Starbucks changed the coffee shop sector forever. The chain began by mucking up the US market before expanding globally. However, the organization is groaning under the weight of the crisis and is under pressure to restructure.
Starbucks is by far the largest café chain in the world, with about 33,000 locations, yet it all started tiny. On March 30, 1971, three college buddies who shared a passion for fine coffee started a modest cafe in Seattle.
As a result, they unwittingly laid the groundwork for a firm that US investor Howard Schultz was meant to turn into a global café empire. After five decades, it may be found in nearly every major metropolis.
The economic crisis, on the other hand, is having a hard time hitting the US firm – on its 50th anniversary, Starbucks may look back on one of its most challenging years. The balance sheet was shattered by pandemic branch closures and revenue losses.
The earnings fell by 30% year on year to $622 million in the three months ending in December, although it was still much better than the two prior quarters.
Starbucks CEO Kevin Johnson, on the other hand, sees the worst-case scenario. Johnson recently told the US magazine “Fortune” that business in the most major markets of the United States and China should be completely recovered shortly.
The crisis had no long-term consequences, according to the 60-year-old, who succeeded long-time CEO Schultz in 2017. “We are more resilient and stronger now than we were before the epidemic,” he added.
Johnson inherited a terrible history and has faced several hurdles since Corona. The hot beverage business is very competitive; for example, Coca-Cola entered into rivalry with Starbucks in 2018 when it acquired the Costa café chain.
Another big rival is the German billionaire family Reimann, which owns Peet’s Coffee, Stumptown, and Espresso House under the German name Balzac, as well as the coffee giant Jacobs Douwe Egberts through its JAB Holding.
Starbucks has been operating in Germany since 2002, when it opened its first coffee shop in Berlin. There were 136 branches here last time I checked. The corporation is also having issues in this nation as a result of the Corona controversy.
“The pandemic containment efforts are also having a negative impact on Starbucks Germany,” says Europe spokesman Annick Eichinger. Despite the challenging scenario, Starbucks maintains the bulk of its locations operational.
Starbucks intends to stand out in the face of tough competition in 2021 by continuing and expanding efforts like the Rewards incentive program, which allows consumers to accumulate stars in exchange for special discounts.
In the United States, Starbucks competes against low-cost competitors like as Dunkin’ Donuts and McDonald’s, which are not only cheaper, but also have more drive-thrus.
These pick-up counters proved to be a valuable trump card for drivers throughout the epidemic. Starbucks, on the other hand, has long promoted drive-thru and digital offerings.
Johnson built on the groundwork laid down by his predecessor Schultz, who had decided years previously on a “e-commerce on steroids” approach involving applications and delivery services in order to capitalize on a “seismic change in customer behavior.”
Schultz was the company’s face for decades, revolutionizing US cuisine with espresso, iced coffee, latte macchiato, and snacks, growing it from a small local chain to a nearly worldwide chain with yearly sales of billions. At the age of 29, Schultz was employed as the director of marketing at Starbucks in 1982.
Back then, a business trip to Milan opened his eyes. Impressed by the Italian espresso bars, he attempted, but failed, to persuade the Seattle Starbucks proprietors to adopt a similar concept.
Jerry Baldwin, Zev Siegl, and Gordon Bowker, the founders of Starbucks, did not share his vision, so Schultz started his own company, Il Giornale, which offered espresso and ice cream based on the Italian concept.
However, only a few years later, in 1987, the three coffee connoisseurs, who had known each other since their undergraduate days in San Francisco, decided to sell Starbucks. Schultz took advantage of the situation. After it, there was a quick expansion.
Schultz breathed new life into the business by merging the concept and quality of European cafés with the infrastructure of trimmed-down US fast-food restaurants, but without adopting their franchising structures.
He was able to establish Starbucks as a quality standard in America, selling mugs of coffee for four dollars and above in a culture that had not previously been accustomed to high sophistication and low pricing for hot beverages. The barista profession is well-established in the workplace today, due in part to Starbucks.
Schultz went public in 1992, when Starbucks only had 140 locations. Only McDonald’s and Subway have more outlets globally than the business, which now has over 30,000 café-restaurants. Starbucks established its first store in Italy in 2018, marking the company’s first foray into the European heartland of coffee culture.
Schultz had quit as CEO at the start of the millennium, but returned after the 2008 financial crisis. Schultz ultimately handed up the scepter in 2017, and the 67-year-old subsequently stepped down as chairman of the board of directors the following year.