense of community. A third place between
work and home. :e left Starbucks for a short period of time to start his own Il *iornale
coffeehouses and returned in August !"9# to purchase Starbucks with the help of local investors.
At the start, Starbucks set out to be a different kind of company. /ne that not only celebrated
coffee and the rich tradition, but that also brought a feeling of connection.
+heir mission is to inspire and nurture the human spirit 4 one person, one cup, and one
neighborhood at a time.
+oday, with more than 1!, stores in 5? countries, It is the premier roaster and retailer of
specialty coffee in the world. And with every cup, they strive to bring both heritage and an
e=ceptional e=perience to life.
Company History:
Starbucks @orporation is the leading roaster, retailer, and marketer of specialty coffee in Aorth
America. Its operations include upwards of 1,B coffee shops and kiosks in the $nited States
and @anada, more than ! in the $nited Cingdom, and more than 1 in other countries,
including @hina, 'apan, Cuwait, Debanon, Aew )ealand, Malaysia, the .hilippines, Singapore,
South Corea, +aiwan, and +hailand. In addition to a variety of coffees and coffee drinks,
Starbucks shops also feature +a;o teas6 pastries and other food items6 and espresso machines,
coffee brewers, and other assorted items. +he company also sells many of these products via mail
order and online at starbucks.com. It also wholesales its coffee to restaurants, businesses,
education and healthcare institutions, hotels, and airlines. +hrough a 0oint venture with .epsi,
@ola @ompany, Starbucks bottles %rappuccino beverages and sells them through supermarkets
and convenience and drugstores. +hrough a partnership with Craft %oods, Inc., the company sells
Starbucks whole bean and ground coffee into grocery, warehouse club, and mass merchandise
stores. A third 0oint venture is with 7reyer8s *rand Ice @ream. In addition, it distributes
Starbucks premium coffee ice creams to $.S. supermarkets. %rom a single small store that
opened in !"#! to its status as a gourmet coffee giant at the turn of the millennium, Starbucks has
led a coffee revolution in the $nited States and beyond.
Roots in Coffee Retailing and Wolesaling
Starbucks was founded in Seattle, 2ashington, a haven for coffee aficionados. +he city was
noted for its coffee before 2orld 2ar II, but the -uality of its coffee had declined so much by the
late !"5s that resident *ordon (owker made pilgrimages to Eancouver, (ritish @olumbia, to
buy his beans there. :is point of reference for the beverage was dark, delicious coffee he had
discovered in Italy. Soon (owker, then a writer for Seattle maga;ine, was making runs for
friends as well. 2hen Seattle folded, two of (owker8s friends, 'erry (aldwin, an &nglish teacher,
and )ev Siegl, a history teacher, also happened to be seeking new ventures6 the three banded
together and literally built their first store,,located in Seattle8s .ike .lace Market,,by hand. +hey
raised F!,3? apiece, borrowed another F?,, picked the name Starbucks,,for the punchy 8st8
sound and its reference to the coffee,loving first mate in Moby Dick--then designed a two,tailed
siren for a logo and set out to learn about coffee.
Siegl went to (erkeley, @alifornia, to learn from a 7utchman, Alfred .eet, who ran .eet8s @offee,
which had been a legend among local coffee drinkers since !"55. .eet8s approach to coffee beans
became the cornerstone for Starbucks8 reputation: high,grade arabica beans, roasted to a dark
e=treme by a trained perfectionist roaster. Starbucks bought its coffee from .eet8s for its first nine
months, giving away cups of coffee to hook customers. +he plan worked. (y !"#1 the three
founders had opened a second store in $niversity Eillage and invested in a .robat roaster.
(aldwin became the young company8s first roaster.
2ithin its first decade, Starbucks had opened stores in (ellevue, @apitol :ill, and $niversity
2ay. (y !"91 the original entrepreneurs had a solid retail business of five stores, a small toasting
facility, and a wholesale business that sold coffee primarily to local restaurants. +he first of the
company8s growth versus ethos challenges came here: how does one maintain a near fanatical
dedication to freshness in wholesaleG Starbucks insisted that the shelf life of coffee is less than
!B days after roasting. As a result, they donated all eight,day,old coffee to charity.
In !"91 Starbucks hired :oward Schult; to manage the company8s retail sales and marketing.
2hile vice,president of $.S. operations for :ammarplast, a Swedish housewares company, and
working out of Aew Hork, Schult; met the Starbucks trio and considered their coffee a
revelation. <:e had grown up on instant.> :e and his wife packed up and drove 3, miles west
to Seattle to 0oin Starbucks.
