Apparel Quality Management

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Starbucks
Coffeehouse Company

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Researched and Submitted by Kartik Garg and SaloniYadav (BFT-5)

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 Table Of Content

1. List Of Figures……………………………………………………….. Pg 3
2. History………………………………………………………………… Pg 4
3. Product……………………………………………………………….. Pg 4
4. Competitors………………………………………………………….. Pg 5
a. United States………………………………………………………. Pg 5
b. India…………………………………………………………………. Pg 6
5. Sales………………………………………………………………….. Pg 7
6. Quality Philosophy…………………………………………………... Pg 8
7. Quality Management………………………………………………… Pg 10
a. Quality of Design…………………………………………………… Pg 10
b. Quality of Conformance and Availability…………………….…… Pg 10
c. Field Service………………………………………………….…….. Pg 10
d. Starbucks’ Quality Table…………………………………...……… Pg 11
8. History of Quality Failure……………………………………………. Pg 13
a. Starbuck’ Failure in Australia………………………..……………. Pg 13
b. Coffee’s subpar quality and taste………………………………… Pg 13
c. Failure of new products to meet quality standards……………... Pg 14
i. Chantico………………………………………….……….... Pg 14
ii. Mazagran………………………………………………….... Pg 14
iii. Sorbetto……………………………………………………....Pg 14
iv. Tazo Tea Infusions…………………………..……………....Pg 14
9. CSR……………………………………………………….……………..Pg 15
a. Community……………………………………...………………..Pg 15
b. Ethical Sourcing……………………………………………...…..Pg 15
c. Environment……………………………………………………..…... Pg 16
10. Bibliography………………………………………………....………….Pg 18

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 List of Figures

1. Figure 1: Menu | Starbucks Coffeehouse Company…………………….... Pg 5

2. Figure 2: Creme Frappuccino & Sandwiches | Starbucks Coffeehouse
Company………………………………………………………………………..Pg 5
3. Figure 3: India Cafe Expansion | Berger and Blake……………………….Pg 6
4. Figure 4: Leading Brands of 2020 | Berger and Blake…………………….Pg 6
5. Figure 5: Starbucks Revenue | SBUX………………………….…………….Pg 7
6. Figure 6: Starbucks Quality-The Glimpse…………………………………...Pg 9
7. Figure7: Starbucks’ Quality Promise………………………………………....Pg 9
8. Figure 8: Quality Table I Paryani……………………………………………...Pg11
9. Figure 9: Bottled Frappuccinos I Bowers…………………………………….Pg 12
10. Figure 10: Mazagran I Melody Overton……………………………………...Pg 14
11. Figure 11: Responsibility | Starbucks Coffeehouse Company…………….Pg 15
12. Figure 12: Ethical Sourcing | Starbucks Coffeehouse Company………….Pg 16
13. Figure 13: Water Conservation | Starbucks Coffeehouse Company……...Pg 16

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Company- History

In 1971, Starbucks was founded by Jerry Baldwin, Gordon Bowker and Zev Siegl by
opening its first store in Seattle.They offered the world's finest fresh-roasted whole bean
coffees. Alfred Peet, founder of Peet’s Coffee provided the founders with roasted coffee
beans and connected them with coffee brokers.

By the early 1980s, Starbucks was standing out with their top-quality fresh-roasted
coffees. They donated all eight-day-old coffee to charity because the shelf life of coffee
is less than 14 days after roasting.

There were no coffee bars in 70s culture. Starbucks’ early focus was on offering
high-quality beans to consumers who used instant coffee, But that changed with the
addition of Howard Schultz, a sales representative for Hammarplast.
In 1983, Howard traveled to Italy in 1983 and loved the concept of Italian coffee bars.
He wanted to bring the coffeehouse tradition to the United States. He left Starbucks to
start his own coffeehouses and returned in 1987 and purchased Starbucks. (Company
Information | Starbucks Coffee Company, 2020).

It opened stores outside North America and Starbucks soon became the largest
coffee-house chain in the world. By the early 21st century, Starbucks was there in
dozens of countries around the world and operated over 30,000 stores.

