Starbucks Going Global Fast

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The Starbucks coffee shop on Sixth Avenue and Pine
Street in downtown Seattle sits serene and orderly, as
unremarkable as any other in the chain bought 15 years
ago by entrepreneur Howard Schultz. A little less than
three years ago, however, the quiet store-front made front
pages around the world. During the World Trade
Organization talks in November, 1999, protesters flooded
Seattle’s streets, and among their targets was Starbucks, a symbol, to them, of free-market capitalism run amok,
another multinational out to blanket the earth. Amid the
crowds of protesters and riot police were black-masked
anarchists who trashed the store, leaving its windows
smashed and its tasteful green-and-white decor smelling
of tear gas instead of espresso. Says an angry Schultz: ‘It’s hurtful. I think people are ill-informed. It’s very difficult to protest against a can of Coke, a bottle of Pepsi, or a can of Folgers. Starbucks is both this ubiquitous brand and a

place where you can go and break a window. You can’t
break a can of Coke.’
The store was quickly repaired, and the protesters have
scattered to other cities. Yet cup by cup, Starbucks really is caffeinating the world, its green-and-white emblem beckoning to consumers on three continents. In 1999, Starbucks
Corp. had 281 stores abroad. Today, it has about 1200 – and it’s still in the early stages of a plan to colonise the globe. If the protesters were wrong in their tactics, they weren’t
wrong about Starbucks’ ambitions. They were just early.
The story of how Schultz & Co. transformed a pedestrian
commodity into an upscale consumer accessory has
a fairy-tale quality. Starbucks has grown from 17 coffee
shops in Seattle 15 years ago to 5689 outlets in 28 countries. Sales have climbed an average of 20 per cent annually
since the company went public 10 years ago, to $2.6
billion in 2001, while profits bounded ahead an average of
30 per cent per year, hitting $181.2 million last year. And
the momentum continues. In the first three quarters of
this fiscal year, sales climbed 24 per cent, year to year, to $2.4 billion, while profits, excluding onetime charges and
capital gains, rose 25 per cent, to $159.5 million.
Moreover, the Starbucks name and image connect with
millions of consumers around the globe. It was one of the
fastest-growing brands in a Business Week survey of the
top 100 global brands published 5 August. At a time when
one corporate star after another has crashed to earth,
brought down by revelations of earnings misstatements,
executive greed, or worse, Starbucks hasn’t faltered. The
company confidently predicts up to 25 per cent annual
sales and earnings growth this year. On Wall Street,
Starbucks is the last great growth story. Its stock, including four splits, has soared more than 2200 per cent over
the past decade, surpassing Wal-Mart,
General Electric, PepsiCo, Coca-Cola,
Microsoft and IBM in total return. Now
section 1
case studies
cases
1.1 Starbucks: Going Global Fast 515
1.2 Nestlé: the Infant Formula Controversy 520
case 1.1 Starbucks: Going Global Fast
515
This Starbucks store opened in 2000, in the Forbidden City
area of Beijing
IntMk-CStud-1.qxd 26/05/2005 13:57 Page 515
at $21, it is hovering near its all-time high of $23 in July, before the overall market drop.
And after a slowdown last fall and winter, when
consumers seemed to draw inward after September 11,
Starbucks is rocketing ahead once again. Sales in stores
open at least 13 months grew by 6 per cent in the 43 weeks
through 28 July, and the company predicts monthly samestore
sales gains as high as 7 per cent through the end of
this fiscal year. That’s below the 9 per cent growth rate in 2000, but investors seem encouraged. ‘We’re going to see a lot more growth,’ says Jerome A. Castellini, president of Chicago-based CastleArk Management, which controls

about 300000 Starbucks shares. ‘The stock is on a run.’
But how long can that run last?’ Already,...
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