Starbucks

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Starbucks Corporation
Type	Public (NASDAQ: SBUX,SEHK: 4337)
Founded	In 1971 across from Pike Place Market in Seattle, Washington
Headquarters	Seattle, Washington, USA
Key people	Howard Schultz, Chairman, President and CEO Martin Coles, Chief Operating Officer James C. Alling, President, Starbucks International Peter Bocian, Chief Financial Officer
Industry	Restaurants Retail Coffee and Tea Retail Beverages Entertainment
Products	Whole Bean Coffee Boxed Tea Made-to-order beverages Bottled beverages Baked Goods Merchandise Frappuccino beverages
Revenue	▲ US$7.786 billion (2006)
Employees	147,436
Subsidiaries	Starbucks Coffee Company Tazo Tea Company Seattle's Best Coffee Torrefazione Italia Hear Music Ethos Water
Website	Starbucks.com

Starbucks Corporation (NASDAQ: SBUX [3]; SEHK: 4337) is a multinational coffee and coffeehouse chain company based in the United States. Starbucks is the largest coffeehouse company in the world,^[1] with 15,011 stores in 42 countries.^[2] Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks and items such as mugs and coffee beans. Through its Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of these products are seasonal or specific to the locality of the store. Starbucks brand ice cream and coffee are also sold at grocery stores.

From its founding in Seattle, Washington, as a local coffee bean roaster and retailer, Starbucks has expanded rapidly. In the 1990s, the company was opening a new store every workday, a pace that continued into the 2000s. Domestic growth has since slowed down, though the company continues to expand in foreign markets and is opening 7 stores a day worldwide. The first location outside of the U.S. and Canada was established in 1996, and they now constitute almost one third of Starbucks' stores.^[3]

As of November 2007, Starbucks had 8,505 company-owned outlets worldwide: 6,793 of them in the United States and 1,712 in other countries and U.S. territories. In addition, the company has 6,506 joint-venture and licensed outlets, 3,891 of them in the United States and 2,615 in other countries and U.S. territories. This brings the total locations (as of November 2007) to 15,011 worldwide.^[2] Starbucks can be found in many popular grocery chains in the U.S. and Canada, as well as in many airports.

Starbucks' corporate headquarters are in Seattle, Washington, United States. As of January 2008, the members of the company's board of directors are Howard Schultz (Chair), Barbara Bass, Howard Behar, Bill Bradley, Mellody Hobson, Olden Lee, James Shennan, Jr., Javier Teruel, Myron Ullman, III, and Craig Weatherup.

Contents 1 History 2 Products 3 Stores 3.1 Staffing 3.2 "The Third Place" 3.3 International operations 4 Intellectual property 4.1 Name 4.2 Logo 4.3 Parodies and infringements 5 Criticism and controversy 5.1 Cultural imperialism 5.2 Anti-competitive tactics 5.3 Labor disputes 5.4 Coffee bean market 5.5 Ethos water controversy 6 Other ventures 6.1 Starbucks and Apple 7 See also 8 References 9 External links

[edit] History

The original Starbucks opened in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker. The three were inspired by Alfred Peet, whom they knew personally, to open their first store in Pike Place Market to sell high-quality coffee beans and equipment. The original Starbucks location was at 2000 Western Avenue from 1971-1976. That store then moved to 1912 Pike Place; it is still open. During their first year of operation, they purchased green coffee beans from Peet's, then began buying directly from growers.

Entrepreneur Howard Schultz joined the company in 1982, and, after a trip to Milan, advised that the company sell coffee and espresso drinks as well as beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home. Certain that there was much money to be made selling drinks to on-the-go Americans, Schultz started the Il Giornale coffee bar chain in 1985.

In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's (Baldwin still works there today). In 1987, they sold the Starbucks chain to Schultz's Il Giornale, which rebranded the Il Giornale outlets as Starbucks and quickly began to expand. Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, Canada (which now has more locations than anywhere in the world)^{[citation needed]} and Chicago, Illinois, United States that same year. At the time of its initial public offering on the stock market in 1992, Starbucks had grown to 165 outlets.

The first Starbucks location outside of North America opened in Tokyo in 1996. Starbucks entered the U.K. market in 1998 with the acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all its stores as Starbucks. By November 2005, London had more outlets than Manhattan,^[4] a sign of Starbucks becoming an international brand.

