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Starbucks Coffee: Case Study

Starbucks Coffee: Case Study



Starbucks Coffee: Case Study

Starbucks Coffee: Case Study
by onion: mrkokung@hotmail.com



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    Starbucks Coffee: Case Study Starbucks Coffee: Case Study Presentation Transcript

    • The Starbucks Story Starbucks Coffee EMEA
    • Today’s Agenda Our History & Building of the Brand. Our Values Our Numbers and Our Goals. Our Partners and Partnerships The Future
    • A brief history ... The story begins in 1971 Howard Schultz arrives 1982 A trip to Italy changes Starbucks Starbucks goes public June 1992 (165 stores) Starbucks opens in Japan 1996 (1006 Stores)
    • Our Values and Our BrandThe following six guiding principles will help us measure the appropriateness of our decisions: Provide a great work environment and treat each other with respect and dignity. dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.
    • Starbucks … Brand Essence “Who We Are” Comfort Surprise Familiarity Discovery Authenticity Inspiration The third place experience
    • Starbucks … •Uncompromising Standards •Attention to detail •Everything matters Passion Coffee People •Quality •Service •Innovation •Community•Personalization and Choice •Personal Connections •Knowledge/Expertise •Employer of ChoiceSource: Starbucks Internal Audit.
    • An ExpandingGlobal Brand
    • An Expanding Global Brand Leading specialty coffee brand & retailer in the world 5,000+ stores worldwide serving approximately 18 million customers a week. Presence in 26 countries with 1,000+ stores outside of North America Enormous retail expansion opportunity worldwide Tremendous worldwide brand expansion potential
    • What we do ... Coffee - roast, retail and wholesale Retail- our core business Retail- Ice Cream - No.1 coffee ice cream in US No.1 Frappuccino - No.1 prepared coffee drink in US No.1 Merchandise  Brewing, mugs, books, coffee/tea ware  CDs  Starbucks chocolate  Tazo Tea
    • Focus on People,Experience and Product
    • Where WeAre Today
    • Today Category leader with a very strong & still improving image Among 100 Strongest Global Brands 2nd year as America’s Most Admired Company In Food Service Category One of 75 Great Global Brands in the 21st Century
    • Today… Dedicated to sourcing the highest quality coffee in the world
    • Today… Loyal partners create the experience that creates loyal customers 4th year as one of “The 100 Best Companies to Work For”
    • Today…Business practices that contribute positively to our communities & environment Among 100 Best Corporate Citizens Component of Dow Jones Sustainability World Index
    • Today…
    • Today… Starbucks partner volunteering at United Way’s Day of Caring
    • Commitment to origin coffee growing regions
    • What do we mean by Commitment to Origins?‘Starbucks aspires to be recognised as much for ourcommitment to social responsibility as we are for thequality of our coffee. We will do this through focusingour efforts on improving social and economicconditions for coffee farmers; minimising ourenvironmental impact; making a positive contributionin the communities where we do business; andproviding a great work environment for our partners.’ Orin Smith, 2001
    • Specific Elements of Commitment to Origins Unique Coffee Selections: • Fair Trade Coffee • Shade Grown Coffee • Organic Coffee … AND… Corporate Social Responsibility: • Commitment to Coffee Farmers • Commitment to the Environment • Commitment to Local Community
    • Fair Trade How Fair Trade helps farmers: Over half of the worlds coffee is produced on small family farms with only a few acres of coffee trees. Fair Trade certification provides a way for these farmers to increase their incomes by helping them organize into cooperatives and linking them directly to coffee importers. Fair trade farmers are guaranteed a premium over the prevailing price being paid for coffee on the international market. This helps them afford basic healthcare, education and housing improvements for their families and farms. In addition, Fair Trade improves farmers economic stability by encouraging importers to extend financial credit to cooperatives and to develop long- term trading relationships.About Starbucks and Fair Trade: Starbucks is committed to sourcing coffees of thehighest quality that support a sustainable social, ecological and economic model forproduction and trade. In April 2000, Starbucks formed an alliance with TransFair USAthat provides an additional opportunity for us and our customers to have a meaningfulimpact on the working and living conditions faced by many who grow, harvest andprocess coffee throughout the world.
