Thursday 21 February 2013

Starbucks

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This article is about the coffeehouse chain. For other uses, see Starbuck.
Starbucks Corporation
Type Public
Traded as NASDAQ: SBUX
NASDAQ-100 Component
S&P 500 Component
Industry Restaurants
Genre Coffee house
Founded Pike Place Market in Seattle, Washington (March 30, 1971)
Founder(s) Jerry Baldwin
Gordon Bowker
Zev Siegl
Headquarters Seattle, Washington, U.S.
Number of locations 20,366 in 61 countries (November 16, 2012)[1]
Area served Worldwide
Key people Howard Schultz
(Chairman, President and CEO)
Products Whole bean coffee
Boxed tea
Made-to-order beverages
Bottled beverages
Baked goods
Merchandise
Frappuccino beverages
Smoothies
Services Coffee
Revenue Increase US$ 13.29 billion (2012)[2]
Operating income Increase US$ 1.99 billion (2012)[2]
Net income Increase US$ 1.38 billion (2012)[2]
Total assets Increase US$ 8.21 billion (2012)[2]
Total equity Increase US$ 5.10 billion (2012)[2]
Employees 149,000 (2011)[2]
Subsidiaries Starbucks Coffee Company
Ethos Water
Evolution Fresh
Hear Music
La Boulange Bakery
Seattle's Best Coffee
Tazo Tea Company
Teavana
Torrefazione Italia
Website www.starbucks.com
Starbucks Corporation is an American global coffee company and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 20,366 stores in 61 countries, including 13,123 in the United States, 1,299 in Canada, 977 in Japan, 793 in the United Kingdom, 732 in China, 473 in South Korea, 363 in Mexico, 282 in Taiwan, 204 in the Philippines, and 164 in Thailand.[1]
Starbucks locations serve hot and cold beverages, whole-bean coffee, microground instant coffee, full-leaf teas, pastries, and snacks. Most stores also sell packaged food items, hot and cold sandwiches, and items such as mugs and tumblers. Starbucks Evenings locations also offer a variety of beers, wines, and small bites after 4pm.[3] Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.
From Starbucks' founding in 1971 in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores.[4] The company planned to open a net of 900 new stores outside of the United States in 2009,[5] but has announced 300 store closures in the United States since 2008.[6]

Contents

History

Interior of the Pike Place Market location in 1977.
The Starbucks store at 1912 Pike Place. This is the second location of the original Starbucks, which was at 2000 Western Avenue from 1971 to 1976.

Founding

The first Starbucks opened in Seattle, Washington, on March 30, 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. The three were inspired by coffee roasting entrepreneur Alfred Peet, whom they knew personally, to sell high-quality coffee beans and equipment.[7] Originally the company was to be called Pequod, after a whaling ship from Moby-Dick, but this name was rejected by some of the co-founders. The company was instead named after the chief mate on the Pequod, Starbuck.[8]
From 1971–1976, the first Starbucks was at 1912 Pike Place Market; it then was never relocated. [9] The company only sold roasted coffee and did not yet brew coffee to sell.[10] During their first year of operation, they purchased green coffee beans from Peet's, then began buying directly from growers.
The Starbucks Center, Seattle. The company HQ, in the old Sears, Roebuck and Co. catalog distribution center building

Sale and expansion

In 1984, the original owners of Starbucks, led by Jerry Baldwin, took the opportunity to purchase Peet's.[citation needed] During the 1980s total sales of coffee in the USA were falling, but sales of specialty coffee increased, forming 10% of the market in 1989, compared to 3% in 1983.[11] By 1986 the company had 6 stores in Seattle[11] and had only just begun to sell espresso coffee.[12] In 1987, the original owners sold the Starbucks chain to former employee Howard Schultz, who rebranded his Il Giornale coffee outlets as Starbucks and quickly began to expand. In the same year, Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois.[13] By 1989 there were 46 stores across the Northwest and Midwest in 1989 and Starbucks was roasting over 2,000,000 pounds (910,000 kg) of coffee a year.[11] At the time of its initial public offering on the stock market in June 1992, Starbucks had grown to 140 outlets and had a revenue of $73.5m, up from $1.3m in 1987. Its market value was $271m. The 12% portion of the company sold raised the company around $25m which would help it double the number of stores over the next two years.[14] By September 1992, the share price had risen 70% to over 100 times the earnings per share of the previous year.[10]

Expansion to new markets and products

The first Starbucks location outside North America opened in Tokyo, Japan, in 1996.[15] Starbucks entered the U.K. market in 1998 with the $83 million[16] acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all the stores as Starbucks. In September 2002, Starbucks opened its first store in Latin America, at Mexico City.
In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia.[17] These restaurants were soon "outed" as Starbucks establishments and converted to Starbucks cafes.
In October 2002, Starbucks established a coffee trading company in Lausanne, Switzerland to handle purchases of green coffee. All other coffee-related business continued to be managed from Seattle.[18]
In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises for $72m. The deal only gained 150 stores for Starbucks, but according to the Seattle Post-Intelligencer the wholesale business was more significant.[19] In September 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company-owned locations of the Oregon-based Coffee People chain. Starbucks converted the Diedrich Coffee and Coffee People locations to Starbucks, although the Portland airport Coffee People locations were excluded from the sale.[20]
In August 2003, Starbucks opened its first store in South America in Lima, Peru.[21]
In 2007, the company opened its first store in Russia, ten years after first registering a trademark there.[22]
In March 2008 they purchased the manufacturer of the Clover Brewing System. They began testing the "fresh-pressed" coffee system at several Starbucks locations in Seattle, California, New York and Boston.[23]
Graph showing the growth in the number of Starbucks stores between 1971 and 2011.[13]
In early 2008, Starbucks started a community website, My Starbucks Idea, designed to collect suggestions and feedback from customers. Other users comment and vote on suggestions. Journalist Jack Schofield noted that "My Starbucks seems to be all sweetness and light at the moment, which I don't think is possible without quite a lot of censorship". The website is powered by the Salesforce software.[24]
In May 2008, a loyalty program was introduced for registered users of the Starbucks Card (previously simply a gift card) offering perks such as free Wi-Fi Internet access, no charge for soy milk & flavored syrups, and free refills on brewed drip coffee or tea.[25]
A store in Seattle known for its use of the corporation's new ideas reopened in the fall 2010 with a modified interior design in which the espresso machines were placed in the middle of the store.[26]
On November 14, 2012, Starbucks announced it will purchase Teavana for $620 million dollars in cash.[27]
On January 3, 2013, Starbucks announced it will open a store in Ho Chi Minh City, Vietnam in February 2013.[28][29]