In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks-operated locations worldwide to more than 6,400. On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company owned locations of the Oregon-based Coffee People chain. Starbucks representatives have been quoted as saying they will convert the Diedrich Coffee and Coffee People locations to Starbucks stores.^[5][6]

Starbucks' chairman, Howard Schultz, has talked about the tension that exists in the company between their rapid expansion (they aim to eventually operate 40,000 retail stores worldwide)^[7] and their collective desire to act like a small company.

In January 2008, Chairman Howard Schultz resumed his role as Chief Executive Officer, replacing Jim Donald, who had succeeded Schultz in 2000. Schultz's principal challenge is to restore what he calls the "distinctive Starbucks experience" in the face of rapid expansion. Analysts believe that Schultz must determine how to contend with higher materials prices and enhanced competition from lower-price competitors, including McDonald's and Dunkin' Donuts. ^[8] On January 31, 2008, Schultz announced that Starbucks would discontinue its warm food products, originally scheduled to launch nationwide in 2008, in order to refocus the brand on coffee.

Also in January 2008, with Dunkin' Donuts and McDonalds quickly becoming stiff competition in the specialty coffee market, Starbucks started testing selling an 8 oz "short" brewed coffee for $1 and giving free refils on all brewed coffee. So far this test is limited to the greater Seattle market, with no plans for expansion to national markets as of yet. The normal price for a short brewed coffee at Starbucks is about $1.50, when Dunkin' Donuts 10 ounce coffee runs for $1.39 and McDonalds' 12 ounce premium coffee is $1.07. ^[9]

[edit] Products

Starbucks serves a variety of beverages including brewed coffee, hot chocolate, espresso, teas, and Frappuccino. Also available are bottled beverages including Naked Juice, Ethos water, San Pellegrino, Izze soda, and Horizon Organic Milk.

Starbucks has a "you-call-it" culture allowing the customer to specify all modifications to the drink. For example, instead of just ordering a cafe mocha, customers can order an iced-decaf-triple-grande-five pump-soy-no whip-Mocha. Any beverage can have various flavored syrups, and whipped cream may be added. Cappuccinos, and all other beverages with steamed-milk, can be made with more foam ("dry") or less foam ("wet"). Starbucks also offers blended beverages, such as the "Frappuccino Blended Coffee", a flavored drink of coffee, milk, and sugar blended with ice. The name is a portmanteau of frappé and cappuccino and was introduced in 1995. Starbucks has special beverages for the holiday season, like the gingerbread latte, peppermint mocha, and eggnog latte, as well as a "Christmas Blend" of whole bean coffee.

Starbucks supplements the beverage offerings with pastries, salads, cold sandwiches, coffee merchandise and at-home brewing equipment, and pre-packed or scooped coffee beans.

Starbucks also has a variety of kosher products, but due to business hours and sandwich products a Starbucks retail store cannot be certified 'kosher' according to Jewish law.^[10]

[edit] Stores

Starbucks does not franchise with individuals within North America but does enter into licensing arrangements with some companies.^[11] One example is of Starbucks store locations in airports, most of which are operated by HMSHost, owned by the Italian Autogrill group. Other licensed locations include grocery stores, major food services corporations, college and university campuses, and hospitals. In addition, Starbucks has partnered with Magic Johnson's Johnson Development Corporation to form Urban Coffee Opportunities, which opens retail locations in low-income urban areas.^[12]

[edit] Staffing

There are usually from two to six partners (as Starbucks employees are called), all of them trained baristas, in each retail store at any one time. Black aprons labeled "Coffee Master" are worn by employees who have completed the Coffee Master course, which educates employees in not only the tasting, but also growing regions, roasting and purchasing (including fair trade practices) aspects of the coffee industry.

In the United States and Canada Starbucks offers full benefits such as health, dental, and vision insurance, as well as stock-option grants and 401k with matching to employees who work an average of at least 20 hours per week. Each employee can receive a box of tea or a pound of coffee each week if they choose. As of 2008, Starbucks was ranked by Fortune magazine as the 7th best company to work for in the United States, up from 16th in 2007. In 2006 and 2005 it was ranked 29th and 11th, respectively.^[13] Starbucks was also voted as one of the top ten UK workplaces by the Financial Times in 2007.