+here were other changes taking place at Starbucks at the same time. Siegl had decided to leave
in !"9. +he name of the wholesale division was changed to @aravali, out of fear of sullying the
Starbucks name with less than absolute freshness. (lue Anchor, a line of whole,bean coffees
being prepackaged for supermarkets, was relin-uished. Starbucks learned two lessons from their
brief time in business with supermarkets: first, supermarkets and their narrow profit margins
were not the best outlet for a coffee roaster who refused to compromise on -uality in order to
lower prices, and second, Starbucks needed to sell directly to consumers who were educated
enough to know why the coffee they were buying was superior.
!id"#$%&s: Te Sift to Coffee Bars
In !"93 Starbucks bought .eet8s @offee, which had by then become a five,store operation itself.
+hat same year, Schult; took a buying trip to Italy, where another coffee revelation took place.
2andering the pia;;as of Milan, Schult; was captivated by the culture of coffee and the romance
of Italian coffee bars. Milan had about !,# espresso bars, which were a third center for Italians,
after work and home. Schult; returned home determined to bring Italian coffee bars to the $nited
States, but found his bosses reluctant, being still more dedicated to retailing coffee. As a result,
Schult; left the company to write a business plan of his own. :is parting with Starbucks was so
amicable that the founders invested in Schult;8s vision. Schult; returned to Italy to do research,
visiting hundreds of espresso and coffee bars. In the spring of !"95, he opened his first coffee bar
in the @olumbia Seafirst @enter, the tallest building west of @hicago. %aithful to its inspiration,
the bar had a stately espresso machine as its centerpiece. @alled Il *iornale, the bar served
Starbucks coffee and was an instant hit. A second was soon opened in Seattle, and a third in
Eancouver. Schult; hired 7ave /lsen, the proprietor of one of the first bohemian espresso bars in
Seattle, as a coffee consultant and employee trainer.
A year later, Schult; was thriving while Starbucks was encountering frustration. +he wholesale
market had been reconfigured by the popularity of flavored coffees, which Starbucks resolutely
refused to produce. +he company8s managers were also increasingly aggravated by the lack of
wholesale -uality control, so they sold their wholesale line, @aravali, to Seattle businessman (art
2ilson and a group of investors. In addition, (owker was interested in leaving the company to
concentrate on a new pro0ect, Ied :ook Ale. Schult; approached his old colleagues with an
attractive offer: how about FB million for the si=,unit Starbucks chainG +hey sold, with /lsen
remaining as Starbucks8 coffee buyer and roaster6 the Starbucks stores were merged into Il
*iornale. (aldwin remained president of the now separately operated .eet8s @offee and +ea. In
!"9# the Il *iornale shops changed their names to Starbucks, and the company became
Starbucks @orporation and prepared to go national.
In August !"9# Starbucks @orporation had !! stores and fewer than ! employees. In /ctober
of that year it opened its first store in @hicago, and by !"9" there were nine @hicago Starbucks,
where employees trained by Seattle managers served coffee roasted in the Seattle plant.
+heir methods were costly, using high,grade arabica beans and e=pensive dark roasting, while
suffering the financial conse-uences of snubbing the supermarket and wholesale markets.
Aevertheless, Starbucks8 market was growing rapidly: sales of specialty coffee in the $nited
States grew from F? million in !"93 to F? million five years later.
In !"99 Starbucks introduced a mail,order catalog, and by the end of that year, the company was
serving mail,order customers in every state and operating a total of 33 stores. (ecause the
company8s reputation grew steadily by word of mouth, it spent little on ads. Schult;8s
management philosophy, 8hire people smarter than you are and get out of their way,8 fed his
aggressive e=pansion plans. Industry e=perts were brought in to manage Starbucks8 finances,
human resources, marketing, and mail,order divisions. +he company8s middle ranks were filled
with e=perienced managers from such giants as +aco (ell, 2endy8s, and (lockbuster. Schult;
was willing to lose money while preparing Starbucks for e=plosive growth. (y !"" he had hired
two star e=ecutives: :oward (ehar, previously president of a leading developer of outdoor
resorts, +housand +rails, Inc.6 and /rin Smith, chief financial and administrative officer for
7an;as, $SA, a freight forwarder.
Starbucks installed a costly computer network and hired a specialist in information technology
from Mc7onald8s @orporation to design a point,of,sale system via .@s for store managers to use.
&very night, stores passed their sales information to Seattle head-uarters, which allowed
planners to spot regional buying trends almost instantly. Starbucks lost money while preparing
for its planned e=pansion, including more than F! million in !"9" alone. In !"" the
head-uarters e=panded and a new roasting plant was built. Aevertheless, Schult; resisted both
the temptation to franchise and to flavor the beans. Slowly, the chain developed near,cult status.
