Welcome to a Cuppa of Starbuck Success Story!!!!
All of us mostly felt the rich aroma of premium coffee in the Starbucks typical ambience and tasted the lip-smacking sandwiches to kick-start our day.
Certainly, our favorite store is the Leader in the Coffee Industry. It’s a part of our daily walk of life with the early morning challenges or the partner of distress at the end of a day’s hectic schedule. It may be a partner in crime of Love-birds or chilling-out friends. However, not only the coffee giant is a place for comfort and relaxation; it can pop-up a serious novel for Pulitzer from the pen of a struggling writer; a script written to win a Grammy Award; or corporate executives fixing deals, solving problems on a cup of its speciality coffee.
So comfort, marketing, business decision and sales all combine to give the extra mile on the road of Starbucks Success. You walk into the store and feel the privilege of being treated as a premium customer.
For, it is not the Starbuck’s coffee that you get – it actually is Starbuck Experience that makes them a clear market leader in the coffee industry.
But how many of us know the reason behind its flavours of success. Let me take you to the world of freshly brew story of the coffee king.
Starbucks was founded in 1971 in Seattle, USA. It has continuously created an experience of exotic coffee culture with high quality and premium flavored lattes, Espresso ……. and a whole new realm of drinks.
The global expansion of Starbucks success has been very rapid and strategic. Since its foundation, it has always offered customers the most relaxing and enjoyable experience creating a ‘Third Place’ to rely apart from Home and Work.
- From 1986 to 2000, Starbucks made aggressive expansion under the leadership of CEO Howard Schultz.
- It became a public company in 1992.
- In 2017, CEO Howard Schultz passed the leadership to Kevin Johnson as the President and CEO
- Starbuck now has annual sales over $26 billion by 2019.
- By 2020, Starbucks has over 31,256 locations worldwide in more than 79 countries on six continents
- It has created its own brand with this particular logo
It is an image of ‘Twin Tailed Mermaid’ or ‘Siren’ taken from Greek Mythology.
The then Starbucks President and CEO Howard Schultz believes that there is no specific or perfect plan or fixed road pinnacle of success in business. But he strongly believes and shows that if anyone dreams then starting from scratch and achieving more is quite possible.
‘Only those who go by unexplored roads creating new industries and new products, can build a strong, long lasting company and inspire others to achieve great results’ – Howard Schultz
Lean Six Sigma Strategies:
Lean Six Sigma, the methodology behind the science of optimizing retail operations behind Starbucks success –
Lean Six Sigma Implementation
- Consumerism – marketing and ways how business tailor to customer experience
- The Art and Science of Persuasion and Admiration
- Change from Practicality to an ‘Experience’ – the Experience should be efficient, personalized, honest
- Operation without waste of time and resource for producer as well as consumer
In retail operation improvement, Lean Six Sigma is a sub-methodology of the Six Sigma implementation. Lean management rests on five steps with the motto of
- Eliminating Defects and Waste
- Improving business process with quality and efficiency
Five following steps are
- Defining the problem and end objective
- Measure current data like levels of performance
- Analyzing current data
- Find Solution
- Responding to customer feedback
- Continually working for improvement
However, there is a debate, which one is better Six Sigma or Lean: but more businesses are inclined to the principles of ‘Lean’ than ‘Six Sigma’ to create more perfection. Take Starbuck for example – they have also adopted Lean Six Sigma concept to increase revenue and customer satisfaction. They took the process by:
- testing in laboratory
- Framing the situation
- Interacting with management, employees and customers
- Gathering data, measuring and analyzing
- Leaning the defects (waste), solving the problems
- Continuous improvement and customer’s satisfaction
So, lean Six Sigma implementation ensures Starbuck’s success. It was introduced in early 2000. Basically, the experiment was by introducing a new machine that roasted Espresso and steamed the milk replacing hand-roasting. However, it was not an instant hit and was criticized marking the dropping of sales.