[edit] "The Third Place"

Starbucks envisions local outlets as a "third place" (besides home and work) to spend time, and store design is intended to achieve this. The café section of the store is often outfitted with stuffed chairs and tables with hard-backed chairs. Most stores provide free electricity for customers, and many stores also have wireless internet access called hotspots provided by T-Mobile.^[14] Both an unsecured and secured (with a client) Wi-Fi connections are available.^[15]

The company is noted for its non-smoking policy at almost all of its outlets, despite predictions that this would never succeed in markets such as Germany, which used to have few restrictions on smoking. This has changed in 2007 with many German states issuing smoking bans for restaurants and bars. Outlets in Vienna and Mexico City, which have smoking rooms separated by double doors from the coffee shop itself, and a smoking room upstairs in the Largo do Senado, Macau, branch are the closest the company has come to making exceptions. According to the company, the smoking ban is to ensure that the coffee aroma is not adulterated. The company also asks its employees to refrain from wearing strong perfumes for similar reasons.^[16] Starbucks generally does not prohibit smoking in outside seating areas, unless required by local codes.

[edit] International operations

Stores are now found in Argentina^[17], Australia, Austria, Bahamas, Bahrain, Brazil, Canada, Chile, China (including Hong Kong and Macau), Cyprus, Czech Republic, Denmark, Dominican Republic, Egypt, France, Germany, Greece, India, Indonesia, Ireland, Japan, Jordan, Kuwait, Lebanon, Malaysia, Mexico, New Zealand, the Netherlands, Oman, Peru, Philippines, Puerto Rico, Qatar, Romania, Russia^[18], Saudi Arabia, Singapore, South Korea, Spain, Switzerland, Taiwan, Thailand, Turkey, Egypt, United Arab Emirates, and the United Kingdom.

New stores will be opened in Bulgaria^[19] , Colombia^[20], Hungary^[21], India, Morocco, Poland^[22], Portugal^[23], Serbia and South Africa.

[edit] Intellectual property

Starbucks U.S. Brands, LLC, is a Starbucks-owned company that currently holds and owns the property rights to approximately 120 Starbucks Coffee Company patents and trademarks. It is located at 2525 Starbucks Way in Minden, Nevada.^[24]

[edit] Name

The company is named in part after Starbuck, Captain Ahab's first mate in the book Moby-Dick, as well as a turn-of-the-century mining camp (Starbo or Storbo) on Mount Rainier. According to Howard Schultz's book Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, the name of the company was derived from Moby-Dick, although not in as direct a fashion as many assume. Gordon Bowker liked the name "Pequod" (the ship in the novel), but his creative partner Terry Heckler responded, "No one's going to drink a cup of Pee-quod!" Heckler suggested "Starbo." Brainstorming with these two ideas resulted in the company being named for the Pequod's first mate, Starbuck.^[25]

International names include:

• Arabic-speaking countries: ستاربكس (transliteration: stārbaks)
• China, Hong Kong, Taiwan: 星巴克 Pinyin: xīngbākè (星 xīng means "star", while 巴bā 克kè is a transliteration of "-bucks")
• Israel: סטארבקס (transliteration: sṭārbaqs)
• Japan: スターバックス (transliteration: sutābakkusu)
• South Korea: 스타벅스 (transliteration: seutabeokseu), often used in conjunction with the English name
• Quebec, Canada: Café Starbucks Coffee^[26] (added the French word to avoid controversy with local language politics)
• Thailand: สตาร์บัคส์ pronounced [sǒtāːbākʰō]

[edit] Logo

The logo is a "twin-tailed siren" (the siren of Greek mythology).^[27] The logo has been streamlined over the years. In the first version, the Starbucks siren was topless and had a fully-visible double fish tail. In the second version, her chest was covered by her flowing hair, but her navel was still visible, and the fish tail was cropped slightly. In the current version, her navel and chest are not visible at all, and only vestiges remain of the fish tails. The original logo can still be seen on the Starbucks store in Seattle's Pike Place Market and on certain coffee bags.

At the beginning of September 2006, Starbucks temporarily reintroduced its original brown logo on paper hot drink cups. Starbucks has stated that this was done to show the company's heritage from the Pacific Northwest and to celebrate 35 years of business. The vintage logo has sparked some controversy due to the siren's bare chest. Recently, an elementary school principal in Kent, Washington, was reported as asking teachers to "cover up" the mermaid of the retro cups with a cup sleeve of some kind.^[27]

[edit] Parodies and infringements

In 2000, San Francisco cartoonist Kieron Dwyer was sued by Starbucks for copyright and trademark infringement after creating a parody of its siren logo and putting it on coffee mugs, t-shirts, and stickers that he sold on his website and at comic book conventions. Dwyer felt that since his work was a parody it was protected by his right to free speech under U.S. law. The judge agreed that Dwyer's work was a parody and thus enjoyed constitutional protection; however, he was forbidden from financially "profiting" from using a "confusingly similar" image of the Starbucks siren logo. Dwyer is currently allowed to display the image as an expression of free speech, but he can no longer sell it.^[28]

