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.

Business Strategy	Description	Example	Implications	Integration
Customer-Centric Experience	Starbucks places a strong emphasis on providing an exceptional customer experience. This includes creating a welcoming atmosphere, personalized service, and high-quality products. They aim to be the “Third Place” between home and work for customers.	Starbucks provides a comfortable and cozy environment with free Wi-Fi and friendly baristas, ensuring a memorable in-store experience.	– Fosters customer loyalty and advocacy. – Encourages longer visits and repeat business. – Enhances the brand’s reputation for quality and service.	Customer-centricity is deeply ingrained in Starbucks’ culture, reflected in its employee training programs, customer feedback channels, and ongoing efforts to improve the in-store experience.
Premium Pricing	Starbucks adopts a premium pricing strategy, positioning its products as high-quality and offering a premium coffee experience. This strategy supports the company’s focus on quality and sustainability.	Starbucks charges higher prices for its coffee and espresso beverages compared to many competitors, signaling a commitment to quality. For instance, a tall latte at Starbucks is priced higher than a basic coffee from other coffee chains.	– Conveys a perception of quality and exclusivity. – Supports investment in high-quality coffee sourcing and ethical practices. – Allows for premium profit margins.	Premium pricing aligns with Starbucks’ brand identity and supports its mission to provide ethically sourced and sustainably produced coffee.
Global Expansion	Starbucks pursues an aggressive global expansion strategy, opening new stores in various countries and regions. They adapt their menu and store design to suit local preferences while maintaining a global brand image.	Starbucks has expanded to countries such as China and India, offering localized menu items like Green Tea Frappuccinos in China and Masala Chai Tea Lattes in India.	– Increases market reach and revenue potential. – Allows adaptation to diverse cultural preferences. – Builds a strong global brand presence.	Global expansion is a core part of Starbucks’ strategy, with a focus on understanding local markets, establishing partnerships, and adhering to international regulations and standards.
Digital Transformation	Starbucks leverages digital technology to enhance customer convenience and engagement. They offer mobile ordering and payment options, loyalty programs (Starbucks Rewards), and personalized promotions through their mobile app. This strategy aligns with the changing consumer landscape.	Starbucks’ mobile app allows customers to order ahead, pay, and earn rewards. The app also offers personalized recommendations and exclusive discounts.	– Improves customer convenience and speed of service. – Enhances customer data collection and personalization. – Encourages repeat visits and loyalty.	Digital transformation is integrated into Starbucks’ operations, with investments in app development, mobile order and pay technology, and data analytics to drive customer engagement and loyalty.
Product Innovation	Starbucks continually innovates its menu by introducing new beverages, food items, and limited-time offerings. They often collaborate with brands or celebrities to create unique products and experiences. Innovation keeps the menu fresh and exciting for customers.	Starbucks collaborates with companies like Nestlé to produce Starbucks-branded coffee products for retail sales. Seasonal drinks like the Pumpkin Spice Latte are eagerly anticipated by customers every fall.	– Attracts customer interest and excitement. – Generates buzz and media attention. – Drives seasonal and limited-time sales.	Product innovation is integrated into Starbucks’ menu development process, with a focus on seasonal offerings, testing new products in select markets, and adapting to changing consumer preferences.
Sustainability Initiatives	Starbucks is committed to sustainability, with initiatives aimed at ethical sourcing of coffee beans, reducing environmental impact, and supporting coffee farmers and their communities. They aim to make coffee the world’s first sustainable agricultural product.	Starbucks promotes ethical coffee sourcing through initiatives like Coffee and Farmer Equity (C.A.F.E.) Practices and commits to reducing waste through initiatives like the Greener Stores program.	– Enhances brand reputation and attracts socially conscious consumers. – Ensures a sustainable supply chain for coffee sourcing. – Aligns with customer values and expectations.	Sustainability initiatives are deeply integrated into Starbucks’ operations, from responsible sourcing practices to store design elements that reduce environmental impact, such as energy-efficient equipment and compostable packaging.
Community Engagement	Starbucks engages with local communities through initiatives like the Starbucks Foundation, which supports education and social projects. They also encourage employee volunteerism and community involvement. Community engagement reinforces the company’s role as a responsible corporate citizen.	Starbucks supports programs like Youth Action Grants and FoodShare, which aim to address community needs and youth engagement. Starbucks employees are encouraged to volunteer and give back to their local communities.	– Builds a positive brand image and goodwill. – Strengthens relationships with local stakeholders. – Aligns with corporate social responsibility (CSR) goals.	Community engagement is integrated into Starbucks’ corporate culture and values, with ongoing support for local initiatives, disaster relief efforts, and employee volunteer programs.
Partnerships and Collaborations	Starbucks frequently collaborates with other brands, such as Spotify and Uber Eats, to enhance the customer experience and extend its reach. These partnerships offer added value to Starbucks customers and contribute to revenue growth.	Starbucks partnered with Spotify to offer in-store music streaming and curated playlists for customers. Collaboration with Uber Eats enables Starbucks to expand its delivery service to reach more customers.	– Extends brand reach through partner networks. – Enhances customer offerings and convenience. – Drives sales and revenue growth.	Partnerships and collaborations are integrated into Starbucks’ strategy, with a focus on selecting partners that align with its brand and enhance the customer experience through added services like music, delivery, or loyalty program benefits.

