What’re you most likely to encounter in every major city in the world? It’s the Starbucks café, no doubt. This is because, today, over 20,000 cafes that dot the globe do an 80-billion-dollar business and account for 57 percent of sales of the total café market!
So, how did this one coffee shop in Seattle turn into such a mammoth business? It all started in 1973, when three college friends Zev Siegel, Jerry Baldwin, and Gordon Bowker found coffee business lucrative enough to get into it. They made Peet’s Coffee owner, Alfred Peet, their mentor, who had brought custom coffee roasting in the US.
Under Peet’s guidance, the trio opened the first Starbucks outlet in Seattle’s famous Pike Place Market in 1971. Peet provided roasted coffee beans and introduced them to coffee brokers until they set up their own roastery. As the popularity of Starbucks coffee grew, they opened five more in the city. However, the turning point came when Starbucks took Howard Schultz on board as a professional director of marketing and sales. He introduced a latte in Starbucks in 1983, which proved to be a runaway success.
Seeing the potential of this business, Schultz roped in investors and bought Starbucks for $3.8 million, just after four years of working. This was quite an achievement for this 34-year-old marketing executive, who lost no time in aggressively expanding Starbucks’ domain. By 1992, Starbucks had added 165 stores and two years later, it opened in 1,000 locations, including those in Japan and Singapore. By 1997, it had made its presence in 2,000 locations.
By the year 2000, Schultz not only became executive chairman of Starbucks from CEO but also added 3,500 stores in over a dozen countries. From this figure, the outlets jumped to 15,000 in 2007. The Starbucks opening spree averaged 1,500 stores every year with sales touching $9.4 billion, up from $2 billion.
Good things don’t last forever. Starbucks faced a financial crash in 2007 with cash-strapped consumers shying away from it. Schultz again took the reins in his hands and the stocks that had plummeted by 50 percent rose up by nine percent, simply by his return. The first thing he did was to freeze expansion and, instead, focused on customer experience. In the process, he laid off around 6,700 cafes by 2009.
Schultz even closed all Starbucks cafés for a day in the US – all 135,000 of them – to re-train its staff in making its signature espresso. Focusing on customer experience, he made the outlets more customer-friendly. He stopped selling eats, removed automatic espresso machines and once again infused the café with fresh coffee aroma.
Starbucks ‘ expansion resumed in 2012 and by 2017, it had opened in 3,000 more locations; the enviable total around the world being 20,000 cafés. Today, the company is more focused on healthy beverages, replacing its full-of-sugar Frappuccino and drinks topped with whipped cream to lighter drinks, such as cold brew and fruity refreshers. It has also introduced its new line of upscale stores – Starbucks Reserve Roasteries.