Rapid 'arly #$$&s (ro)t As a P*+li, Company
Starbucks also developed a reputation for treating its employees well. In !""! it became the first
privately owned company in history to establish an employee stock option program that included
part,timers. Starbucks also offered health and dental benefits to both full, and part,time
employees. As a result, the company had a turnover rate that was very low for the food service
industry. &mployees were rigorously trained, completing at least 1? hours of coursework on
topics including the history of coffee, drink preparation, and how to brew a perfect cup at home.
+he company went public in !""1, the same year it opened its first stores in San %rancisco, San
7iego, /range @ounty, and 7enver. Its stores totaled !5? by year8s end. +he company began
special relationships with Aordstrom8s and (arnes J Aoble, Inc., offering coffee to shoppers at
both chains.
*rowth mandated the opening of a second roasting plant, located in Cent, 2ashington, by !""3.
After 11 years in business, Starbucks had only !" individuals it deemed -ualified to roast coffee.
/ne of the !" was Schult;, who considered it a tremendous privilege. Ioasters were trained for
more than a year before being allowed to roast a batch, which consisted of up to 5 pounds of
coffee roasted for !1 to !? minutes in a gas oven. +he beans made a popping sound, like
popcorn, when ready, but roasters also used sight and smell to tell when the beans were done to
perfection. Starbucks standards re-uired roasters to test the roasted beans in an Agron blood,cell
analy;er to assure that each batch was up to standards. If not, it was discarded.
Starbucks8 first &ast @oast store opened in !""3, in a premier location in 2ashington, 7.@. +he
chain had 1#? stores by the end of !""3 and B1? one year later. Sales had grown an average of
5? percent annually over the previous three years <reaching F19B." million in !""B>, with net
income growing # to ! percent a year during that time. Starbucks broke into important new
markets in !""B, including Minneapolis, (oston, Aew Hork, Atlanta, 7allas, and :ouston, and
purchased the @offee @onnection, a 13,store rival based in (oston, for F13 million, making it a
wholly owned subsidiary. Smith was promoted to president and @// and (ehar became
president, international. Starbucks also announced a partnership with .epsi,@ola to develop new
ready,to,drink coffee beverages. After Starbucks debuted a fro;en coffee drink called
%rappuccino in its stores in the summer of !""?, resulting in a sales bonan;a, the partnership
with .epsi began rolling out a bottled version in grocery, convenience, and drugstores the
following year. Starbucks broke into new markets in !""?, including .ittsburgh, San Antonio,
Das Eegas, and .hiladelphia. +hat same year, Starbucks began supplying coffee for $nited
Airlines flights and launched a line of Starbucks compilation music @7s which were sold in its
coffee houses.
-ate #$$&s and Beyond: International '.pansion and Ne) /ent*res
+he following year,,in addition to continued Aorth American e=pansion into Ihode Island,
Idaho, Aorth @arolina, Ari;ona, $tah, and /ntario,,the company ventured overseas for the first
time. Its initial foreign forays were launched through 0oint venture and licensing arrangements
with prominent local retailers. 2ith the help of SA)A(H Inc., a 'apanese retailer and
restaurateur, the first market developed in !""5 was 'apan6 through other partnerships, :awaii
and Singapore also received their first Starbucks that year. +he .hilippines followed in !""#.
Meantime, Starbucks entered into a partnership with 7reyer8s *rand Ice @ream, Inc. in !""5 to
develop and sell Starbucks Ice @ream. 2ithin eight months of introduction, the product became
the number one coffee ice cream in the $nited States. Starbucks8 e=pansion into %lorida,
Michigan, and 2isconsin in !""# helped the total number of units reach an astounding !,B!1 by
year,end, more than double the previous two,year total. Sales approached the F! billion mark
that year, while net income hit F?#.B million, more than five times the result for !""B.
As this rapid growth continued, the company began to be needled by late night talk show hosts
for its seeming Starbucks,on,every,corner e=pansion strategy, while a number of owners and
patrons of local coffee shops began speaking out and demonstrating against what they considered
overly aggressive and even predatory moves into new territory. @ritics complained that the
company was deliberately locating its units near local coffee merchants to siphon off sales,
sometimes placing a Starbucks directly across the street. In !""5 and !""# residents in +oronto,
San %rancisco, (rooklyn, and .ortland, /regon, staged sidewalk protests to attempt to keep
Starbucks out of their neighborhoods. /ne of the company8s responses to the scattered resistance
was to try to enhance its image through stepped,up advertising. Still, like 2al,Mart Stores, Inc.
and its reputation in some -uarters as a destroyer of Main Street, Starbucks remained the ob0ect
of snickers from comedians and derision from a vocal minority of protesters. +his undercurrent
of hostility burst into the spotlight in late !""" when some of the more aggressive protesters
against a 2orld +rade /rgani;ation meeting took their anger out on several Starbucks stores in
the company8s hometown of Seattle, tagging a number of the 15 downtown locations with graffiti
and inflicting more serious vandalism on three stores, which were then temporarily closed.