Corporate governance

Howard Schultz, CEO of Starbucks
Orin C. Smith was President and CEO of Starbucks from 2001 to 2005.
Starbucks' chairman, Howard Schultz, has talked about making sure growth does not dilute the company's culture[30] and the common goal of the company's leadership to act like a small company.
In January 2008, Schultz resumed his roles as President and CEO after an eight-year hiatus, replacing Jim Donald, who took the posts in 2005 but was asked to step down after sales slowed in 2007. Schultz aims to restore what he calls the "distinctive Starbucks experience" in the face of rapid expansion. Analysts believe that Schultz must determine how to contend with higher materials prices and enhanced competition from lower-price fast food chains, including McDonald's and Dunkin' Donuts. Starbucks announced it will discontinue its warm breakfast sandwich products, originally intended to launch nationwide in 2008, in order to refocus the brand on coffee, but the sandwiches were reformulated to deal with complaints and the product line stayed.[31] On February 23, 2008, Starbucks closed its stores from 5:30–9:00 pm local time to train its baristas.[32][33]

Products

A typical sales area, this one in Peterborough, UK, showing a display of food and the beverage preparation area
Starbucks stopped using milk originating from rBGH-treated cows in 2007.[34]
A "Skinny" line of of drinks rolled out in 2008, offering lower-calorie and sugar-free versions of the company's offered drinks which use skim milk and are sweetened by a choice of artificial sweetener (such as Sweet'N Low, Splenda, Equal), or one of the company's sugar-free syrup flavors.[35][36]
In June 2009, the company announced that it would be overhauling its menu and selling salads and baked goods without high-fructose corn syrup or artificial ingredients.[37] This move was expected to attract health- and cost-conscious consumers and will not affect prices.[37]
Starbucks introduced a new line of instant coffee packets, called VIA "Ready Brew", in March 2009. It was first unveiled in New York City with subsequent testing of the product also in Seattle, Chicago and London. The first two VIA flavors include Italian Roast and Colombia, which were then rolled out in October 2009, across the U.S. and Canada with Starbucks stores promoting the product with a blind "taste challenge" of the instant versus fresh roast. Many people could not tell the difference between the instant and fresh brewed coffee. Some analysts theorized that by introducing instant coffee, Starbucks would devalue its own brand.[38]
Starbucks began selling beer and wine at at some US stores in 2010. As of April 2012, it is available at seven locations and others have applied for licenses.[39]
In 2011, Starbucks introduced its largest cup size, the Trenta, which can hold 31 ounces.[40] In September 2012, Starbucks announced the Verismo, a consumer-grade single-serve coffee machine that uses sealed plastic cups of coffee grounds, and a "milk pod" for lattes.[41]
On November 10, 2011, Starbucks Corporation announced that it had bought juice company Evolution Fresh for $30 million in cash and plans to start a chain of juice bars starting in around middle of 2012, venturing into territory staked out by Jamba Inc. Its first store released in San Bernardino, California and plans for a store in San Francisco will be launched in early 2013.[42]
In 2012, Starbucks began selling a line of iced refresher beverages in its stores which contain an extract from green arabica coffee beans. The beverages are fruit flavored and contain caffeine but, according to the company, "with none of the coffee flavor". Starbucks' green coffee extraction process involves soaking the beans in water.[43]
Name Measurement Notes
Demi 3 US fl oz (89 ml) Smallest size. Espresso shots.
Short 8 US fl oz (240 ml) Smaller of the two original sizes
Tall 12 US fl oz (350 ml) Larger of the two original sizes
Grande 16 US fl oz (470 ml) Italian/Spanish/Portuguese/French for "large"
Venti 20 US fl oz (590 ml), 26 US fl oz (770 mL) Italian for "twenty"
Trenta 30 US fl oz (890 ml) Italian for "thirty"

Tea

Starbucks entered the tea business in 1999 when it acquired the Tazo brand for US$8.1 million.[44][45] In late 2012, Starbucks announced it will be paying US$620 million in cash to buy Teavana.[46] As of November 2012, there is no intention of marketing Starbucks' products in Teavana stores, though the acquisition will allow the expansion of Teavana beyond its current main footprint in shopping malls.[45]

Coffee quality

Kevin Knox, who was in charge of coffee quality at Starbucks from 1987 to 1993, recalled on his blog in 2010 how George Howell, coffee veteran and founder of the Cup of Excellence, had been appalled at the dark roasted beans that Starbucks was selling in 1990.[23][47] Talking to the New York Times in 2008, Howell stated that the dark roast used by Starbucks does not deepen the flavor of coffee, but instead can destroy nuances of flavor.[23] The March 2007 issue of Consumer Reports compared American fast-food chain coffees and ranked Starbucks behind McDonald's Premium Roast. The magazine called Starbucks coffee "strong, but burnt and bitter enough to make your eyes water instead of open".[48]