Product
To provide comfort to consumers, their product range is available in their stores as well as at
home and on the go. The prime target of Starbucks is to become the leading retailer of finest
coffee internationally by selling the best quality coffee and related products.

Figure 1: (Menu | Starbucks Coffeehouse Company, 2020)

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Starbucks also sells 30 blends and single origin premium coffees. Other than quality coffee,
Starbucks has a variety of hand-crafted beverages, fresh food items like pastries, sandwiches,
salads, oatmeal and parfaits.

Figure 2: (Creme Frappuccino & Sandwiches | Starbucks Coffeehouse Company, 2020)

Starbucks also sells Ready-To-Drink coffee and tea through channels such as
supermarkets, grocery stores and non traditional retail channels such as United Airlines,
Marriott International, Barnes & Noble bookstores. Even in Delhi, it’s available in all high
end supermarkets.

They also offer merchandise such as Mugs, Travel tumblers, coffeemakers, coffee
grinders, storage containers, exclusive espresso machines etc.

“From the merchandise on our shelves to the furniture in our stores or the aprons worn
by our baristas, Starbucks cares about the way in which these products are made, and
about the workers who make them.” (Manufactured Goods | Starbucks Coffee
Company, 2020).

Competitors

United States

Starbucks’ closest competitor is Dunkin Donuts which has over 9.5 thousand stores.
Caffè Nero, Costa Coffee, Mc Cafe, Cafe Ritazza, KFC are also considerable
competitors to Starbucks.

Starbucks gained two new competitors: Maxwell House and Folgers (dominators in the
dry coffee goods market) when they started distributing its product line to retail and
grocery stores. As they lack brick and mortar stores, they aren’t a direct competition to
Starbucks.
In FY 2017, McDonald’s outperformed both Starbucks and Dunkin' Donuts. (Hawley,
2020)

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India

India is a famous coffee producing country where coffee is one of the most popular
beverages.
In 2011, Starbucks announced a partnership with Tata Coffee. By 2012 they agreed to a
50/50 joint venture (Business Wire, 2012). Starbucks outlets were named Tata
Starbucks emphasizing their local partnership.

Figure 3: (India Cafe Expansion | Berger and Blake, 2016)

Starbucks is challenged by Cafe Coffee Day, Indian Coffee House, Barista Cafe, Costa
Coffee, Dunkin Donuts, Cafe Mocha, Café Amul Franchise and Qwkiy’s Coffee.

Figure 4: (Leading Brands of 2012 | Berger and Blake, 2016)

Howard Schultz, the Ex- CEO of Starbucks said that “The coffee market here [in India]
is ferocious in terms of competition. There are so many players trying to do what we
think we can do better” (Krishna, 2012)

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Sales

Although Starbucks dominates the U.S. market, it has a tough competition in international
markets, including from U.K.-based Costa Coffee and Cafe Coffee Day in India.

For Starbucks, Beverages are the biggest revenue generator by product category. (Farley,2020)

Starbucks gained comparative sales by 5% in FY 2019 at company-owned stores, a jump from

2% in FY 2018. The gains come from Beverages (74%), Food (20%), Packaged goods and
other brand items (6%). (Starbucks Investor Relation, Annual Report 2019).

Starbucks reported a net loss of $678.4 million during the quarter ending June 28 2020, largely
due to the negative impacts of the pandemic. Starbucks revenue declined 38% from the same
period in the prior year to $4.2 billion. (Farley,2020)

Figure 5: (Starbucks Revenue 2006-2020 | SBUX, n.d.)

“In Q3 Fiscal Year 2020, Global comparable store sales declined 40%, driven by a 51%
decrease in comparable transactions” (Starbucks Reports Q3 Fiscal 2020 Results |
Starbucks Coffee Company, 2020).

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Quality Philosophy
“Our Coffee: It has always been, and will always be, about quality. We’re passionate
about ethically sourcing the finest coffee beans, roasting them with great care and
improving the lives of people who grow them. We care deeply about all of this; our work
is never done” (Mission Statement | Starbucks Coffee Company, 2020).

