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... rocks, comments Zone Vice President Roly Morris, a native of Toronto. Over the past 25 years, Starbucks has become a staple of daily life in major cities throughout North America. The company offers more than 30 varieties of the finest arabica coffee beans from growers around the world, presenting them in a cozy, welcoming setting. In addition to whole beans, Torontonians can look forward to enjoying the finest coffee and espresso beverages, expertly prepared by Starbucks professional baristas (coffee bartenders), each of whom partakes in 24 hours of classroom training before stepping into his or her respective store. Starbucks has been interested in expanding into Hawaii for a few years.
Hawaii fit into Starbucks's tragedy to expand internationally as a "cross-over market" that reaches customers from both sides of the Pacific. Starbucks Coffee Company signed an agreement on Saturday, August 3, 1996 with The Mac Naughton Group to form a joint venture partnership that will develop Starbucks retail locations in Hawaii. The partnership is scheduled to open its first store on the island of Oahu by the end of calendar 1996. The joint venture plans to develop approximately 30 stores throughout the Hawaiian Islands over the next three to four years.
The company is gearing up to expand its empire overseas and is now poised to expand to the Far East. Since the Company's initial announcement last year of its plan to move into Asia. Starbucks Coffee Company has been quietly brewing a strategy to develop latte culture in Japan. Japan will be Starbucks' first expansion outside of North America. The store is similar to other Starbucks Coffee locations. At this new store, well-trained, friendly baristas customize and serve a variety of Starbucks Coffee drinks to every patron, just like the stores in North America.
In addition, Japanese customers are able to purchase Starbucks Coffee beans, packaged food, serving and brewing equipment as well as fresh pastries and sandwiches. The company plans to offer the same menu as it does in its U. S. stores although the portions may be smaller. The names of items -- many of which are Italian -- such as coffee latte, will not change. The company has picked a country that loves coffee -- Japan is the third-largest coffee consuming country in the world, behind the U.
S. and Germany. Starbucks opened an outlet in Tokyo in the Ginza shopping district on August 2, 1996 under a joint venture with Sazaby, Inc. -- Sazaby has more than 180 stores in Japan that sell a wide range of products it manufactures, including furniture, interior decorations, clothing and handbags. The new company will be called Starbucks Coffee Japan Ltd. A second Starbucks store was opened in Ochanomizu, a less glitzy district of Tokyo than Ginza, in September, 1996.
The Company hopes to continue to roll out stores elsewhere in Tokyo and in other Japanese cities if the operation proves successful. It will open as many as 12 stores in Japan within the next 18 months under a new partnership with the Japanese company. The company will not say how much money its foray into Tokyo has cost the company. But officials said they do not expect to earn a profit from the Japanese venture for several years. Operating costs are double tall. Starbucks will have to pay to ship coffee to Japan from its roasting facility in Kent, PA and retail space in downtown Tokyo is two to three times as expensive as in Seattle.
The flagship Tokyo store will occupy 1, 500 square feet on two floors. Starbucks plans to open four more Japanese locations by the end of the year and 10 additional stores in 1997. The company hopes to have 100 coffee bars in major Japanese cities in five years. If Starbucks succeeds in Japan, the company will consider opening stores in other Asian countries.
Japanese consumers do not buy coffee to go. Unlike Americans, Japanese rarely eat or drink as they walk down the street or drive to work. And Tokyo already has lots of coffee bars. Demand for coffee blends in Japan has doubled in the past five years and specialty blends are the fastest growing segment of the industry.
Gourmet coffee accounts for 2. 5 % of 1. 2 billion pounds of coffee bought by Japan each year. The average per capita consumption among gourmet drinkers in 1995, the National Coffee Association reported in its latest consumption survey. Japanese have not developed a taste. They drink a lot of instant coffee or ready-to-drink coffee in cans, as well as American-style hot coffee. Iced coffee in a can is actually quite popular in Japan. Bottle Frappuccino, an iced coffee product Starbucks has been test marketing in stores, could do well in Japan.
Faced with strong competition at home, the Seattle coffee giant's closest competitor in Japan will be Doctor Coffee Company, Japan's No. 1 coffee-bar chain, with 453 shops. Other Japanese coffee bars now hawk "Seattle Coffee, " remodel their shops to look like those of Starbucks and go on intelligence missions to the U. S. to study its secrets. Starbucks has a reputation for knowing how to create a thirst. And Japanese coffee purveyors fear it may be able to create new coffee markets in Japan where they have failed.
Mr. Honna, president of Pronto Corp. -- a big bar coffee-bar chain with 94 stores, traveled to the U. S. last year to gather intelligence on Starbucks' methods, visiting incognito more than 20 Starbucks coffee shops along the West Coast. Mr. Honna said that "If they really mean business, I think they will probably put some of us out of business. " However, Starbucks' path is not free of obstacles, rents and labor costs are high.
Starbucks must keep prices relatively low-under $ 3 for a caffe latte. It should offer light food to raise per-customer spending. The land of the rising sun is Starbucks' first step toward realizing a lofty vision to be a global brand with 2, 000 stores by the year 2000. Hot on the heels of opening its first international outlet in Tokyo, Starbucks announced its plans to open coffee bars in Singapore. Starting to open retail locations in December 1996, the Starbucks Coffee locations will be operated by Bonvests Holdings Limited which has signed a licensing agreement with Starbucks Coffee International. Singapore is the first country involved in Starbucks' expansion into Southeast Asia.