+he anti,multinational protesters in Seattle also singled out stores operated by Mc7onald8s
@orporation and Aike, Inc. +he lumping of the once,modest purveyor of gourmet coffee in with
these global giants was in part an outgrowth of the company8s aggressive overseas e=pansion in
the late !""s. *rowth in the .acific Iim continued with the opening of locations in +aiwan,
+hailand, Aew )ealand, and Malaysia in !""9 and in @hina and South Corea in !""". (y early
1 the number of Starbucks in 'apan had reached !. +he company aimed to have ? stores
in the .acific Iim by 13. +he Middle &ast was another target of global growth, with stores
opened in Cuwait and Debanon in !""", but it was the $nited Cingdom that was the ob0ect of the
company8s other big late !""s push. In !""9 Starbucks ac-uired Seattle @offee @ompany, the
leading $.C. specialty coffee firm, for about F95 million in stock. Starbucks began rebranding
Seattle @offee8s locations under the Starbucks name. Aggressive e=pansion in the $nited
Cingdom yielded more than ! units by late !""". Starbucks hoped to use its $.C. base for an
invasion of the @ontinent, aiming for ? stores in &urope by 13.
*rowth was not slowing back home either. Areas receiving their first Starbucks in !""9 and !"""
included Aew /rleans, St. Douis, Cansas @ity, and Memphis and Aashville, +ennessee. +he
number of Aorth American locations approached 1,1 by early 1. Always searching for new
revenue streams, Starbucks in !""9 entered into a long,term licensing agreement with Craft
%oods, Inc. for the marketing and distribution of Starbucks whole bean and ground coffee into
grocery, warehouse club, and mass merchandise stores. +he company also began e=perimenting
with a full,service casual restaurant called @afKL Starbucks. A further move into food came in
early !""" through the purchase of .as-ua @offee @o., a chain of coffee and sandwich shops
with ?5 units in @alifornia and Aew Hork. Starbucks had already developed its own in,house tea
brand, Infusia, but it was replaced following the early !""" ac-uisition of +a;o +ea @ompany, a
.ortland, /regon,based maker of premium teas and related products with distribution through
?, retail outlets.
Starbucks had also launched a web site featuring an online store in !""9, and Schult; began
talking about Starbucks becoming a mega,cybermerchant offering everything from gourmet
foods to furniture. +o this end, the company attempted, but failed, to ac-uire 2illiams,Sonoma,
Inc., a specialty retailer of high,end kitchenware. 2all Street analysts began -uestioning the
wisdom of moving so far afield from the company8s core coffee business. In mid,!""", following
Starbucks8 announcement of an earnings shortfall, the company8s stock plunged 19 percent,
leading Schult; to pull back on his ambitious cyber plans. In early 1, however, the company
did enter into an agreement with Co;mo.com Inc., an operator of an Internet home,delivery
service providing its customers with videos, snacks, maga;ines, books, and other items.
Co;mo.com agreed to pay Starbucks F!? million over a five,year period to place drop bo=es in
Starbucks stores for the return of videos and other items, and to begin delivering Starbucks
coffee, +a;o teas, and other items to its customers.
/ther developments included an agreement with Albertson8s, Inc. to open more than !
Starbucks coffee bars in Albertson8s supermarkets in the $nited States6 and the ac-uisition of the
five,store San %rancisco,based :ear Music chain, in an e=tension of Starbucks8 music retailing
ventures. Image problems continued to crop up for the rapidly growing company, whose fiscal
!""" revenues of F!.59 billion were nearly si= times the figure of five years earlier. In April
1 a San %rancisco,based human rights group called *lobal &=change was readying a large
protest at Starbucks in 1" cities to publici;e its allegations that the coffee company was buying
its beans from wholesalers who were paying farmers what amounted to poverty wages. In a
preemptive move, which staved off the protests and the resultant bad publicity, Starbucks
announced that it would buy more coffee certified as 8fair trade,8 meaning that the farmers who
grew it received more than market price for their crop, sometimes as high as three times the 3
cents per pound they typically received.
