Starbucks Case

Topics: Coffee, Starbucks, Espresso Pages: 14 (4221 words) Published: February 17, 2013
Starbucks Case

* Founded in 1987 in Seattle, Wash by Howard Shultz
* World premier roaster and retailer of specialty coffees * As of April 2010: 8,812 company owned stores, and 7,852 licensed stores in more than 50 countries and annual sales of about $10 bil

Company Background
* Start in 1971, 3 academics: Jerry Baldwin, Zev Siegal, and Gordon Bowker opened Starbucks in the touristy Pikes Place Market in Seattle each invested $1,350 and borrowed $5K from the bank * Pikes Place store featured: modest, hand-built, classic nautical fixtures * Store was an immediate success

* Howard Schultz Enters the Picture
* 1981, Shultz VP and general manager of US operations for a Swedish maker of stylish kitchen equipment and coffee makers, decided to pay starbucks a visit – wondered why starbucks was selling so many of his comp products * Schulz got coffee there, and was hooked

* Met with Baldwin and Bowker and was impressed by their commitment to providing customers with quality coffees, and their passion to educate custs * Baldwin Schultz ** “We don’t manage the business to maximize anything other than the quality of the coffee” * Differentiating feature/bedrock value: top quality, fresh roasted, whole bean coffee * Educating customers to appreciate the qualities of fine coffees * Word of mouth to get ppl into stores

* Built custs loyal
* Shultz asked Baldwin if there was any way he could work with Starbucks – wanted to expose ppl all around the US & Canada to this * Baldwin called and said they did not want to hire him because expansion was too risky and did not share Shultzs vision for Starbucks – Baldwn reconsidered * Schultz got the job of heading marketing and overseeing the retail stores was his – Sept 1982, Shultz took over his new responsibilities in Sbucks * Starbucks and Howard Schultz 1982-1985

* first 4 months S spent time working behind counters, tasting diff coffee, working with custs, getting t know store – last, roast coffee * informal dress code, credibility & building trust with colleagues, casual, low key ambience * Shultz worked with employees on cust-friendly sales skills and developed brochures that made it easy for custs to learn about fine coffees * Went to Milan, Italy to attend an international housewares show saw how popular & vibrant the Italian coffee bars were: barista that performed with flair & camaraderie with custs * Took the idea of a lattee

* Refelation from Italy: the Starbucks sotres in Seattle completely missed the point – Sbucks needed to do was serve fresh-brewed coffee, espressos, and cappuccinos in its stores (in addition to beans & equip) and try to create an American version of the Italian coffee bar culture * Schultz Becomes Frustrated

* Resistance from Baldwin & Bowker – said it was a retailer, not a coffee bar, thought serving drinks would put them in the bev business and diminish the integrity of Starbucks mission as a purveyor of fine coffees * Baldwin and Bowker wanted to purchase Peet’s Coffee and Tea – acquisition in 1984, and Sbucks had to take on considerable debt to fund it * Schultz had to go to San Fran to support marketing of Peet’s * Employees did not get bonus due to tight finc

* Took 1 yr for Shultz to convince Baldwin to let him test an espresso bar – April 1984 * w/in 2 months: serving 800 cust per day, more than 250 avg of highest Starbucks, most business at espresso counter, sales at reg counter were only adequate * Baldwin didn’t want to go forward with bringing beverages into the store – but Baldwin did finally agree to let Schultx put espresso machines in the back of one or two starbucks stores * Over the next several months, Schultz decided to leave Starbucks to start his own comp: to open espresso bars in high-traffic downtown locations, serve espresso drinks & coffee by...
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