But finally, the business shoot up with lean six sigma implementation and the result is before us. In 40 years, Starbuck has climbed the ladder from a standalone shop in Seattle to the largest coffee-house chain in the world.
Nonconformist Trend Setter
- Their advertisements are minimal compared to any brand (however, now they have Facebook page, Youtube channel, twitter account, Instagram page, Google Plus community, Pinterest page)
- When industry cuts cost to promote business, they emphasize creating a third place loyal culture against premium price
- Unlike other businesses, they made employees Partners with stock options and health insurance
- Employees are provided retirement account
- 2014 US Starbucks employees are promoted to complete on-line bachelor’s degree at Arizona State university
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- Innovative and strategic ways to engage customer with quality experience and chats to capture their mood and feedback (Crowd sourcing)
- They could even take the challenge of closing 7100 Starbuck stores in 2008 behind the process of making the perfect Espresso.
Result 2010 – Profit tripled from $ 315 million to $ 945 million
- They support farmer loans, creating opportunities through education, training and employment
- They undertake forest energy and water conservation, recycling and environmental construction
- 2014, they launched ‘Meet me at Starbucks’ campaign (unconventional from advertisements generally on newspaper, magazine, poster, bill board, TV etc.)
- In 2015, they collaborated with DURACELL Powermat to bring digital innovation to store providing wireless charging
Business Strategy / Philosophy behind Starbuck’s Success
- Schultz bought the company in 1987 to create the ‘Third Place’ experience – the one that exists between work and home (the comfort zone to hang-out)
- Mobile app transaction
- Personalized rewards programme for the customer
- Order and pay promptly and conveniently
- Machine makes the drink faster and free better service and personal care to the customers
- Consistent Brand Sustainability – atmosphere, digital content, look sound, all feel like Starbuck
- Reliable wireless internet connection for remote work
- Calm but interactive warm ambience
- Adding personalized nature by calling names and hand-written order system
- 95% of company’s emphasis is on engagement marketing.
- The coffee giant has moved from one to one marketing to in-app provisions, boosting sales of the company …. Starbucks Success.
- In 2006, it started to use 10% recycled paper and gradually to use reusable cups to show environment conservation.
- In 2018, announcement of banning plastic straws by 2020 was done by Kevin Johnson
Another crown of Starbucks Success comes from the exclusive Starbucks ambience enriching consumers’ taste.
- Visually appealing, well designed, firm infrastructure
- Soothing Jazz Music or the latest Indie-playlist (in collaboration with Apple to play music in the stores)
- Young professionals carrying meeting with their notebooks
- Writers jotting on laptop, cushioned at a corner place
- Friends enjoying snacks in relaxing mood
- The aroma of Starbuck coffee is also a tool of branding
- Experience of an Eco-friendly environment in the outlets
Retail Expansion strategy
It is based on Differentiation Strategies i.e. how Starbucks product can meet different customers need.
The company has a strong foot-hold now in China against the odds of China being the largest tea-consuming country.
The markets of China, Mexico and South Africa with middle class population emerge as the new growth expansion for Starbucks.
India also is a big market for them and Starbucks Indie (Tata-Starbucks) is a 50-50 joint venture company of Tata Consumer Products and Starbucks Corporation.
TATA – Starbucks
TATA – Starbucks started its operation in India in 2012 with Tata Global Beverages and now has 185 stores in 11 cities in the country.
In Fiscal year 2019 – 20, TATA-Starbucks has 21% growth.
They introduced Innovative Indian cuisine in the menu by the side of also introducing international best-sellers. Menus like Chicken Kathi roll, Murgh Tikka Panini, Elaichi Mewa Crossiant, Tandoori Paneer Roll, Chocolate Rossomalai Mousse, Malai Chom-Chom Tiramisu are innovations of Starbucks’ success.