Locations

Current

As of November 16, 2012, Starbucks is present in 61 countries.[1]
Transcontinental (Europe and Asia)
 Africa South America Oceania Asia Europe North America
  • Turkey
  • Russia
  • Egypt
  • Morocco
  • Argentina
  • Brazil
  • Chile
  • Peru
  • Australia
  • New Zealand
  • Bahrain
  • China
  • Hong Kong
  • Indonesia
  • India
  • Japan
  • Jordan
  • Kuwait
  • Lebanon
  • Macau
  • Malaysia
  • Oman
  • Philippines
  • Qatar
  • Saudi Arabia
  • Singapore
  • South Korea
  • Sri Lanka
  • Taiwan
  • Thailand
  • Vietnam
  • United Arab Emirates
  • Austria
  • Belgium
  • Bulgaria
  • Cyprus
  • Czech Republic
  • Denmark
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Netherlands
  • Norway
  • Poland
  • Portugal
  • Romania
  • Spain
  • Sweden
  • Switzerland
  • United Kingdom
  • Aruba
  • Canada
  • Curaçao
  • El Salvador
  • Guatemala
  • Costa Rica
  • Mexico
  • Puerto Rico
  • The Bahamas
  • United States
Starbucks Map.svg
In 2008, Starbucks continued its expansion, settling in Argentina, Belgium, Brazil, Bulgaria, the Czech Republic and Portugal.[13]
European and Scandinavian expansion continued in 2009 with Poland (April),[49] Utrecht, Netherlands (August), and Sweden at Arlanda airport outside Stockholm (October).[50]
In 2010, the growth in new markets continued. In May 2010, Southern Sun Hotels South Africa announced that they had signed an agreement with Starbucks that would enable them to brew Starbucks coffees in select Southern Sun and Tsonga Sun hotels in South Africa. The agreement was partially reached in order for Starbucks coffees to be served in the country in time for the commencement of the 2010 FIFA World Cup hosted by South Africa.[51] In June 2010, Starbucks opened its first store in Budapest, Hungary and in November the company opened the first Central American store in El Salvador's capital, San Salvador.[52]
In December 2010, Starbucks debuted their first ever Starbucks at sea, where with a partnership with Royal Caribbean International; Starbucks opened a shop aboard their Allure of the Seas Royal Caribbean's second largest ship, and also the second largest ship in the world.[53]
Starbucks is planning to open[when?] its third African location, after Egypt and Morocco, in Algeria. A partnership with Algerian food company Cevital will see Starbucks open its first Algerian store in Algiers.[54]
In January 2011, Starbucks and Tata Coffee, Asia's largest coffee plantation company, announced plans for a strategic alliance to bring Starbucks to India and also to source and roast coffee beans at Tata Coffee's Kodagu facility.[55] Despite a false start in 2007,[56] in January 2012, Starbucks announced a 50:50 joint venture with Tata Global Beverages called Tata Starbucks. Tata Starbucks will own and operate Starbucks outlets in India as Starbucks Coffee "A Tata Alliance".[57] Starbucks had previously attempted to enter the Indian market, in 2007, with a joint venture involving its Indonesian franchise and Kishore Biyani of the Future Group. However, the joint venture withdrew its foreign investment proposal with the Indian government. Starbucks did not cite any reason for the withdrawal.[58] Starbucks opened its first store in India in Mumbai on 19 October 2012.[59][60][61]
In February 2011, Starbucks started selling their coffee in Norway by supplying Norwegian food shops with their roasts. The first Starbucks-branded Norwegian shop opened on 8 February 2012 at Oslo lufthavn, Gardermoen. In October 2011, Starbucks opened another location in Beijing, China, at the Beijing Capital International Airport's Terminal 3, international departures hall; making the company's 500th store in China. The store is the 7th location at the airport. The company plans to expand to 1,500 stores in China by 2015.[62] In May 2012, Starbucks opened its first coffeehouse in Finland, with the location being Helsinki-Vantaa airport in Vantaa.[63] Starbucks recently opened a store in San Jose Costa Rica, in 2 popular locations. 1 opened in a mall and the other in Avenida Escazu.
Many bookstores have Starbucks licensed stores within them, including Barnes & Noble in the United States, Chapters-Indigo in Canada (company operated), Jarir Bookstores in Saudi Arabia, Livraria Saraiva, Fnac in Brazil and B2S in Thailand.[citation needed] In October 2012, Starbucks announced plans to open 1,000 stores in the United States in the next five years.[64] The same month, the largest Starbucks in the US opened at the University of Alabama's Ferguson Center.[65]

Former

In 2003, Starbucks closed all six of its locations in Israel, citing "on-going operational challenges" and a "difficult business environment."[66][67]
The Starbucks location in the former imperial palace in Beijing closed in July 2007. The coffee shop had been a source of ongoing controversy since its opening in 2000 with protesters objecting that the presence of the American chain in this location "was trampling on Chinese culture."[68][69]
In July 2008, the company announced it was closing 600 underperforming company-owned stores and cutting U.S. expansion plans amid growing economic uncertainty.[70][71] On July 29, 2008, Starbucks also cut almost 1,000 non-retail jobs as part of its bid to re-energize the brand and boost its profit. Of the new cuts, 550 of the positions were layoffs and the rest were unfilled jobs.[72] These closings and layoffs effectively ended the company's period of growth and expansion that began in the mid-1990s.
Starbucks also announced in July 2008 that it would close 61 of its 84 stores in Australia in the following month.[73] Nick Wailes, an expert in strategic management of the University of Sydney, commented that "Starbucks failed to truly understand Australia's cafe culture."[74]
In January 2009, Starbucks announced the closure of an additional 300 under-performing stores and the elimination of 7,000 positions. CEO Howard Schultz also announced that he had received board approval to reduce his salary.[75] Altogether, from February 2008 to January 2009, Starbucks terminated an estimated 18,400 U.S. jobs and began closing 977 stores worldwide.[76]
In August 2009, Ahold announced closures and rebranding for 43 of their licensed store Starbucks kiosks for their US based Stop & Shop and Giant supermarkets. However, Ahold has not yet abandoned the licensed Starbucks concept; they plan to open 5 new licensed stores by the end of 2009.[77][78]
In July 2012, the company announced that they may begin closing unprofitable European stores immediately.[79]