Starbucks aims to become a premier purveyor of best quality coffee. Their premium
coffee is acclaimed for its delicious taste and rich aroma. It’s been successful in
focusing the customers’ attention on the quality of a pleasurable, relaxed experience,
the warm and rapport ambiance of its stores and not on the price.

Starbucks believes that ‘exceptional coffee can only come from exceptional beans’.

● The coffee quality can be easily ruined by mishandling activities in the supply
chain therefore to control process quality, Starbucks manages its own supply
chain.

● They ethically source arabica coffee from Latin America, Africa, and Asia-Pacific
but their signature coffee blends mostly come from the Asia-Pacific region’s
high-altitude ranges as the cold nights and warm days create denser beans with
complex flavours.

● The team picks up red and ripened coffee cherries and sorts them repeatedly
based on size, colour, and density with zero tolerance for defects.

● More than 1000 cups of coffee are tasted everyday to verify the superior taste
that the customers expect. A batch of coffee is tasted at least three times before
approval so every time the consumer takes a sip, it’s a sip they’ll love.

● The brand has established farmer support centres on four continents where their
agronomists conduct soil tests, examine samples and provide free advice to
farmers which helps them grow the best quality beans. They strive to provide
better livelihoods to the farmers and fair prices for their harvest.
(Coffee Quality I Starbucks Coffee Company, 2020)

● If the farmer isn’t paid fair for the green coffee beans they wouldn't invest in
fertilizer and the maintenance required for growing quality beans.

● The coffee can get under or over roasted and the beans can go stale if they are
left unattended for too long hence, controlling inventory determines the
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 effectiveness of supply chain management. The water used in making coffee and
improper brewing methods affects the taste. The coffee left in the pot for more
than 20 minutes isn’t considered fresh. The use of ceramic cups enhances the
flavor but makes it impractical for carry-outs. Starbucks prefers to handle its own
supply chain, open company-owned stores and has resisted franchising as they
feared that they’ll have to give up control over selling a high-quality product
(Paryani, 2012).

● The outlets offer customer comment cards, available at the condiment stations
enabling the management to stay in touch with customer’s expectations from its
products and the experience.” The cards urge the customers to critique their
experience and make suggestions on new products. Customer requirements are
considered while designing the quality and reliability of the drinks and the store
experience.

● Starbucks guarantees, “Our Promise: Your drink should be perfect, every time. If
not, let us know and we will make it right”. It assures the customers that their
drink will be made the way they want and if the drink doesn’t satisfy them,
another one will be made to their satisfaction. The barista will offer a sample if
the consumer wants to taste the coffee before buying.

Figure 6: (Starbucks Quality-The Glimpse, 2013)

Figure 7:(Starbucks’ Quality Promise, n.d.)

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Quality Management
Starbucks uses several quality systems to ensure quality of its products and customer
service.

● The process begins with the baristas on the store floor. The drink is called from
the barista on the sales counter to the barista making drinks and is then sent
again to the first barista. The drink which is called back is checked for accuracy
before serving it to the customers ensuring that no drink is missed.

● It conducts random check ins from District Managers (DM) who interact with the
customers, watches the baristas, and does random checks of drinks to ensure
quality.

● Starbucks uses ECOSURE, a third party system to conduct checks every six
months to ensure that its outlets possess a copy of the expected qualifications
that it must meet to prepare for these checks as well as maintain the quality
standards.

Quality of Design

The quality of design is decided by taking customer needs and inputs from a
cross-functional design team with members from marketing, engineering, operations,
into consideration. Starbucks is aware that customers keep looking for different
combinations and flavours of caffeinated or decaffeinated drinks therefore their CEO
added even more choices after spending time in Italy and loving their blends of coffee.

Quality of conformance and Availability

Starbucks meets expectations by providing personalized options to customers like

non-fat, decaffeinated, foam, a shot of espresso, etc. The availability, reliability, and
maintainability, are critical for conformance. Availability ensures that the machines
required for completing orders are working. Each store has more than one machine and
each employee is trained to use and maintain it by cleaning it every night which makes
them more reliable. If the machine breaks down, it's fixed or a new machine is ordered
depending on the severity and everything becomes normal within three days.