It has also started Himalayan Bottled Mineral Water. To give the business an exotic Indian touch, India Spice Majesty Blend, was specifically researched and developed for the Indian market. This variety is exclusively served in Indian outlets. India Spice Majesty Blend is a blend of full leaf Assam black tea infused with whole cinnamon, cardamom, cloves, pepper, star anise and ginger that gives a taste of Indian Household Chai.
Stores recreating values from local culture: as flagship store in Hyderabad is designed with elements of Hyderabadi pearls, Pune Starbucks has copper elements because of its history of copper.
It is also introducing new products in partnership with Nestle – adding more items in cafes (Nespresso pods, Coffee Creamers)
Tata -Starbucks launched the Home Delivery program since early 2019 with a partnership with Swiggy in Mumbai and is gradually extending its reach in other cities.
Tata Starbucks, being trend setter in beverage industry of India, introduced Starbucks’ tea brand Teavana offering 18 different varieties of tea across its outlets in India in January, 2017.
100 is always a magic figure – A Century. Tata-Starbucks also touched that magic figure ‘The 100th Store’ with the inauguration of its new outlet at Kamala Mills in Mumbai. It took enthusiastic initiative at all fronts through to celebrate the CENTURY Target through #Starbucks100 campaign with the hype and excitement that it had first witnessed during the opening of its first outlet in India. The feat was achieved in just 5 years.
As part of this grand celebration, Starbucks announced a special offer on 28th October 2017 pan India to sell any beverage at INR 100 inclusive of all taxes. They also tied up with renowned Newstainment blogs like ScoopWhoop, Buzzfeed India, and LBB to make their #Starbucks100 campaign popular and known amongst the youngsters. The enthusiasm was so high that made the people, especially the young generation wait for hours to buy and taste an INR 100 coffee or Frappuccino.
People took all the social media platforms to post pictures of their Starbucks coffees and Frappuchinos through this unique campaigns hashtags #Starbucks100 and #StoryInEveryCup. This effort, in turn, helped Starbucks to be trending on Facebook and Instagram. What a business policy!! What a rewarding achievement!! Starbucks knows the best way to connect to the people and they spend the least behind advertisement as their policy.
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Is Starbucks a Speciality Coffee?
Starbucks success hugely depends on it being the SPECIALITY COFFEE
- Creating sustainable bonds with (Employee, Customer and Partners)
- Pursuing premium quality
- A global community – global network chains of coffee across various countries
- Specially graded coffee beans
- Qualifying the roasted level test
- Starbucks sponsor the SCAA trade show every year
- Roastery – for Premium Customers (Syphon, Clover, Pour-over, Scoop-bar of specifically roasted barista, offering food from ‘Capital Princi’.
Growth strategy of Starbucks success
- It is the most preferred coffee shop now by competing all other brands. Let us draw a pyramid to see the new elevated structures of Starbucks
They have the largest market share in the coffee and snacks shops in the US include Starbucks Corporation alongwith Dankin Brands, Coffee and Bagel, Krispy Kreme Doughnuts (Data from IBIS world).
All of these business strategies mark Starbucks success with lean Six Sigma implementation and to mark their foots strongly in the markets with so many competitors (Dunkin’ Donuts, McDonald’s, CCD, Costa Coffee, Pete’s Coffee, Mom and Pops Specially Coffee Stores)
Unlike McDonald with 90% franchise stores, Starbucks has a mix of Company owned and franchise stores.
The Coffee chain plans to compete with KFC to be the fastest growing western food chain in China.
Starbucks Success Rank (Y-2020)
Global 500 (100) – by Brand Finance
World’s most Admired Companies -by Fortune
Top 50 Global Retailers – by NRF
Sustainable Brand Index – by Sustainable Brand Index
Everyone knows the challenges in the business. Starbucks has faced too. In 2008, almost it was on the verge of bankruptcy when Schultz came back as CEO. But Starbucks’s success was not vulnerable and it came out of the market recession for its sustained brand and culture.
2014 it announced the launch of Starbucks evening programme – making the inclusion of the alcoholic beverages and innovation of food products. As many Latin American and Asian countries, coffee is a part of meal. This is to adhere specific countries culture as it has always believed in creating ’3rd Place’ in its coffee culture.