Unbranded stores

In 2009, at least three stores in Seattle were debranded to remove the logo and brand name, and remodel the stores as local coffee houses "inspired by Starbucks."[80][81] CEO Howard Schultz says the unbranded stores are a "laboratory for Starbucks".[82] The first, 15th Avenue Coffee and Tea, opened in July 2009 on Capitol Hill. It serves wine and beer, and plans to host live music and poetry readings.[83] Although the stores have been called "stealth Starbucks"[80][84] and criticized as "local-washing",[85] Schultz says that "It wasn't so much that we were trying to hide the brand, but trying to do things in those stores that we did not feel were appropriate for Starbucks."[82]

Automated locations

Starbucks has automated systems in some areas. These machines have 280 possible drink combinations to choose from. They have touchscreens and customers can play a game while they wait for their order.[86]

Facilities

Free Wi-Fi Internet access varies in different regions. In Germany customers can get 2-hours of free Wi-Fi through BT Openzone, and in Switzerland and Austria customers can get 30 minutes with a voucher card (through T-Mobile).
In September 2009, Starbucks in the UK rolled out free Wi-Fi at most of its outlets. Customers with a Starbucks Card are able to log-on to the Wi-Fi in-store for free with their card details, thereby bringing the benefits of the loyalty program in-line with the United States.[87] Beginning in July 2010, Starbucks offers free Wi-Fi in all of its US stores via AT&T and information through a partnership with Yahoo!. This is an effort to be more competitive against local chains, which have long offered free Wi-Fi, and against McDonald's, which began offering free wireless internet access in 2010.[88] On June 30, 2010, Starbucks announced it would begin to offer unlimited and free Internet access via Wi-Fi to customers in all company-owned locations across Canada starting on July 1, 2010.[89]
In October, 2012, Starbucks and Duracell Powermat announced a pilot program to install Powermat charging surfaces in the tabletops in selected Starbucks stores in the Boston area.[90] Further more, Starbucks announced its support in the PMA (Power Matters Alliance) and its membership in the PMA board, along with Google and AT&T, in order to create a real-world ecosystem of wireless power, by creating a universal standard for wireless charging, and to help the customers to recharge their smart phones.[91]

Advertising

Starbucks sign in Naga City, Philippines
Starbucks at Ibn Battuta Mall, Dubai
The store in Insadong, Seoul, South Korea with Hangeul script sign
Starbucks Coffee (星巴克咖啡) in Xi'an, China
Starbucks coffee in Nicosia, Cyprus

In 2006, Valerie O'Neil, a Starbucks spokeswoman, said that the logo is an image of a "twin-tailed mermaid, or siren as she's known in Greek mythology".[92] The logo has been significantly streamlined over the years. In the first version, which was based on a 16th-century "Norse" woodcut,[93] the Starbucks siren was topless and had a fully visible double fish tail.[94] The image also had a rough visual texture and has been likened to a melusine.[95] In the second version, which was used from 1987–92, her breasts were covered by her flowing hair, but her navel was still visible. The fish tail was cropped slightly, and the primary color was changed from brown to green, a nod to Bowker's Alma Mater, the University of San Francisco.[96] In the third version, used between 1992 and 2011, her navel and breasts are not visible at all, and only vestiges remain of the fish tails. The original "woodcut" logo has been moved to the Starbucks' Headquarters in Seattle.
At the beginning of September 2006 and then again in early 2008, Starbucks temporarily reintroduced its original brown logo on paper hot-drink cups. Starbucks has stated that this was done to show the company's heritage from the Pacific Northwest and to celebrate 35 years of business. The vintage logo sparked some controversy due in part to the siren's bare breasts,[97] but the temporary switch garnered little attention from the media. Starbucks had drawn similar criticism when they reintroduced the vintage logo in 2006.[98] The logo was altered when Starbucks entered the Saudi Arabian market in 2000 to remove the siren, leaving only her crown,[99] as reported in a Pulitzer Prize-winning column by Colbert I. King in The Washington Post in 2002. The company announced three months later that it would be using the international logo in Saudi Arabia.[100]
In January 2011, Starbucks announced that they would make small changes to the company's logo, removing the Starbucks wordmark around the siren, enlarging the siren image, and making it green.[101]
  • Original brown logo, used from 1971–1987.
  • Green logo used from 1987–2010, still being used as a secondary logo.
  • Redesigned logo used from 2011–present.

Partnerships

Starbucks has agreed to a partnership with Apple to collaborate on selling music as part of the "coffeehouse experience". In October 2006, Apple added a Starbucks Entertainment area to the iTunes Store, selling music similar to that played in Starbucks stores. In September 2007 Apple announced that customers would be able to browse the iTunes Store at Starbucks via Wi-Fi in the US (with no requirement to login to the Wi-Fi network), targeted at iPhone, iPod touch, iPad, and MacBook users. The iTunes Store will automatically detect recent songs playing in a Starbucks and offer users the opportunity to download the tracks. Some stores feature LCD screens with the artist name, song, and album information of the current song playing. This feature has been rolled out in Seattle, New York City, and the San Francisco Bay Area, and was offered in limited markets during 2007–2008.[102] During the fall of 2007, Starbucks also began to sell digital downloads of certain albums through iTunes. Starbucks gave away 37 different songs for free download through iTunes as part of the "Song of the Day" promotion in 2007, and a "Pick of the Week" card is now available at Starbucks for a free song download. Since 2011 Starbucks also gives away a "Pick of the Week" card for app downloads from the App Store. A Starbucks app is available in the iPhone App Store.
Starting on June 1, 2009, the MSNBC morning news program Morning Joe has been presented as "brewed by Starbucks" and the show's logo changed to include the company logo. Although the hosts have previously consumed Starbucks coffee on air "for free" in the words of MSNBC president Phil Griffin, it was not paid placement at that time.[103] The move was met with mixed reactions from rival news organizations, viewed as both a clever partnership in an economic downturn and a compromise of journalistic standards.[104]