Field Service

It facilitates customer service by providing warranty, repair or replacement of the product

after it’s been sold. If the drink isn’t to the customers liking, the baristas add whatever’s

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missing or makes another cup. Starbucks' promptness in locations that have high traffic
to speed things up is achieved by splitting up the work such that two people may be in
charge of ringing up orders while two others prepare the orders.

Starbucks’s Quality Table

It contains an organized list of customer requirements, appearing in the rows of the

table gathered from research and customer feedback. The corresponding Starbucks’
solutions are mentioned in the columns of the table.

The strength of the relationship between the customer requirements and Starbucks’
solutions is determined using the conventional symbolism of the quality function
deployment (QFD) process.

Strength of relationships: Strong , Medium , Weak

Figure 8: (Quality Table I Paryani, 2012)

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● The “Fresh coffee” requirement is always prioritized at Starbucks because of
independent demand and isn’t prepared until an order is placed. If the bags of
roasted coffee beans sit idle in inventory for long, they are donated. Starbucks
uses vacuum packaging in flavor-lock bags with a one-way valve that allows
carbon dioxide to escape but keeps out air and moisture to prevent the coffee
beans from going stale. The barista brews the coffee every hour.(Michelli, 2007).

● The “Hot coffee” requirement involves freshness, but the customers don’t want to
burn their fingers while holding the cup. To satisfy these conflicting requirements,
the brand adopted double cupping but it arose another conflict of meeting the
environmental goals and still providing the sense of freshness and comfort
therefore Starbucks developed corrugated cup holders that act as sleeves on the
cup.

● The “No bitter coffee” was addressed when Starbucks introduced its Pike Place
light roast coffee which improved the company's sales (Adamy, 2008 I and II).

● The “Making drinks with low-fat milk” requirement was tough because low-fat milk
made the espresso taste watery. The brand tested various combinations of
low-fat (2%) milk, regular milk, and espresso coffee to create the best quality
drink. (Schultz and Jones, 1997).

● The “Organic milk” requirement was met by purchasing milk from cows that aren’t
given growth hormones rather than purchasing expensive certified organic milk.

● The “Cold coffee” requirement was achieved in 1994 when a California store
created the cold Frappuccino, a bottled blended ice beverage and a registered
trademark of Starbucks.

Figure 9: (Bottled Frappuccinos I Bowers, n.d.)

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History of Quality Failures

Starbucks’ failure in Australia

Unlike many other countries, the coffeehouse industry in Australia is dominated by
numerous independent coffee shops. Starbucks’ rapid expansion growth strategy failed
when they tried to open eighty stores throughout Australia in 2000. About 60 stores
were closed because they couldn’t attract customers and suffered losses of at least
$143 million.(Starbucks, Australian expansion 2016)

Currently, Starbucks owns 23 stores in Australia. Their market entry strategy failed
because local laneway espresso bars already had a well-established position and
offered high quality coffee and food, a hospitable atmosphere and highly-trained
baristas besides the “intimacy, personalization, and familiarity of a suburban boutique
café” (Patterson, Scott and Uncles, 2010), thereby preventing the consumers from
switching to Starbucks.

Starbucks decided to shift their focus to cities like Sydney to reposition themselves,
confirming which Starbucks Australia’s CEO Chris Garlick says, “Our growth strategy is
centered around our customers preferences and where they want us to be, which
includes shopping centers and high traffic tourist locations”.

Coffee’s subpar quality and taste

● Kevin Knox, in charge of doughnuts quality at Starbucks from 1987-93,
mentioned in 2010 how George Howell, founder of the Cup of Excellence, was
disappointed with the dark roasted beans that Starbucks was selling in 1990.
● Howell, in his interview with New York Times in 2008 stated that the dark roast
used by Starbucks doesn’t deepen the flavor of coffee instead destroys the
purported nuances of flavor.

● The March 2007 issue of Consumer Reports compared American fast-food chain
coffees and ranked Starbucks behind McDonald's Premium Roast. They called
Starbucks coffee "strong, but burnt and bitter enough to make your eyes water
instead of open".

● In 2010 TIME reported that third wave coffee proponents criticize Starbucks for
over-roasting beans.