For example, in China, the stores include beverages with tea-based ingredients to make Starbucks popular in local preferences.
Moreover, Starbucks always faces a monopolistic competition structure because coffee industry’s saturation is moderately high. But with its brand recognition and strong market position, it has always maintained its popularity.
It is always known for its human resource management. They always win in respect of goodwill among employees and consumers showing their social responsibility. The Starbucks rewards programme and Starbucks card add values in this sense.
It is cautious of Customer’s health. To take care of that it gives support to TEAVANA branded iced teas and refreshers to popularize health challenges specially for young generations. They are fruity, light caffeinated and fewer calorie drinks.
In 2008, Starbucks offered ‘Skinny’ Line of Drinks with low calorie and sugar-free version. Using skim milk in coffee, and choice of natural sweeteners such as honey, raw sugar or artificial sweeteners for example Sweet’N-LOW, Splenda, Equal’
The greatest challenge of all times in the history of the company they admit to face is the threatening Covid-19 impact. Although the virus is a threat for many businesses, Starbucks do not suffer much despite the initial setback. It is because that prior to Covid-19 it had some experiments running that have only proved essential in the pandemic.
- Electronic payment
- Mobile App ($ 1.6 billion in pre-paid deposit into 2019 for Mobile app and loyalty card)
- Pick-up only store
- Third party delivery network
- All have paid off in this time of business threat.
Company’s plan is to speed new store development with the expansion of drive-through. TOAST study reveals in this situation only 90% consumer are comfortable to returning to restaurant. With more ‘Work From Home’ options, the trade area transformation will be location close to home for taking brakes rather than office in commercial district.
March 2020 Starbucks announced two free mental health therapy sessions for employees per month from April 6th. They also have unlimited access to ‘Self Care Applications’ through LYRA HEALTH Inc.
- Sensitization towards the Scenario
- Stop using reusable personal cups
- Maintaining restrictions by social distancing requirement
- Starbucks restricted business related air travel as a safety measure in the Epidemic
- Cleaning and Sanitizing in all the Stores to prevent the spread of Covid-19
- Strengthening Partnership
- Requesting property owners to put aside rentals due to closure of store
- Partners (employees) are given benefits of grant as a support in Covid-19
- Employees detected with Covid-19 will be given paid leave until they fully recover.
- Positive and responsible way to serve communities
March 25 – announcement of a free tall brewed coffee for frontline responders. Even in this situation of lock-down, 40 TATA-Starbucks stores have opened till now across Delhi NCR, Mumbai, Kolkata, Chennai, Bengaluru, Pune and Surat.
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Covid 19 has given new remodeling strategy with Lean Six-Sigma Implementation on Starbucks success. They have always ensured business sense along with public health sense. But however, Starbucks hope to emerge stronger more on customer adoption with the new challenges.
The Starbucks team is confident that in a few more time everything will be recovering and their business will shoot up as per their future business plan.
The group’s optimism, commitment and loyalty of their customer can only get better with the changing times as the accountability and the trust of the Coffee king’s warm experience and the performance driven attitude wins the heart, dignity and respect of the world.
Even Starbucks keeps personal data of customers in the maintenance and security of the information system with lot of investment. All these business models create the best impact to make Starbucks success on strong foundation and recognition in the world market.
In today’s world, quality matters and consumers are ready to pay more for it. Starbucks success rest on the strategy of ensuring highest quality in the coffee industry and their premium sustainability is highly appreciated.
Looking forward to 2021, the 50th anniversary of Starbucks, we wish you more success. For sure, we believe, your crown is ensured and the celebration of the Coffee King’s success is unstoppable.
One cup. One Customer. One Partner. One Experience – at a time– Schultz
And we hail that the captivating sound of ‘Welcome to Starbucks’ – cheer us not only with a Cup of Rejuvenating Drink but creating an everlasting experience forever..