Parodies and infringements

Starbucks has been a target of parodies and imitations of its logo, and has used legal action against those it perceives to be infringing on its intellectual property. In 2000, San Francisco cartoonist Kieron Dwyer was sued by Starbucks for copyright and trademark infringement after creating a parody of its siren logo and putting it on the cover of one of his comics; later placing it on coffee mugs, t-shirts, and stickers that he sold on his website and at comic book conventions. Dwyer felt that since his work was a parody it was protected by his right to free speech under U.S. law. The case was eventually settled out of court, as Dwyer claimed he did not have the financial ability to endure a trial case with Starbucks. The judge agreed that Dwyer's work was a parody and thus enjoyed constitutional protection; however, he was forbidden from financially "profiting" from using a "confusingly similar" image of the Starbucks siren logo. Dwyer was allowed to display the image as an expression of free speech, but he can no longer sell it.[105] In a similar case, a New York store selling stickers and T-shirts using the Starbucks logo with the words "f—k off" was sued by the company in 1999.[106][107] An anti-Starbucks website, starbuckscoffee.co.uk, which encouraged people to deface the Starbucks logo[108] was transferred to Starbucks in 2005,[109][110] but has since resurfaced at www.starbuckscoffee.org.uk. Christian bookstores and websites in the US are selling a T-shirt featuring a logo with the siren replaced by Jesus and the words "Sacrificed for me" around the edge.[111]
Other successful cases filed by Starbucks include the case won in 2006 against the chain Xingbake in Shanghai, China for trademark infringement, because the chain used a green-and-white logo with a name that sounded phonetically similar to the Chinese for Starbucks.[112] Starbucks did not open any stores after first registering its trademark in Russia in 1997 and in 2002 a Russian lawyer successfully filed a request to cancel the trademark. He then registered the name with a Moscow company and asked for $600,000 to sell the trademark to Starbucks, but was ruled against in November 2005.[22]
In 2003, Starbucks sent a cease-and-desist letter to "HaidaBucks Coffee House" in Masset, British Columbia, Canada. The store was owned by a group of young Haida men, commonly referred to as "bucks." After facing criticism, Starbucks dropped its demand after HaidaBucks dropped "coffee house" from its name.[113] Sam Buck Lundberg, who owns a coffee store in Oregon, was prohibited from using "Sambuck's Coffee" on the shop front in 2006.[114]
In 2005 Starbucks lost a trademark infringement case against a smaller coffee vendor in South Korea that operates coffee stations under the name Starpreya. The company, Elpreya, says Starpreya is named after the Norse goddess, Freja, with the letters of that name changed to ease pronunciation by Koreans. The court rejected Starbucks' claim that the logo of Starpreya is too similar to their own logo.[115] A bar owner in Galveston, Texas, USA won the right to sell "Star Bock Beer" after a lawsuit by Starbucks in 2003 after he registered the name, but the 2005 federal court ruling also stated that the sale of the beer must be restricted to Galveston, a ruling upheld by the Supreme Court in 2007.[116]
Ongoing cases include a dispute over the copyright application for Seattle's Rat City Rollergirls logo in 2008[117] The company claimed the roller derby league's logo by a Washington artist[118] was too similar to its own. Starbucks requested an extension to further examine the issue and possibly issue a complaint, which was granted by the Trademark Office. The July 16, 2008 deadline passed without action by the corporation.[119] Starbucks launched action against an Indian cosmetics business run by Shahnaz Husain, after she applied to register the name Starstruck for use with coffee and related products. She said her aim was to open a chain of stores selling coffee and chocolate-based cosmetics.[120]
Others have used the Starbucks logo unaltered and without permission, such as a café in Pakistan that used the logo in 2003 in its advertisements[121] and a cafe in Cambodia in 2009, the owner saying that "whatever we have done we have done within the law".[122]

Intellectual property

Environmental impact

Grounds for your Garden
In 1999, Starbucks started "Grounds for your Garden" to make their business environmentally friendlier. This gives leftover coffee grounds to anyone requesting it for composting. Although not all stores and regions participate, customers can request and lobby their local store to begin the practice.
In 2004, Starbucks began reducing the size of their paper napkins and store garbage bags, and lightening their solid waste production by 816.5 t (1,800,000 lb).[123] In 2008, Starbucks was ranked No.15 on the U.S. Environmental Protection Agency's list of Top 25 Green Power Partners for purchases of renewable energy.[124]
In October 2008, The Sun newspaper reported that Starbucks was wasting 23.4 million liters (6.2 million US gal) of water a day by leaving a tap constantly running for rinsing utensils in a 'dipper well' in each of its stores,[125] but this is often required by governmental public health code.[126]
In June 2009, in response to concerns over its excessive water consumption, Starbucks re-evaluated its use of the dipper well system. In September 2009, company-operated Starbucks stores in Canada & the United States successfully implemented a new water saving solution that meets government health standards. Different types of milk are given a dedicated spoon that remains in the pitcher and the dipper wells were replaced with push button metered faucets for rinsing. This will reportedly save up to 150 US gal (570 l) of water per day in every store.[127][not in citation given]
A bin overflowing with Starbucks cups

Recycling

Starbucks began using 10% recycled paper in their cups in 2004, which they claimed was the first time that recycled material had been used in a product that came into direct contact with a food or beverage.[128] In 2005 Starbucks received the National Recycling Coalition Recycling Works Award.[129] Allen Hershkowitz of the Natural Resources Defense Council called the 10% content 'miniscule' but Starbucks claimed they only used 10% recycled material because it is more expensive.[128]
Starbucks bought 2.5 billion cups for stores in North America in 2007. The 10% recycled paper cups used by Starbucks are not recyclable, because the plastic coating that prevents the cup from leaking also prevents it from being recycled. The plastic cups used for cold drinks are also non-recyclable in most regions. Starbucks cups were originally made using plastic No.1 (polyethylene terephthalate, PETE) but were changed to plastic No.5 (polypropylene, PP). The former type of plastic can be recycled in most regions of the U.S. whereas the latter cannot. Starbucks is considering using biodegradable material instead of plastic to line the cups, and is testing composting of the existing cups. The exception to this is stores in Winnipeg, Manitoba, Canada, where paper cups are recycled to a local company called "Wriggler's Wranch", where they are composted. The majority of Starbucks stores do not have recycling bins; only 1/3 of company-owned stores recycled any materials in 2007;[130] however, improvements have since been made and recycling bins are popping up in more stores (the only thing hindering Starbucks' ability to have bins in every store is the lack of facilities for storage and collection of recycling in certain areas.)[citation needed]
Starbucks gives customers a 10-cent discount when they bring their own reusable cup, and it now uses corrugated cup sleeves made from 85 percent post-consumer recycled fiber, which is 34 percent less paper than the original.[130]

