Twenty five years ago this spring, Starbucks jumped the border, reaching from its Seattle home roots to open a cafe at Vancouver's Seabus station. For the next nine years, the franchise took on part of the city's distinctiveness, if not on par with the mountains and the water, at least something that you could experience nowhere else in the country.
By the time Starbucks ventured east, opening five stores in Toronto on the same day in 1996, a cult following had already been created. If anything, the long wait only enhanced the aura.
There are now some 1,700 cafes and kiosks across the country, and in many ways, devotion to the brand has only deepened. Of course, Starbucks made some serious miscues along the way.
The discipline that constrained its Canadian expansion for almost a decade was flung out the window in the rush to plant a store on every major street corner. When the recession hit in 2008, and its North American sales tanked, Starbucks pulled back, closing 900 stores worldwide, cutting US$580-million in costs and promising to put an end to a pattern of reckless expansion.
Today, the beast of dark brews is very much back on top, with US$310 in profits on US$3.2 billion in sales in the last quarter. As such, it seems only fitting to reflect on the lessons that companies can learn from Starbucks' battles and its return to dominance.
Take big risks
If closing almost 10 per cent of your stores, the vast majority of which you just opened, wasn't a big enough gamble, pulling out all of the stops to promote a light roast - i.e. the antithesis of everything the brand has been built on — surely sent the signal that nothing is sacred. Willard (Dub) Hay, Starbucks' senior vice president, told Fast Company magazine that he figured coming up with the Blonde roast would take a few weeks of trial and error.
Turns out it required 80 different roasting attempts and countless different kinds of beans to finally arrive at a flavour that tasted right. While the company doesn't release sales on individual product lines, the fact that same stores sales increased by 7 per cent last quarter suggests the going light gamble paid off.
Refresh your operations
Once the decision was made to change the flagship flavour, mixing up the baked goods couldn't have been far behind. In June, Starbucks announced it was buying San Francisco-based Bay Bread for US$100-million. No longer would it rely exclusively on third-party providers for its baked goods, which accounts for almost 20 per cent of Starbucks overall revenue. Chief Financial Officer Troy Alstead told the New York Times that purchase would signal the beginning of a new range of baked goods and snacks, and that food would soon become a much bigger part of Starbuck's mix.
The bakery buy follows on the heels of a smaller, though potentially more significant move in a new direction. In November, the company bought Evolution Fresh, a maker of premium juices and cut fruit, for US$30 million. Starbucks plans to feature Evolution's products in its cafes as well as in a line of new stores featuring vegan and vegetarian goodies. The acquisition positions it one step closer to the US$50 billion health and wellness market, while also enabling the company to begin competing in the trillion dollar packaged goods space. "Our customers are looking for a healthier lifestyle," Starbucks president of Channel Development Jeff Hansberry,told USA Today. "Juice and nutrition is no longer a fad. It's a full-blown trend."
Do something good
Just as the push towards healthier good represents a smart mix of marketing and morals, Starbucks recent decision to begin making more goods in North America is a move that will surely generate greater gains in free publicity and customer goodwill than it will cost in labour charges (particularly as manufacturing and shipping overseas only grows more expensive and time consuming). Last month, the company announced it would build a factory in Georgia to make its instant coffee. The move is part of a larger initiative Starbucks is now pursuing to help local small businesses.