Starbucks' Foray into Tea-Drinking India
Case Code: BSTR435
Case Length: 17 Pages
Pub Date: 2013
Teaching Note: Not Available
Industry: Electronic Retailer
Themes: Internationalization, International Management, Joint Ventures
Abstract Case Intro 1 Case Intro 2 Excerpts
On March 30, 1971, Jerry Baldwin, Zev Siegl, and Gordon Bowker started Starbucks in Seattle. However, the company only sold high quality roasted coffee beans then, and not brewed coffee. By 1982, the company had set up five stores, a small roasting facility, and a wholesale business that sold coffee to local restaurants. The same year, Howard Schultz (Schultz) joined Starbucks as manager of retail sales and marketing. During one of his business trips, he noticed the coffee bar culture prevalent in Italy.
After returning home, he tried to sell the idea of a national chain of coffee bars to the Starbucks owners. However, they were not interested in the restaurant business. So, in April 1985, Schultz opened a coffee bar himself and named Il Giornale. He served Starbucks coffee there. With the instant success of Il Giornale, Schultz began expanding his chain and in 1987, he bought Starbucks for $4 million. He then renamed Il Giornale as Starbucks and expanded the chain despite incurring losses till 1990. In 1991, Starbucks' sales improved by 84% and the company turned profitable. In 1992, it went public and the aggressive expansion continued. Starbucks grew from 17 coffee shops in 1987 to 20,891 stores in 62 countries by March 2013, including 13,279 in the US and 1,324 in Canada.
By April 2013, Starbucks had become the world's largest coffee house chain, serving hot and cold beverages, whole-bean coffee, microground instant coffee, full-leaf teas, pastries, snacks, packaged food items, hot and cold sandwiches, and items such as mugs and tumblers. Some of the Starbucks evening locations also offered beers, wines, and appetizers. More than the offerings, the company focused on selling a 'third place' experience, and the stores became places for relaxation, chatting with friends, reading the newspaper, holding business meetings, or browsing the Web. The 'experience' brought spectacular success for the store. For the year end September 30, 2012, Starbucks had earned revenue of US$ 13.29 billion and a net income of US$ 1.38 billion.
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