Fair trade

Starbucks coffee beans
In 2000, the company introduced a line of fair trade products.[131] Of the approximately 136,000 metric tons (300 million pounds) of coffee Starbucks purchased in 2006, only about 6% was certified as fair trade.[132]
According to Starbucks, they purchased 2,180 metric tons (4.8 million pounds) of Certified Fair Trade coffee in fiscal year 2004 and 5,220 metric tons (11.5 million pounds) in 2005. They have become the largest buyer of Certified Fair Trade coffee in North America (10% of the global market). Transfair USA,[133] a third-party certifier of Fair Trade Certified coffee in the United States, has noted the impact Starbucks has made in the area of Fair Trade and coffee farmer's lives:
Since launching its FTC coffee line in 2000, Starbucks has undeniably made a significant contribution to family farmers through their rapidly growing FTC coffee volume. By offering FTC coffee in thousands of stores, Starbucks has also given the FTC label greater visibility, helping to raise consumer awareness in the process.
All espresso roast sold in the UK and Ireland is Fairtrade.[134]
Groups such as Global Exchange are calling for Starbucks to further increase its sales of fair trade coffees.[135]
Beyond Fair Trade Certification, Starbucks argues that it pays above market prices for all of its coffee.[citation needed] According to the company, in 2004 it paid on average $1.42 per pound ($2.64 kg) for high-quality coffee beans, 74% above the commodity prices at the time.[136]
After a long-running dispute between Starbucks and Ethiopia, Starbucks agreed to support and promote Ethiopian coffees. An article in BBC NEWS,[137] states that Ethiopian ownership of popular coffee designations such as Harrar and Sidamo is acknowledged even if they are not registered. The main reason Ethiopia fought so hard for this acknowledgement was to allow its poverty-stricken farmers a chance to make more money. Unfortunately, this has not been the case. In 2006 Starbucks says it paid $1.42 per pound for its coffee. At, the coffee Starbucks bought for $1.42 per pound had a selling price, after transportation, processing, marketing, store rentals, taxes and staff salary and benefits of $10.99 per pound.[138] As of August 2010, Starbucks sells only one Ethiopian coffee on its website and it is proclaimed by the website to be new.

Ethos water

Ethos, a brand of bottled water acquired by Starbucks in 2003, is sold at locations throughout North America. Ethos bottles feature prominent labeling stating "helping children get clean water", referring to the fact that $.05 from each $1.80 bottle sold ($.10 per bottle in Canada) is used to fund clean water projects in under-developed areas. Although sales of Ethos water have raised over $6,200,000 for clean water efforts, the brand is not incorporated as a charity. Critics have argued that the claim on the label misleads consumers into thinking that Ethos is primarily a charitable organization, when it is actually a for-profit brand and the vast majority of the sale price (97.2%) does not support clean-water projects.[139][140] The founders of Ethos have stated that the brand is intended to raise awareness of third-world clean water issues and provide socially responsible consumers with an opportunity to support the cause by choosing Ethos over other brands.[141] Starbucks has since redesigned the American version of the Ethos water bottles, stating the amount of money donated per bottle in the description.

Controversy

A local coffee shop in New York's East Village claiming it had to close because Starbucks is willing to pay higher rent for the space

Market strategy

Starbucks footprint in the United States, showing saturation of metropolitan areas
Some of the methods Starbucks has used to expand and maintain their dominant market position, including buying out competitors' leases, intentionally operating at a loss, and clustering several locations in a small geographical area (i.e., saturating the market), have been labeled anti-competitive by critics.[142] For example, Starbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company, but then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Critics claimed this was an unfair attempt to drive out small, independent competitors, who could not afford to pay inflated prices for premium real estate.[143]

Labor disputes

Baristas work inside the Seattle store at 1912 Pike Place.
Starbucks workers in seven stores have joined the Industrial Workers of the World (IWW) as the Starbucks Workers Union since 2004.[144]
According to a Starbucks Union press release, since then the union membership has begun expanding to Chicago and Maryland in addition to New York City, where the movement originated.[145][146] On March 7, 2006, the IWW and Starbucks agreed to a National Labor Relations Board settlement in which three Starbucks workers were granted almost US$2,000 in back wages and two fired employees were offered reinstatement.[147][148][149] According to the Starbucks Union, on November 24, 2006, IWW members picketed Starbucks locations in more than 50 cities around the world in countries including Australia, Canada, Germany, and the UK, as well as U.S. cities including New York, Chicago, Minneapolis and San Francisco,[150] to protest the firing of five Starbucks Workers Union organizers by Starbucks and to demand their reinstatement.
The Reverend Billy leading an anti-Starbucks protest in Austin, Texas in 2007
Some Starbucks baristas in Canada,[151] Australia and New Zealand,[152] and the United States[153] belong to a variety of unions.
In 2005, Starbucks paid out US$165,000 to eight employees at its Kent, Washington, roasting plant to settle charges that they had been retaliated against for being pro-union. At the time, the plant workers were represented by the International Union of Operating Engineers. Starbucks admitted no wrongdoing in the settlement.[144]
A Starbucks strike occurred in Auckland, New Zealand, on November 23, 2005.[152] Organized by Unite Union, workers sought secure hours, a minimum wage of NZ$12 an hour, and the abolition of youth rates. The company settled with the Union in 2006, resulting in pay increases, increased security of hours, and an improvement in youth rates.[154]
In March 2008, Starbucks was ordered to pay baristas over US$100 million in back tips in a Californian class action lawsuit launched by baristas alleging that granting shift-supervisors a portion of tips violates state labor laws. The company plans to appeal. Similarly, an 18-year-old barista in Chestnut Hill, MA has filed another suit with regards to the tipping policy. Massachusetts law also states that managers may not get a cut of tips.[155][156] A similar lawsuit was also filed in Minnesota on March 27, 2008.[157]

