Wake up and smell the coffee -- Starbucks is everywhere. The world's #1 specialty coffee retailer, Starbucks has more than 18,000 coffee shops in about 60 countries. The outlets offer coffee drinks and food items, as well as roasted beans, coffee accessories, and teas. Starbucks operates more than 10,000 of its own shops, which are located mostly in the US, while licensees and franchisees operate roughly 9,575 units worldwide (primarily 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.
The company's global expansion plans have a particular focus on the growing consumer markets in Brazil, China, India, South Korea, and Vietnam. Starbucks has announced plans to develop its own coffee farm in China, with hopes to begin harvesting by 2014.
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).
In late 2012 Starbucks completed its purchase of Teavana Holdings for $620 million in cash. Teavana operates some 250 Heaven of Tea retail stores that sell gourmet loose-leaf teas, teapots, and other tea-related products. Teavana became a wholly-owned subsidiary of Starbucks and the newest property in its emerging brands portfolio, which also includes Evolution Fresh, La Boulange, Seattle's Best Coffee, and Tazo.
Sales and Marketing
The company's annual marketing expenses totaled $306.8 million in fiscal 2013, which included $205.8 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.
In 2012 Starbucks expanded its strategic relationship with Green Mountain Coffee Roasters for the manufacturing, marketing, distribution, and sale of Starbucks-branded Vue packs. The move helps the company's growth in the single cup category.
Starbucks has been on the cutting edge of using social media and technology as part of its marketing and customer services efforts.
Starbucks’ annual revenues were $14.9 billion for fiscal 2013. That was an increase of $1.6 billion, or 12%, compared to fiscal 2012. The revenue spike was primarily due to increased revenues from company-operated stores, an increase in comparable store sales, and licensed store revenue growth. Foodservice and other revenues increased $184 million, primarily driven by increased sales of premium single serve products.
Despite the increased annual revenues, Starbucks suffered a dramatic decrease in net income of 99%, to $8.3 million in fiscal 2013 compared to net income of $1.38 billion in fiscal 2012. The drop was largely caused by increased legal and other operating expenses.
Starbucks reported an increase in cash inflow of $1.38 billion in fiscal 2013, compared to $40.5 million in fiscal 2012. The jump came with the increased revenues and was offset somewhat by litigation charges.
Looking to gain ground in the home, office, and hotel coffee markets, Starbucks introduced single-serve packets in 2009. The company has a partnership with single cup leader Green Mountain to distribute Starbucks single-serve packages. The packs, specially made to be brewed by Green Mountain's Keurig brewer, are sold at retail stores throughout the US and Canada.
Starbucks began using a new corporate logo in 2011. The company rolled out a menu with more breakfast items and other hot foods, as well as a new menu of cold drink options and a 31-ounce "Trenta" size for lemonade, iced tea, and iced coffee. Starbucks also continues to expand the number of locations offering drive-thru service.
Starbucks in 2012 formed a strategic partnership with Umoe Restaurant Group AS, a chain of service establishments in Scandinavia, to open Starbucks stores across the Scandinavian region. The previous year Starbucks expanded in Europe when acquired 50% ownership interest in holdings in Switzerland and Austria from its joint venture partner, Marinopoulos Holdings, for $65.5 million. The deal gave Starbucks 100% ownership in Starbucks Coffee Switzerland and Starbucks Coffee Austria.
In 2014 the company rolled out a whole new line of tea in partnership with media mogul Oprah Winfrey.
Mergers and Acquisitions
In 2012 Starbucks agreed to acquire San Francisco-based Bay Bread, LLC and its La Boulange bakery brand. It is making the purchase to try its hand in the French bakery market. The previous year Starbucks acquired fruit and vegetable juice maker Evolution Fresh for $30 million as part of an effort to push itself as a healthy lifestyle brand.
In 2012 Starbucks invested $25 million in mobile payments company Square. The coffee company had been looking to expand its mobile payments program for some time prior to the deal. Square will now process all of the coffee shop chain's debit and credit card transactions in exchange for a smaller fee than other payment networks charge.
In 2013 Starbucks acquired a 49% equity method ownership interest in Starbucks Spain from its licensee partner Sigla S.A. (Grupo Vips) for about $33 million in cash. Also in 2013 Starbucks purchased its own coffee farm in Costa Rica for $8.1 million in cash.