How Does Starbucks Make Money?

Starbucks is a chain business model that makes most of its money from company-operated stores and beverages. Within Starbucks' strategy, licensed stores are also critical to expanding its reach, distribution, and margins while lowering operational costs. At the same time, its beverage business is the engine that enables Starbucks to build another product offering around food and more. Related To Starbucks Who Owns Starbucks Starbucks' main individual shareholder is Howard Schultz, the founder of Starbucks. Major institutional shareholders comprise BlackRock, with 7.18%, and The Vanguard Group, with 8.6% ownership. Starbucks follows a heavy-chained business model, where the company-operated stores play a critical role in the company's long-term strategy, compared to McDonald's heavy-franchised business model, where the long-term plan is to have over 95% of the stores as franchising. Starbucks Business Model Starbucks is a retail company that sells beverages (primarily consisting of coffee-related drinks) and food. In 2022, Starbucks had 51% of company-operated stores vs. 49% of licensed stores. In 2022, company-operated stores accounted for more than 80% of total revenues, thus making Starbucks a chain business model. Starbucks Revenue Starbucks follows a chain business model strategy, where most of its revenue comes from its owned stores. For instance, in 2022, with over $32.2 billion in revenue, most of the revenue came from owned stores ($26.57 billion) compared to franchised stores ($3.65 billion) and other revenue sources ($2 billion). Yet owned stores have higher operational costs compared to franchised stores. Starbucks Profits Starbucks generated $3.28 billion in net nearnigns in 2022, compared to $4.2 billion in 2021 and $928 million in 2020. Starbucks Employee Starbucks had 402,000 employees in 2022, compared to 383,000 in 2021 and 228,000 in 2020. Starbucks Revenue Per Employee Starbucks generated over $80K revenue per employee in 2022, compared to over $75K in 2021 and over $103K in revenue in 2020. Starbucks Strategy Starbucks follows a chain business model, building its brand through its owned stores. And its owned stores are also where most of the revenue is generated. In addition, the owned stores are a great asset to keep experimenting with new products while maintaining tight control over the customer experience. Indeed, in 2022, of the over 18K owned stores, Starbucks generated over $26.5 billion in revenue. Yet, its licensing operations are also critical to further amplifying the brand while generating royalties at much lower operational costs than owned stores. In addition, Starbucks' main revenue driver is comprised of beverages which generated over $19.5 billion in 2022, followed by food, which generated over $3.5 billion in the same year. Starbucks Store Strategy Starbucks had 18,253 operated stores vs. 17,458 licensed stores in 2022. Starbucks leverages primarily company-operated stores to keep tight control over product development, branding, distribution, and customer experience. While it also leverages licensed stores for better amplification of brand, revenue, and profits. Starbucks Revenue Per Store Starbucks generated over $900K per store in 2022, compared to $858K in 2021 and $720K in 2020. Starbucks Revenue By Product Starbucks made over 61% of its revenue, in 2022, from beverages, followed by other revenue, which accounted for 21% of the total revenue (that comprises packaged and single-serve coffees and teas, plus royalty and licensing revenues, beverage-related ingredients, serve ware, and ready-to-drink beverages, among other items.) and food, which accounted for 18% of the total sales in 2022. Starbucks Mission Statement Starbucks's mission is "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time." And its vision is to “treat people like family, and they will be loyal and give their all.” Starbucks Competitors Starbucks is a multinational coffee chain headquartered in Seattle, Washington. It was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971. From a single and very humble bean roasting store in Pike Place Market, the company is now a global giant operating over 37,711 stores around the world. This large global footprint obviously increases the competition for Starbucks in many different markets. The coffee industry itself is also highly competitive, with established players including McDonald’s and Dunkin’ Donuts. Starbucks Organizational Structure Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple overlapping chains of command and divisions. McDonald's vs. Starbucks McDonald's and Starbucks sit in the opposite spectrum of retail business models. Indeed, whereas McDonald's follows a heavily franchised business model, Starbucks follows a heavy-chained one. Starbucks Mission Statement Starbucks highlights its mission as "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time." And its vision is to “treat people like family, and they will be loyal and give their all.” Starbucks SWOT Analysis Starbucks is a global consumer brand with direct distribution, recognized brands, and products that make it a viable business. Its reliance on the Americas as a primary operating segment makes it a weakness. At the same time, Starbucks faces risks related to coffee beans price volatility. Yet the company still has global expansion opportunities.

How Does Starbucks Make Money?

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Gennaro Cuofano