Opening without planning permission

Starbucks has been accused by local authorities of opening several stores in the UK in retail premises, without the planning permission for a change of use to a restaurant. Starbucks has argued that "Under current planning law, there is no official classification of coffee shops. Starbucks therefore encounters the difficult scenario whereby local authorities interpret the guidance in different ways. In some instances, coffee shops operate under A1 permission, some as mixed use A1/A3 and some as A3".[158]
In May 2008, a branch of Starbucks was completed on St. James's Street in Kemptown, Brighton, England, despite having been refused permission by the local planning authority, Brighton and Hove City Council, who claimed there were too many coffee shops already present on the street.[159][160] Starbucks appealed the decision by claiming it was a retail store selling bags of coffee, mugs and sandwiches, gaining a six month extension,[161] but the council ordered Starbucks to remove all tables and chairs from the premises, to comply with planning regulations for a retail shop.[162] 2500 residents signed a petition against the store,[163] but after a public inquiry in June 2009 a government inspector gave permission for the store to remain.[164]
A Starbucks in Hertford won its appeal in April 2009 after being open for over a year without planning permission.[165] Two stores in Edinburgh,[166] one in Manchester,[167] one in Cardiff,[168] one in Pinner and Harrow, were also opened without planning permission.[158] The Pinner cafe, opened in 2007, won an appeal to stay open in 2010.[169] One in Blackheath, Lewisham[170] was also under investigation in 2002 for breach of its licence, operating as a restaurant when it only had a licence for four seats and was limited to take away options. There was a considerable backlash from members of the local community who opposed any large chains opening in what is a conservation area. To this date, the Starbucks is still operating as a takeaway outlet.

Hoax letter

There have been calls for boycott of Starbucks stores and products because it has been wrongly claimed that Starbucks sends part of its profits to the Israeli military,[171] but such allegations are based on a hoax letter attributed to the President, Chairman and CEO of Starbucks Howard Schultz, who is Jewish[172] and supports Israel's right to exist.[173] He is a recipient of several Israeli awards including "The Israel 50th Anniversary Tribute Award" for "playing a key role in promoting a close alliance between the United States and Israel."[174]
The hoax letter claiming that Schultz had donated money to the Israeli military was actually written by Andrew Winkler,[173][175] editor of the ziopedia.org website and an Australian Holocaust denier.[176] Winkler has admitted fabricating the document.[173] Starbucks responded to these claims, widely circulated on the internet, stating that "Neither Chairman Howard Schultz nor Starbucks fund or support the Israeli Army. Starbucks is a non-political organization and does not support individual political causes."[174] The protests against Starbucks derived from the Winkler letter were not the first, these reported occurred in June 2002 in Cairo, Dubai and Beirut universities in response to Schultz's criticism of Yasser Arafat.[175]
Starbucks has been a regular target of activists protesting against the Israeli intervention in Gaza over the (false) claims. Starbucks was forced to close a store in Beirut, Lebanon due to demonstrators shouting anti-Israel slogans and causing customers to flee.[177] Demonstrators hung several banners on the shop's window and used white tape to paste a Star of David over the green-and-white Starbucks sign. They also distributed a letter saying Schultz "is one of the pillars of the American Jewish lobby and the owner of the Starbucks," which they said donates money to the Israeli military.[178]
A store on Piccadilly with its windows boarded up after being smashed by protesters
A damaged front window of a Starbucks coffee shop in Toronto
On January 2009, two Starbucks stores in London were the target of vandalism by pro-Palestinian demonstrators who broke windows and reportedly ripped out fittings and equipment after clashes with riot police.[179][180][180][181][182][183][184]

"The Way I See It"

Quotes by artists, writers, scientists and others have appeared on Starbucks cups since 2005 in a campaign called "The Way I See It".[185] Some of the quotes have caused controversy, including one by writer Armistead Maupin and another by Jonathan Wells that linked 'Darwinism' to eugenics, abortion and racism.[186] Disclaimers were added to the cups noting that these views were not necessarily those of Starbucks.[citation needed]

US military viral email

A US Marines Sergeant emailed ten of his friends in August 2004 having wrongly been told that Starbucks had stopped supplying the military with coffee donations because the company did not support the Iraq War. The email became viral, being sent to tens of millions of people. Starbucks and the originator sent out a correction,[187] but Starbucks' VP of global communications, Valerie O'Neil, says the email is still forwarded to her every few weeks.[188][189][190]

Gun controversy

As gun laws in many US states have become more relaxed, and more states have adopted open carry or concealed carry statutes, some gun owners have begun carrying guns while performing every day shopping or other tasks. Many stores and companies have responded by banning the carrying of guns on their premises, as allowed by many states local laws. Starbucks has not instituted a policy banning guns in their stores.
In 2010, the Brady Campaign proposed a boycott of Starbucks due to their gun policy.[191][192] At that time, Starbucks released a statement saying "We comply with local laws and statutes in all the communities we serve. That means we abide by the laws that permit open carry in 43 U.S. states. Where these laws don't exist, openly carrying weapons in our stores is prohibited. The political, policy and legal debates around these issues belong in the legislatures and courts, not in our stores."[193][194]
In 2012, the National Gun Victims Action Council published an open letter to Starbucks, asking them to revise their policy, and also proposed a "Brew not Bullets" boycott of the chain until the policy is changed, with Valentine's Day selected as a particular day to boycott the chain.[195][196][197]
In response, gun rights advocates started a counter "Starbucks Appreciation Day" buycott to support Starbucks stance, and suggested paying for products using two-dollar bills as a sign of Second Amendment support.[198][199][200]

