Starbucks is an American corporation that operates the largest coffeehouse chain globally and is recognized as one of the most iconic brands worldwide. With its headquarters located in Seattle, Washington, the company boasts over 35,000 locations across 80 countries as of 2022.
The original Starbucks logo displayed in a window at the company’s store in Pike Place Market, Seattle.
While Starbucks was not the first significant coffeehouse chain in the United States, it was the pioneer in popularizing and mass-marketing a specific brand of café culture. Beginning in the 1990s, Starbucks promoted coffee as a comprehensive experience that encompassed ambiance, community, functionality, and lifestyle. By reshaping public perception of coffee and coffeehouses, Starbucks experienced remarkable growth and solidified its position as a leading name in the coffeehouse sector.
Strategic and Competitive Advantages
Starbucks’ supremacy in the coffee retail market can be attributed to several strategic initiatives and competitive advantages, including:
Promotion of coffee as a social and cultural experience. By emphasizing the quality of its coffee offerings and the inviting atmosphere of its coffeehouses, Starbucks successfully redefined coffee as an affordable luxury that can be savored in a social setting, often referred to as a “third place” distinct from home and work. Starbucks cafés became favored venues for social interactions, small business meetings, studying, and working. The company gained a first-mover advantage in the café market by being one of the earliest to curate, define, and widely distribute its unique brand of coffeehouse culture.
Saturation strategy. Starbucks implemented a saturation strategy that considered factors such as population density, income levels, proximity to other businesses, available amenities, competition, and overall foot traffic patterns. This approach enabled Starbucks to achieve geographical dominance without cannibalizing its own market (i.e., new outlets drawing customers away from existing ones).
Product innovation. Starbucks has consistently engaged in the experimentation of new products.
The Founding Years
Starbucks was established by Jerry Baldwin, Gordon Bowker, and Zev Siegl, with its inaugural store opening in 1971 in close proximity to the historic Pike Place Market in Seattle. The founders shared two key characteristics: they all had academic backgrounds and a passion for coffee and tea. They pooled their resources and secured loans to launch the first store, naming it “Starbucks” after the first mate, Starbuck, from Herman Melville’s renowned novel Moby Dick.
The original Starbucks Coffee shop is located at 1912 Pike Place in Seattle, Washington.
Alfred Peet, a coffee-roasting entrepreneur, significantly influenced the founders of Starbucks. A Dutch immigrant, Peet began importing high-quality arabica coffees into the United States in the 1950s. In 1966, he opened Peet’s Coffee and Tea in Berkeley, California, a small establishment that focused on premium coffees and teas. Peet’s achievements inspired the Starbucks founders to adopt a business model centered on selling superior coffee beans and equipment, with Peet serving as their initial supplier of green coffee beans. The partners acquired a used roaster from Holland, and Baldwin and Bowker experimented with Peet’s roasting methods to develop their unique blends and flavors.
By the early 1980s, Starbucks had expanded to four locations in Seattle, distinguishing itself from competitors with its exceptional fresh-roasted coffees. In 1980, Siegl chose to explore other ventures, leaving Baldwin and Bowker as the remaining partners, with Baldwin taking on the role of company president.
The Howard Schultz Era
In 1981, Howard Schultz, a sales representative for Hammarplast, a Swedish manufacturer of kitchen equipment and housewares from which Starbucks sourced drip coffee makers, became aware of the substantial orders placed by the company, prompting him to visit. Impressed by what he saw, Schultz decided to pursue a career at Starbucks and was appointed as the head of marketing in 1982. He observed that first-time customers…