    • Organic CoffeeOrganic coffee is grown without synthetic pesticides,herbicides or fertilizers. This procedure helps maintaina healthy environment and clean ground water.Many farmers have traditionally employed organicgrowing methods passed down from one generation toanother. In fact many of the coffees that Starbucksbuys are grown using organic methods, although mostare not identified as such. Coffee grown organically,but not certified is sometimes called ‘passive organic.’ EcoLogica, an organic certification organization in South America, provided the certification to the coffee farm that produced Starbucks first certified 100% organically grown coffee, Organic Costa Rica, in 1999.Official certification requires that farms submit to three years of soil testing followed by annual testing to retain certification as organic producers. Once harvested, the coffee beans must be processed in organically certified mills and roasting facilities in order to be sold as organic.
    • Organic Shade Grown Mexico• The wave of growth in coffee houses has raised with it the issue of the plight of coffee growing nations especially Southern Mexico• Organic coffee is available in grocery stores and markets across the region, but not widely available in coffee shops, and is a small but rapidly growing segment within speciality coffee (c. 3% of whole bean sales, however there is 25% growth per year in this category).
    • Corporate Social Responsibility• Starbucks commitment to “contribute positively to our communities and our environment” is a key guiding principle in the Company’s mission statement.• Starbucks strives to become a great, enduring company by championing business practices that produce social, environmental, and economic benefits for Starbucks communities around the world.•
    • Commitment to Farmers• Starbucks commitment to coffee origin countries includes addressing social and environmental issues in order to help sustain the people and places that produce our coffees.• Starbucks purchases coffee directly from farms, paying high premiums for the coffee, working closely with the producers on quality, and encouraging participation in social programs for health and education.• Purchases of organic, shade grown and fair trade coffees by Starbucks all contribute to greater social, economic and environmental sustainability of coffee production.
    • Humanitarian Support • Starbucks has contributed more than $1.5 million to CARE, the international development and relief organization. • CARE focuses on long-term support for literacy and education programs in the coffee-growing regions of Indonesia, Ethiopia, Kenya and Guatemala. • In addition, Starbucks frequently provides emergency relief aid to disaster victims in coffee origin countries.
    • Origin Country InitiativesStarbucks makesmany long-terminvestments incoffee origincountries, such asbuilding schools,health clinics,and coffee For example, Starbucks alliance with Grants to Enterprise Works Worldwide helpedprocessing farmers build two coffee processing facilitiesfacilities to in Guatemala, enabling a cooperative of 700improve the well farm families to improve their economicbeing of families situation by milling their own coffees.in coffee farmingcommunities.
    • Commitment to the Environment Starbucks Environmental Mission Statement: Starbucks is committed to a role of environmental leadership in all facets of our
    • Environmental InitiativesStarbucks will fulfill our Commitment to the Environment through: • Support of Conservation International programs • Starbucks Green Team (Environmental management team) – Instill environmental responsibility as a corporate value – Striving to buy, sell and use environmentally friendly products in all operations – Minimising the environmental impacts of materials, manufacturing processes and distribution systems • Reduce, Re-use, Recycle Program – Program employed or being developed in all stores and company facilities – Starbucks recycles used coffee grounds and burlap bags used to ship green coffee – Encouraging customer use of re-usable serveware • Green Sweeps Program ( Cleanups by staff)