In 2003, Starbucks successfully sued a Shanghai competitor in China for trademark infringement, because that chain used a green-and-white logo with a similar sounding Chinese name.^[29]

Also in 2003, Starbucks sent a cease-and-desist letter to "HaidaBucks Coffee House" in Masset, British Columbia, Canada. The store was owned by a group of young Haida men, commonly referred to as "bucks." After facing criticism, Starbucks dropped its demand after HaidaBucks dropped "coffee house" from its name.^[30]

In 2005 Starbucks lost a trademark infringement case against a smaller coffee vendor in South Korea that operates coffee stations under the name and style Starpreya. The company, Elpreya, says Starpreya is named after the Norse goddess, Freja, with the letters of that name changed to ease pronunciation by Koreans. The court rejected the Seattle-based retailer's claim that the logo of Starpreya is too similar to the famous Starbucks logo.^{[citation needed]}

[edit] Criticism and controversy

Starbucks has come to be regarded by some, particularly in the global justice movement, as symbolic of the problems posed by globalization. Several activist groups maintain websites criticizing the company's fair-trade policies, labor relations, and environmental impact, and hold it as a prime example of U.S. cultural and economic imperialism. Several Starbucks locations were vandalized during the WTO meeting held in Seattle in late 1999. Although no organization claimed responsibility for the vandalism, the anarchist circle-A symbol was spray-painted on several stores.^[31]

[edit] Cultural imperialism

The Starbucks location in the former imperial palace in Beijing closed in July 2007. The coffee shop had been a source of ongoing controversy since its opening in 2000 with protesters objecting that the presence of the American chain in this location "was trampling on Chinese culture".^{[32][33][34][35]}

[edit] Anti-competitive tactics

Some of the methods Starbucks has used to expand and maintain their dominant market position, such as buying out competitors' leases, acquiring independent coffee shops and converting them into Starbucks stores, and clustering several locations in a small geographical area (i.e., saturating the market), have been labeled anti-competitive by critics.^[36] For example, Starbucks fueled its initial expansion into the UK market with a buyout of its only major potential competitor (the 49 outlet, UK-based Seattle Coffee Company), then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Critics claimed this was an unfair attempt to drive out small, independent competitors, who could not afford to pay inflated prices for premium real estate.^[37]

[edit] Labor disputes

Since 2004, workers at seven Starbucks stores in New York City have joined the Industrial Workers of the World (IWW) as the Starbucks Workers Union.^[38] According to a Starbucks Union press release, since then, the union membership has begun expanding to Chicago and Maryland.^[39] On March 7, 2006, the IWW and Starbucks agreed to a National Labor Relations Board settlement in which three Starbucks workers were granted almost US$2,000 in back wages and two fired employees were offered reinstatement.^[40][41][42] According to the Starbucks Union, on November 24, 2006, IWW members picketed Starbucks locations in more than 50 cities around the world in countries including Australia, Canada, Germany, Great Britain and New Zealand, as well as U.S. cities including New York, Chicago, Minneapolis and San Francisco,^[43] to protest the firing of five Starbucks Workers Union organizers by Starbucks and to demand their reinstatement.

Some Starbucks baristas in Canada,^[44] Australia and New Zealand,^[45] and the United States^[46] belong to a variety of unions. In 2005, Starbucks paid out US$165,000 to eight employees at its Kent, Washington, roasting plant to settle charges that they had been retaliated against for being pro-union. At the time, the plant workers were represented by the IUOE. Starbucks admitted no wrongdoing in the settlement.^[38]

A Starbucks strike occurred in Auckland, New Zealand, on November 23, 2005.^[45] Organized by Unite Union, workers sought secure hours, a minimum wage of NZ$12 an hour, and the abolition of youth rates. The company settled with the Union in 2006, resulting in pay increases, increased security of hours, and an improvement in youth rates.^[47]

According to Starbucks Chairman Howard Schulz, "If they had faith in me and my motives, they wouldn't need a union." According to The Seattle Times, "The International Union of Operating Engineers Local 286 had trouble with Starbucks at its Kent roasting plant, where the union no longer represents workers".^[38]

[edit] Coffee bean market

In 2000, the company introduced a line of fair trade products.^[48]

Of the approximately 136,000 tonnes (300 million pounds) of coffee Starbucks purchased in 2006, about 6 percent was certified as fair trade.^[49]

According to Starbucks, they purchased 2,180 tonnes (4.8 million pounds) of Certified Fair Trade coffee in fiscal year 2004 and 5,220 tonnes (11.5 million pounds) in 2005. They have become the largest buyer of Certified Fair Trade coffee in North America (10% of the global market). Transfair USA,^[50] the only third-party certifier of Fair Trade Certified coffee in the United States, has noted the impact Starbucks has made in the area of Fair Trade and coffee farmer's lives by saying:

Since launching {their} FTC coffee line in 2000, Starbucks has undeniably made a significant contribution to family farmers through their rapidly growing FTC coffee volume. By offering FTC coffee in thousands of stores, Starbucks has also given the FTC label greater visibility, helping to raise consumer awareness in the process.