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Failure of new products to meet the quality standards
The addition of new products complicated the menu with half of the customers
customizing their drinks which increased the waiting time, declining the store’s
experience.

Chantico
It had steamed cocoa butter and whole milk, literally liquid chocolate and cost $2.65 for
six-ounces. Starbucks’ senior vice president Michelle Gass told CNN in January 2005,
“Imagine drinking a melted truffle and you’re close to the Chantico chocolate
experience”. It was pulled from the menu after 11 months as nobody wanted to drink
truffles.

Mazagran
Starbucks partnered with Pepsico to create Mazagran, a bottled hybrid drink with coffee
and soda in 1994. Starbucks’ then CEO wrote in his book “Pour Your Heart Into It”,
“Some loved it, others hated it,”. Many customers tried it because of the brand’s name
but it didn’t get the repeat business and was replaced with bottled Frappuccinos which
are still popular.

Sorbetto
The tart and fruity drink launched in 2008 had “tropical tangy creme” and “berry pink
citrus” flavours. Reuters mentioned that the drink failed to amaze consumers and
cleaning the machine was a mundane task for baristas as it added 45 minutes to closing
duties.

Tazo Tea Infusions

The drink added juice into tea and had Apple Chai Infusion and Berry Chai Infusion.
Starbucks marketed it as a “perfect winter pick-me-up”. But it couldn’t attract the tea
lovers or juice purists and was later dropped.

Figure 10: (Mazagran I Melody Overton, n.d.)

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CSR

“We have always believed Starbucks can – and should – have a positive social impact
on the communities we serve. One person, one cup and one neighborhood at a time.”
(Starbucks Social Impact | Starbucks Coffee Company, 2020)

Starbucks’ CSR focuses on Community, Following Ethical Sourcing, and Taking Care of the
Environment.

Figure 11: (Responsibility | Starbucks Coffeehouse Company, 2020.)

Community:

● To expand ‘Swastha’, a school for children with special needs, Starbucks and Tata will
together work to increase the outreach and capacity in the coffee growing areas of
Karnataka.

● In Assam and Darjeeling, Starbucks along with Mercy Corps is working on improving the
quality of life for 190 tea and botanical communities through the CHAI Project.
“More than 75,000 people and their families have been directly impacted by CHAI.”
(CHAI | Starbucks Coffee Company, 2020)

● Starbucks believes different people should be there to make it a good community, hence
they have supported various community activities like the community service, youth
action, Starbucks foundation, Ethos water fund, Starbucks RED.

Ethical Sourcing:

“it's our goal for all of our coffee to be grown under the highest standards of quality, using ethical
trading and responsible growing practices” (Ethical Sourcing | Starbucks Coffee Company,
2020)

● Starbucks focuses on providing ethically purchased and responsibly produced coffee,

tea, cocoa and manufactured goods of the highest quality.
● They focus on the climate of Earth and the livelihood of the farmers.

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 Figure 12: (Ethical Sourcing | Starbucks Coffeehouse Company, 2020.)

Environment:

● Recycling: Starbucks is developing more environmentally friendly cups. They are also
working to expand their recycling program to reduce the waste they create.

● Energy: They are reducing their environmental footprint by building LEED- Certified
stores, saving the energy, and investing in renewable energy sources.

● Water: “ In 2015 Starbucks exceeded its water conservation goal, reducing consumption
more than 26% over 2008 – from 24 gallons of water per square foot of retail space to
fewer than 18 gallons” (Vandelveld,2015)

Figure 13: (Water Conservation | Starbucks Coffeehouse Company, 2020.)

They are constantly focusing on water-saving technologies to reduce their water consumption.

● Green Building: They intend to design, use and build stores in such a way which will
reduce their impact on the planet. They are Using recycled floor tiles, Improving lighting
efficiency, Controlling air conditioner’s temperature etc in their LEED certified stores.

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● Climate Change: They are doing their bit through energy and water conservation,
recycling waste and incorporating green design in their stores.
“The steps we're taking not only address our environmental footprint – they help to
ensure the supply of high-quality coffee that our customers expect from us into the
future” (Tackling Climate Change | Starbucks Coffee Company, 2020)

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