    • Commitment to CommunityStarbucks recognises the importance of communityand the role which we play and provides supportthrough donations, partner volunteerism, strategicpartnerships and giving programs.The Make Your Mark in the US programencourages volunteerism of employees in localcommunities, likewise within EMEA, many of ourpartners are involved in local community-relatedactivities. Employee-led initiatives focus on physicalimprovements to neighbourhoods, tutoring, andassistance with sick children, in soup kitchens forthe homeless, among many others.
    • International History
    • From a small start in 1996 … Japan Stores 0 2 1995 1996 1997 1998 1999 2000
    • FY 1997 … JapanHawaii Singapore 0 2 17 Stores 1995 1996 1997 1998 1999 2000
    • FY 1998 … UK Japan Thailand TaiwanHawaii Singapore Philippines 128 0 2 17 Stores 1995 1996 1997 1998 1999 2000
    • FY 1999 … UK China Japan Kuwait Korea Thailand Taiwan MalaysiaHawaii Singapore Philippines 278 New Zealand 128 0 2 17 Stores 1995 1996 1997 1998 1999 2000
    • FY 2000 … UK Lebanon China Japan Kuwait Korea Qatar Thailand Taiwan UAE MalaysiaHawaii Singapore Philippines 524 278 Australia New Zealand 128 0 2 17 Stores 1995 1996 1997 1998 1999 2000
    • FY 2001 … 524 278 128 0 2 17Stores 1995 1996 1997 1998 1999 2000 2001
    • By this Morning.. 1155 international stores open in 26 international markets Exceeding expectations in virtually all markets Opening stores at an annualized rate of over 400 new stores in the international division
    • Today 335 4270 Europe 75 North America Middle 745 East Asia1155 International Stores Pacific 26 Markets
    • WhereWe Are Going
    • (In Millions) Net Revenues $2,649$3,000 (5 Year CAGR=31%) $2,178$2,500 $1,687$2,000 $1,309 $975$1,500 $698$1,000 1996 1997 1998 1999* 2000 2001 $500 $0 *Fiscal Year 1999 includes 53 weeks versus 52 weeks for all other years
    • Global Retail Store Growth 4,7095,000 (5 Year CAGR=36%)4,5004,000 3,501 31% 31%3,5003,000 2,4982,500 1,8862,000 1,4121,500 1,015 69% 69%1,000 500 1996 1997 1998 1999 2000 2001 0 Company-operated Licensed
    • Comparable Store Sales10 9%98 7%7 6%6 5% 5% 5%543 1996 1997 1998 1999 2000 20012
    • Earnings Per Share$0.50 $0.46 (5 Year CAGR=29%)$0.45$0.40 $0.35$0.35 $0.27$0.30 $0.22$0.25 $0.17$0.20 $0.13$0.15$0.10$0.05 1996 1997 1998 1999* 2000 2001$0.00 Excluding one-time charges *Fiscal Year 1999 includes 53 weeks versus 52 weeks for all other years
    • Our Partners
    • International Ownership Strategy Partners Greater Equity Over Time Starbucks 100% 50/50 <20% Straight Starbucks JV JV License Demonstrate Leverage partner’s Gain board seat, Move quickly, concept, establish expertise, maintain minimize P&L minimize risks credibility influence impact
    • Programs International Ownership Strategy Example market with 3 ownership assumptions 5Operating Profit ($ Millions) 4 3 2 • Years 1 to 3: Minimize P&L 1 impact of start-up losses 0 (1) • Year 5: Opportunity to capture earnings through contractual buy- (2) in provisions Year 1 Year 2 Year 3 Year 4 Year 5 Licensed (0%) JV (50%) Owned (100%)
    • Our Partners and PartnershipsChoosing the right partners is critical to our success Shared values and corporate culture Dedicated human resources Strong multi-unit retail/restaurant experience Commitment to customer service Quality image Creative ability, local knowledge and brand- building skills Strong financial resources
    • Programs• Growth: Develop New Markets Increasing Competitive Threats
    • A quick World Tour …
    • Sydney, Australia
    • Canberra, Australia
    • Auckland, New Zealand
    • Shanghai, China
    • Beijing, China
    • Philippines
    • Beirut, Lebanon
    • Palm Strip store in Dubai
    • Kuwait City
    • Edinburgh, Scotland
    • Worlds highest volume Starbucks Shibuya, JapanShibuya, Japan
    • A glimpse of our future...
    • The Potential in Europe: 0 500 1000 1500 2000 Germany 1450 France 990 UK 750 Spain 725 Potential 370 5,225 Italy Benelux 360 StoresScandinavia 300Switzerland 140 Europe Austria 140
    • • International Store Growth )’02 to ‘07 ‘07 1,821 ‘07 2,615 Europe ‘02 361 ‘02 865 ‘07 Latin America (incl. Puerto 316 Rico & Hawaii) ‘02 87 ‘07 430 Middle East/Africa ‘02 Asia-Pacific 371,350 International Stores by FYE 025,182 International Stores by FYE 07
    • …and the Rest of the World: 0 1000 2000 3000 4000 5000 6000 7000 Europe 5225 1425 Asia Pacific 4120 745 PotentialLatin America 110 11, 11,740 Middle East Stores Africa 115 Internationally
    • Still room to grow – even here … (Company- operated North American stores only)No StoresFewer than 100 StoresMore than 100 Stores
    • QUESTIONS?Thank you!
    • Onion HeadSiriporn Pongvinyoo mrkokung@hotmail.com