The agreement makes Starbucks one of the rare U. S. companies to enter the Asian market in a serious way before trying out Europe. Approximately ten Starbucks Coffee stores are expected to be opened within the first 12 to 15 months. The first retail location is scheduled to open at List Towers, which is owned by the Bonvests Group, and the remaining locations are expected to be primarily located in the Orchard Road belt, the Civic District, and the Central Business District. Singapore, likewise, has seen a proliferation of gourmet-coffee outlets in the past few years, many of them based on U.
S. style operations like Starbucks, that have crowded the market. Singapore still has no clear leader in the field, which should make Starbucks' task easier. And the spread of high-end coffee shops has raised the level of sophistication among consumers, which is good for Starbucks. Starbucks will also face a challenge as it enters Singapore amid a prolonged and still-deepening crisis in the retail industry that has seen department stores such as K-Mart of the U. S.
and France's Galleries Lafayette abandon the island this year. Starbucks is betting that Singaporeans, who have continued to window-shop even if they are not buying, will at least fork out the cash for a cup of coffee. COMPETITION: Starbucks whole bean coffees compete directly against specialty coffees sold at retail through supermarkets, specialty retails, and a growing number of other specialty coffee stores. The coffee beverages compete against all restaurant and beverage outlets that serve coffee and a growing number of espresso stands, carts, and stores. They both compete indirectly against all other coffees on the market. Starbucks believes that its customers choose among retailers primarily on a basis of quality and convenience, and to a lesser extent, on price.
Management believes that supermarkets pose the greatest competitive challenge in the whole bean coffee market. Mostly because they offer customers the convenience of one stop shopping. A number of nationwide coffee manufacturers are now selling premium coffee products through supermarkets, which may serve as substitutes for Starbucks coffee. In addition, Starbucks competes for whole bean coffee sales with franchise operators and independent specialty coffee stores.
In virtually every major metropolitan area where Starbucks operates and expects to expand there are local or regional competitors with substantial market presence in the specialty coffee business. As a result, Starbucks has developed a shark-like reputation for putting competing mom-and-pop coffee shops out of business. The primary competitors for beverage sales are restaurants, shops, and street carts. There has been a significant increase in competition in the specialty coffee beverage business and this trend is expected to continue. Starbucks also expects that competition for suitable sites for new stores to support the Company's planned growth will be intense. There can be no assurance that they will be able to continue to secure adequate sites at acceptable rent levels.
INTERNET ACTIVITY: Starbucks announced June 1996 that it has assembled a team including three leading digital media companies to develop a digital strategy. They will produce a multi-faceted digital marketing project, including alliances with on-line service providers and telecommunications companies. This will provide Starbucks and its customers new ways to communicate and do business interactively. FUTURE OUTLOOK: Competition among coffee stores is intense. Starbucks is the only one out there that has a national level of recognition and awareness. Starbucks, which pioneered upscale coffee bars, is still in a fast-growth phase as every city in America must get its much-anticipated espresso bar.
Not all of them will belong to Starbucks. But the more people become accustomed to spending $ 3 on a cup of coffee, the more Starbucks, the dominant player, benefits. In any event, the national push presents ad challenges, and even Starbucks expects same-store sales, which showed 20 % increases in the past five years, to fall. They have established a major presence all through word-of-mouth. "The window is closing, " cautions Matthew Patsy, VP of a San Francisco investment company. "There's no secret sauce here. Anyone can do it. " Mr. Schultz says.
That explains Starbucks's else of urgency about expansion. However, Starbucks believes there is huge potential in the international market. Overseas expansion and joint ventures promise to be major growth areas for Starbucks. Starbucks' expansion carries inherent risks. Many brands cannot do both retail and packaged goods. Too many extensions can erode a brand's identity.
Wall Streeters say Starbucks should move onto supermarket shelves under a dual-brand strategy, but Mr. Schultz says that will not happen because the brand might suffer. In addition to fluctuating coffee prices, management believes that in the future, the Company's results of operations and earnings could be significantly impacted by other factors such as increased competition within the specialty coffee industry, the Company's ability to find optimal store locations at favorable lease rates, the increased costs associated with opening and operating retail stores in new markets, the Company's continued ability to hire, train and retain qualified personnel, and the Company's ability to obtain adequate capital to finance its planned expansion. Despite these potential problems, Starbucks remains excited about future growth and continues to be hopeful about the future. REFERENCES Advertising Age, March 7, 1994. Author: Alice Z.
Cuneo Journal of Commerce and Commercial, July 9, 1996. Author: Howard Simon Journal of Portland, June 28, 1996. Author: Nancy J. Kim New York Times, August 14, 1996 Press Releases furnished by Starbucks Coffee Company Starbucks Corporation 1995 Annual Report The Seattle Times, July 29, 1996. "Launching Starbucks in Japan. " The Wall Street Journal, July 28, 1996. Author: Norihik Shirauza web web web web web web web web web web web
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Research essay sample on Complete Analysis Of The Starbucks Coffee Company