Table of Contents

Key Highlights:

Chain Business Model:
- Starbucks follows a chain business model, primarily building its brand through owned stores.
Owned Stores and Revenue Generation:
- Owned stores are a significant source of revenue for Starbucks.
- Most revenue is generated through these owned stores.
Innovation and Customer Experience:
- Owned stores serve as platforms for experimenting with new products.
- Maintains tight control over the customer experience through owned stores.
Revenue from Owned Stores:
- In 2022, Starbucks’ over 18,000 owned stores generated more than $26.5 billion in revenue.
Licensing Operations:
- Licensing operations play a crucial role in expanding the brand’s reach and generating royalties.
- Offers brand amplification with lower operational costs compared to owned stores.
Main Revenue Drivers:
- Starbucks’ primary revenue driver is beverages, generating over $19.5 billion in 2022.
- Food also contributes significantly, generating over $3.5 billion in the same year.

Starbucks Related Visual Stories

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 2023, Starbucks had 44% of company-operated stores vs. 56% of licensed stores which might make you think Starbucks is a franchise business, when in reality most of its revenue (nearly 82% in 2023) came from company-operated stores, 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 2023, with nearly $36 billion in revenue, most of the revenue came from owned stores ($29.46 billion) compared to franchised stores ($4.51 billion) and other revenue sources ($2 billion). Yet owned stores have higher operational costs compared to franchised stores.

Starbucks Profits

Starbucks generated $4.12 billion in 2023, compared to $3.28 billion in net earnings in 2022, $4.2 billion in 2021, and $928 million in 2020.

Starbucks Employee

Starbucks had 381,000 employees in 2023, compared to 402,000 employees in 2022, 383,000 in 2021, and 228,000 in 2020.

Starbucks Revenue Per Employee

Starbucks generated over $94K per employee in 2023, compared to $80K revenue per employee in 2022, $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.

Starbucks Store Strategy

In 2023, Starbucks operated 19,592vs. 18,253 licensed stores. Starbucks leverages primarily company-operated stores to keep tight control over product development, branding, distribution, and customer experience. It also leverages licensed stores for better amplification of brand, revenue, and profits.

Starbucks Revenue Per Store

Starbucks generated over $945K per store in 2023, compared to $900K per store in 2022, $858K in 2021, and $720K in 2020.

Starbucks Revenue By Product

Starbucks made 60% of its revenue, in 2023, from beverages, followed by other revenue, which accounted for 22% 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 2023.

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.