Groups such as Global Exchange are calling for Starbucks to further increase its sales of fair trade coffees. However, fair trade certification can cost US$20,000 to US$30,000^{[citation needed]}, and many growers are unwilling or unable to pay for certification^{[citation needed]}.

[edit] Ethos water controversy

Ethos, a brand of bottled water acquired by Starbucks in 2005, is sold at locations throughout North America. Ethos bottles feature prominent labeling stating "helping children get clean water", referring to the fact that $.05 from each $1.80USD bottle sold ($.10 per unit in Canada) is used to fund clean water projects in under-developed areas. Critics have argued that the claim on the label misleads consumers into thinking that Ethos is primarily a charitable organization, when it is actually a for-profit Starbucks brand and the vast majority of the sale price (over 94%) does not support clean-water projects.^[51] Although sales of Ethos water has raised over $4,000,000 for clean water efforts, the brand is not a charity and has added to Starbucks revenue.^[52] The founders of Ethos have stated that the brand is intended to raise awareness of third-world clean water issues and provide socially responsible consumers with an opportunity to support the cause by choosing Ethos over other brands.^[53] Starbucks has since redesigned the American version of the Ethos water bottles, stating the amount of money donated per bottle in the description.

[edit] Other ventures

Main article: Hear Music

Starbucks entered the music industry in 1999 with the acquisition of Hear Music, and the film industry in 2006 with the creation of Starbucks Entertainment. Starbucks Entertainment was one of the producers of the 2006 film Akeelah and the Bee. Retail stores heavily advertised the film before its release.

Hear Music is the brand name of Starbucks' retail music concept. Hear Music began as a catalog company in 1990 and was purchased by Starbucks in 1999. Nearly three years later, in 2002, they produced a Starbucks opera album, featuring artists such as Luciano Pavarotti.

[edit] Starbucks and Apple

Starbucks has entered into a partnership with Apple to collaborate on selling music as part of the coffeehouse experience. In October of 2006, Apple added a Starbucks Entertainment area to the iTunes Music Store, selling similar music that appeared in Starbucks stores. In September of 2007 Apple announced that there would be wireless communication between Apple and Starbucks. Through the T-Mobile Wi-Fi, a paywall is opened up to allow any individual connecting to T-Mobile Hotspot access to the iTunes Music Store (regardless of whether he or she is a T-Mobile Hotspot subscriber). The partnership is primarily targeted at iPhone, iPod Touch, and Macbook users (although anyone with access to iTunes can take advantage of it). In addition, the iTunes Music Store will automatically detect the current and last 10 songs playing in a Starbucks and offer users connected to the store's wireless network the opportunity to download the tracks. This feature has been rolled out in Seattle, New York City, and the San Francisco Bay Area, and will slowly be offered in limited markets during 2007-2008.^[54] During the fall of 2007 Starbucks also began to sell digital downloads of certain albums through iTunes. The buyer would buy the download at Starbucks, and enter the code on the download card at the iTunes Music Store, and then the entire album would immediately start downloading. From October 2 to November 7, 2007, Starbucks gave away 37 different songs for free download through iTunes as part of the "Song of the Day" promotion. Each day, baristas would give out download cards for a particular song which could be redeemed on iTunes.

[edit] See also

• List of coffeehouse chains
• List of companies based in Seattle

[edit] References

[edit] External links

v • d • e Starbucks Corporation
Corporate Directors:	Barbara Bass · Howard Behar · Bill Bradley · Mellody Hobson · Olden Lee · Greg Maffei · Howard Schultz · James Shennan · Javier Teruel · Myron Ullman · Craig Weatherup
Assets & Products:	Hear Music · Starbucks XM Café (under XM ownership) · Pasqua Coffee · Seattle's Best Coffee · Tazo Tea Company · Torrefazione Italia
Annual Revenue: $6.4 billion USD (▲25% FY 2005) · Employees: 96,700 · Stock Symbols: NASDAQ: SBUX HKSE: 4337 · Website: www.starbucks.com

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