Wake up and smell the coffee -- Starbucks is everywhere. The world's #1 specialty coffee retailer, Starbucks has more than 25,000 coffee shops in 75 countries. The outlets offer coffee drinks and food items, as well as roasted beans, coffee accessories, and teas. Starbucks operates more than 12,700 of its own shops, which are located mostly in the US, while licensees and franchisees operate roughly 12,375 units worldwide (including many locations in shopping centers and airports). In addition, Starbucks markets its coffee through grocery stores, food service customers, and licenses its brand for other food and beverage products.
What was once a simple chain of coffeehouses has become a force of nature in the retail business. With so many outlets throughout the world, Starbucks has used its chain to branch out into other retail segments, including teas, CDs, books, and similar lifestyle products. Through partnerships with food manufacturers, it also licenses the Starbucks brand for such products as ice cream (made by Nestlé's Dreyer's Grand Ice Cream subsidiary), coffee flavored liqueur (Beam), and bottled Frappuccino (PepsiCo).
Teavana Holdings is a wholly-owned subsidiary of Starbucks. Teavana operates some 355 Heaven of Tea retail stores that sell gourmet loose-leaf teas, teapots, and other tea-related products.
The company's global expansion plans have a particular focus on the growing consumer markets in Asia and South America. Starbucks has its own coffee farm in China. However, almost 75% of Starbucks' revenue still comes from the US.
Sales and Marketing
Starbucks has been on the cutting edge of using social media and technology as part of its marketing and customer services efforts. The company's annual marketing expenses totaled $378.7 million in fiscal 2016, which included almost $250 million for advertising.
Starbucks has faced growing competition in the coffee sector. Both Dunkin' Donuts (owned by Dunkin' Brands) and fast food giant McDonald's are marketing their coffee selections as cost-effective morning java alternatives, cutting in on the company's gourmet coffee market. In response, Starbucks is looking to steal some market share in the quick-service segment by promoting its Seattle's Best Coffee brand to restaurant chains and other counter-service outlets.
Starbucks expanded its strategic relationship with Green Mountain Coffee Roasters for the manufacturing, marketing, distribution, and sale of Starbucks-branded Vue packs. The move helped the company's growth in the single cup category.
Starbucks reported revenue of $21.3 billion for fiscal 2016. That was an increase of $2.15 billion (or 11%) compared to the $19.16 billion the company reported for revenue in fiscal 2015. The revenue increase in fiscal 2016 was primarily due to increased revenue from the company's Americas segment that includes the US. Its Asia Pacific division, which includes China, accounted for $2.9 billion in revenue during fiscal 2016 (nearly 15% of the company's total revenue).
Despite the spike in total annual revenue during fiscal 2016, Starbucks net income only increased slightly in fiscal 2016 compared to the prior fiscal period. The company claimed a net income of $2.82 billion in fiscal 2016 after reporting $2.76 billion for net income in fiscal 2015.
Starbucks has cut back on its aggressive acquisition strategy. The company has been simplifying instead and selling off underperforming assets as the chain refocuses on its core mission of serving quality coffee drinks and "healthy" food items in modern buildings.
The chain continues to add locations outside of the US. In 2016 Starbucks opened its first location in Trinidad and Tobago as it continued to expand its footprint in the Latin America and Caribbean region. Starbucks has set a goal of having a total of 37,000 cafes open by 2021.