Same-sex marriage

In January 2012, a Starbucks executive stated it supports the legalization of same-sex marriage. This resulted in a boycott by the National Organization for Marriage, a traditionalist Christian group, who received 22,000 signatures in favor of their boycott.[201] On the other hand, 640,000 people signed a petition thanking Starbucks for its support, meaning the conservative Christian group was out-numbered 20:1.[202]

European tax avoidance

In October 2012, Starbucks faced criticism after a Reuters investigation found that the company reportedly paid just £8.6m in corporation tax in the UK over 14 years, despite generating over £3bn in sales. This included no tax having been paid on £1.3bn of sales in the three years prior to 2012.[203][204] It is alleged Starbucks was able to do this by charging high licencing fees to the UK branch of the business, allowing them to declare a £33m loss in 2011.[205] The British subsidiary pays patent fees to the USA subsidiary, purchases coffee beans from the Netherlands subsidiary (where corporation tax is lower than the UK) and the Swiss subsidiary for other "miscellaneous services".[206] A YouGov survey suggested that Starbucks' brand image was substantially weakened by the controversy surrounding how much tax it pays in the UK several weeks after the allegations surfaced.[207] Starbucks' chief financial officer (CFO) appeared before the Public Accounts Committee in November and admitted that the Dutch government granted a special tax rate to their European headquarters which the UK business pays royalties to.[208] Dutch law permits companies to send royalties collected from other countries to be transferred to tax havens without incurring taxes, unlike in the rest of the EU.[209] The CFO denied that they chose the Netherlands as their European headquarters to avoid tax, but rather because they have a coffee roasting plant there.[208] Until 2009 the royalty rate was 6% of UK sales but after being challenged by UK tax authorities it was reduced to 4.7%.[209] The CFO told the committee this reflected costs such as designing new stores and products, but admitted that there was no detailed analysis by which the rate is decided. The coffee they serve in the UK is purchased from the Swiss subsidiary which charges a 20% markup on the wholesale price and pays 12% corporation tax on profits.[208] Coffee is not transported to Switzerland but the 30 people who work in the subsidiary assess coffee quality.[210] Regarding how Starbucks frequently reports a loss in the UK, the CFO told the committee Starbucks are "not at all pleased" about their financial performance in the UK.[208] MPs replied that it "just doesn't ring true" that the business made a loss, pointing out that the head of the business had been promoted to a new post in the USA and they consistently told shareholders that the business was profitable.[203][211]
In Ireland, Starbucks' subsidiary Ritea only paid €35,000 in tax between 2005 and 2011 and the subsidiary recorded losses in every year other than 2011. Ritea is owned by Dutch-based Starbucks Coffee Emea.[212] Their French and German subsidiaries make large losses because they are in heavily in debt to the Dutch subsidiary which charges them higher interest rates than the group pays to borrow. Reuters calculated that without paying interest on the loans and royalty fees, the French and German subsidiaries would have paid €3.4m in tax. The Dutch subsidiary that royalties are paid to made a €507k profit in 2011 from revenues of €73m, while the company that roasts coffee made a profit of €2m in 2011 and paid tax of €870k.[209]
Protesters, who were unimpressed by the company's offer to pay £20 million tax in the next two years, took part in protests in December 2012 in affiliation with UK Uncut.[213]

Awards and honors

The firm was named by Fortune magazine as one of the top 100 companies to work for in 2013, listing reasons that employees of the company were offered stock rewards for working 20 hours/week, and that "There is potential for anyone to move up the ladder."[214]

Music, film, and television

Main article: Hear Music
Starbucks' second Hear Music Coffeehouse at the South Bank development adjacent to the River Walk in downtown San Antonio, Texas.
Hear Music is the brand name of Starbucks' retail music concept. Hear Music began as a catalog company in 1990, adding a few retail locations in the San Francisco Bay Area. Hear Music was purchased by Starbucks in 1999. Nearly three years later, in 2002, they produced a Starbucks opera album, featuring artists such as Luciano Pavarotti, followed in March 2007 by the hit CD "Memory Almost Full" by Paul McCartney, making McCartney the first artist signed to New Hear Music Label sold in Starbucks outlets. Its inaugural release was a big non-coffee event for Starbucks the first quarter of 2007.
In 2006, the company created Starbucks Entertainment, one of the producers of the 2006 film Akeelah and the Bee. Retail stores heavily advertised the film before its release and sold the DVD.[215]

Parent company relationships

Starbucks maintains control of production processes by communicating with farmers to secure beans, roasting its own beans, and managing distribution to all retail locations. Additionally, Starbucks’ Coffee and Farmer Equity Practices require suppliers to inform Starbucks what portion of wholesale prices paid reaches farmers.[216][217]

See also

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Further reading

  • Behar, Howard with Janet Goldstein. (2007). It's Not About The Coffee: Leadership Principles from a Life at Starbucks, 208 pages. ISBN 1-59184-192-5.
  • Clark, Taylor. (2007). Starbucked: A Double Tall Tale of Caffeine, Commerce and Culture. 336 pages. ISBN 0-316-01348-X.
  • Michelli, Joseph A. (2006). The Starbucks experience: 5 principles for turning ordinary into extraordinary, 208 pages. ISBN 0-07-147784-5.
  • Pendergrast, Mark (2001) [1999]. Uncommon Grounds: The History of Coffee and How It Transformed Our World. London: Texere. ISBN 1-58799-088-1.
  • Schultz, Howard. and Dori Jones Yang. (1997). Pour Your Heart Into It: How Starbucks Built A Company One Cup At A Time, 350 pages. ISBN 0-7868-6315-3.
  • Simon, Bryant. (2009). Everything but the Coffee: Learning about America from Starbucks. 320 pages. ISBN 0-520-26106-2.

External links


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