With more than 30,000 cafes around the globe, Starbucks has become a well known name across the world. From its iconic and popular cups with espresso inside them, Starbucks evolved from on coffee bean shop in Seattle to a brand with $80 billion business over 48 years. Starbucks cover total of 57% sales in the cafe market.
You heard it right!!
57% is not a small number. Nearly 2/3 of the coffee sold in the U.S. comes from Starbucks. But this itself has come with real pains. With 14,000 locations in U.S. alone, Starbucks has spread itself too thin.
Having too many stores out there led to fewer transactions in individual stores. To compensate the loss of fewer transactions, the company tried to increase the prices of their products. Doing this frequently can drive the customers away.
So, what strategy did Starbucks use to attract its customers ?
This was the time of 1970. Three college friends Zev Siegl, Jerry Baldwin and Gordon Bowker decided to go for a coffee business. They found a mentor in Alfred Peet, founder of Peet’s coffee and the man behind the custom coffee roasting to the U.S. So, with the help of Peet, the three friends founded Starbucks , a coffee bean shop and roastery at Seattle’s famous Pike Place Market in 1971. Peet helped those young entrepreneurs with coffee beans and helped them to connect with coffee brokers to provide the source to get their own roasted coffee beans until they could set up their own roastery. For the first decade, the founders opened the branches of Starbucks at 5 locations. At that time, the conventions coffee consumers found out a glaring absence that was actual coffee drinks or the actual cups made especially for coffee. There was no actual bars and no such demand for espresso based drink at that period of time. People usually take coffee beans their homes and just with simple method, they used to brew the coffee. No one had the thought of getting a beverage at a Starbucks coffee shop until 1980. Initial focus of Starbucks was the high quality coffee as customers were more focused on the canned coffee. The company hired its first Director of Marketing and Sales, Howard Schultz. That man was very professional to the level where he became the CEO of Starbucks later.
In 1983, Schultz went To Italy and returns with an idea that was turning the coffee bean stores into cafes. Starbucks launched its first latte the next year. That experiment was a success and four years later Schultz partnered with the investors and bought Starbucks with $3.8 million. Schultz proposed a strategy of aggressive expansion.
By 1996, the company had opened the cafes in the more than thousand locations including the international cafes in Japan and Singapore.
Growth was too rapid in the case of Starbucks that in just three years later, the company opened the café in 2000th location as well.
Schultz switched from CEO to Executive Chairman at 2000. Between 2000 and 2007, Starbucks witnessed the extreme growth that the number of its cafes got more than quadrupled like 3,500 to 15,000 cafes directly.
Sales hot up from $2 billion to $9.4 billion in that period. But then Starbucks hit a wall.
The 2007 financial crash:
The growth from that year remained constant. The stock price fell by 50 percent. So Starbucks brought back Howard Schultz.
This news alone raised the Starbucks stock by 9 percent. He laid off 6,700 baristas in the café. He wanted customers to remember his brand. Schultz ordered all the cafes in the U.S. locations to call off in the afternoon so that he could show the baristas how to make the signature espresso. He wanted to make the customers to experience real life coffee in the stores to let it remember fresh in their minds. Schultz even ordered to remove automatic espresso machines.
Schultz’s strategy worked and the company stock price soared up by 149 percent in 2009. The company has been gaining positive reviews since then.
Starbucks took the big step of opening the new kind of stores that are Starbucks Reserve Roasteries. These massive foot stores are designed to be a tourist destination. Here, Starbucks baristas experiment new and different brewing methods to come up with delicious beverages. With this , Starbucks decided to come up with something new for the customers every now and then.