In the early 1!st century, Starbucks was working to achieve Schult;8s ambitious goals of ?
stores in both 'apan and &urope by 13, as well as his ultimate goal of 1, units worldwide.
2ith about half of that total envisioned to be located outside Aorth America, Schult; decided to
spend more time on the company8s overseas operations. In 'une 1 he stepped down as @&/
of the company to become its chief global strategist, while remaining chairman. Schult; would
work closely with .eter Maslen, who had taken charge of the international division in late !""",
following the retirement of :oward (ehar. Assuming the @&/ title was /rin Smith, who
retained his previous responsibility for domestic retail and wholesale operations, alliances, and
coffee roasting and distribution.
Prin,ipal S*+sidiaries: +he @offee @onnection, Inc.6 Starbucks Aew Eenture @ompany6
Starbucks @offee International, Inc.6 Starbucks :olding @ompany6 Starbucks Manufacturing
@orporation6 S(I Aevada, Inc.6 @ircadia @orporation6 Starbucks $.S. (rands @orporation6
Starbucks Asset Management @orporation6 Starbucks %oreign Sales @orporation6 Starbucks
@offee :oldings <$C> Dimited6 Starbucks @offee @ompany <$C> Dimited6 Seattle @offee
@ompany International <$.C.>6 +or; J Macatonia Dimited <$.C.>6 +a;o +ea @ompany6 .as-ua
Inc.6 Starbucks @offee %rance, &$ID6 Starbucks @offee Asia .acific Dtd.6 Starbucks @offee
@ompany <Australia> .ty Dtd <"M>6 +ympanum, Inc.
Prin,ipal Competitors: A(. @orporation6 A%@ &nterprises, Inc.6 Allied 7omec- .D@6 (A(
:oldings, Inc.6 7iedrich @offee, Inc.6 &insteinNAoah (agel @orp.6 %armer (ros. @o.6 *reen
Mountain @offee, Inc.6 Craft %oods, Inc.6 AestlKL S.A.6 Aew 2orld @offee,Manhattan (agel,
Inc.6 Aew Hork (agel &nterprises, Inc.6 .anera (read @ompany6 .eet8s @offee J +ea6 +he
.rocter J *amble @ompany6 Sara Dee @orporation6 +ully8s @offee @orporation.
Company Perspe,ti0es:
/ver the years, we have worked tirelessly to make Starbucks an uplifting part of people8s daily
lives. 2e8ve always known that our brand name must stand for something,it must be authentic,
reliable and aspirational. &very day, the passion and enthusiasm of our people and the -uality of
our coffee enable us to build a rewarding relationship with our customers. +his connection has
given us the chance to do things no one thought possible, and we believe our greatest
accomplishments are yet to come. Cey 7ates:
Signifi,ant '0ents and Key 1ates
#$2#: Starbucks starts as a coffee machine store. *ordon (owker, 'erry (aldwin, and )ev Siegl
open the first Starbucks in Seattle8s .ike .lace Market.
#$%&: :oward schult; starts his own coffee business after seeing there potential success while in
europe.
#$%3: :oward Schult; is hired to manage retail sales and marketing.
#$%4: .eet8s @offee is ac-uired.
#$%5: Schult; leaves the company to found Il *iornale, an operator of coffee bars.
#$%2: :oward Schult;3s coffee business buys Starbuck3s retail unit for 3.9 million dollars
,merges them into Il *iornale, renames his company Starbucks @orporation, and begins a
national e=pansion by opening stores in @hicago. (aldwin remains president of the now separate
.eet8s @offee and +ea business.
#$%%: :oward Schult;, @&/ of Starbucks e=tends health benefits to all employees, including
part,time workers. Also, a mail,order catalog is introduced.
#$$&: Starbucks witnesses its first profitable year since selling coffee beverages.
#$$3: @ompany goes public.
#$$4: %irst &ast @oast store opens, in 2ashington, 7.@.
#$$6: Starbucks and the soda company .epsi 0oin together.
#$$5: %rappuccino beverages are introduced.
#$$7: /verseas e=pansion begins with units in 'apan, :awaii, and Singapore. .artnership with
7reyer8s begins selling Starbucks Ice @ream. .artnership with .epsi,@ola begins selling bottled
%rappuccino beverages.
#$$%: $.C.,based Seattle @offee @ompany is ac-uired. .artnership with Craft %oods is formed
for the distribution of Starbucks coffee into supermarkets.

#$$$: .as-ua @offee @o. and +a;o +ea @ompany are ac-uired.
3&&&: Schult; steps aside as @&/ to become chief global strategist, while remaining chairman6
/rin Smith takes over as @&/.