HOW STARBUCKS  CAME INTO BEING

ORIGINS OF STARBUCKS

Starbucks was founded by Gerald Baldwin and Gordon Bowker. Neither of them aspired to build a business empire. They founded Starbucks for one reason only; they loved coffee and wanted Seattle to have access to the best kind of coffee. Their idol was a man called Alfred Peet, who was the son of a coffee trader. He is considered to be the spiritual grandfather of Starbucks as Howard likes to say. Alfred Peet in a way introduced America to fine dark roasted arabica coffee through his small store called Peet's Coffee and Tea in Berkley. Gerald and Gordon had come across this store and become die hard fans ever since. So Starbucks opened a small store in Pike Place Market and started selling high quality coffee beans by the bag imported from different parts of the world. 

MODERN STARBUCKS

When Howard joined Starbucks, he was immediately drawn into the vibe that small store was expressing. Starbucks was doing fine and growing, but things took a major turn after a year. A year later when Howard Schultz went to Italy, he came across the concept of Coffee Bars and found them in every nook and corner. What amazed him was the ambiance inside those coffee bars. The baristas behind the counter moved with a certain grace, smiled  and spoke with every customer as if they were not customers but friends and served extremely good espresso based drinks. This Italian way of espresso making with a personal touch catapulted Howard into a different arena and this is what Howard wanted Starbucks to be in future.  However on returning to the states, the founders of Starbucks weren't on board with Howard's idea. But Howard was so determined, that he left his loving job and with the help of investors opened his first coffee bar called Il Giornale. People connected with it amazingly. And he expanded to 5 stores. Soon the chance of a lifetime came to him. Gerry and Gordon wanted to sell Starbucks entirely. Howard wanted to own the company he so dearly loved, and after a near miss, he attained Starbucks, and ever since there has been no turning back but only going onwards. 

STARBUCKS LOGO AND THE NAME STARBUCKS

The Siren

The Siren has a seductive and unpredictable charm, both the qualities that Starbucks want to convey with their coffee. They want people to seduce people's taste buds with rich velvety coffee and take them by surprise by the different flavor profiles of beans of different regions. 

The name STARBUCKS

Gordon, one of the founders of Starbucks, was an English teacher and loved literature. So he brought in the name Starbucks from Starbuck, the name of the first mate of the whale ship Moby Dick. 

So the logo and the name go hand in hand in indicating Seduction of the coffee flavours like the Siren and the Level Headedness of the First Mate. 

BUSINESS PHILOSOPHY AND STRATEGY OF STARBUCKS

BUSINESS PHILOSOPHY

1. "Every company must stand for something." Starbucks stood for Dark Roasted flavour profile and nothing else for their coffee. 

2. "Don't give the customers directly what they ask for. If you offer something else, something more superior, you excite them, create a sense of discovery and then loyalty." Americans didn't know about fine arabica coffee, so when they found high quality espresso based drinks it was obviously something new for them. In fact, this desire to keep serving something new, brought about the invention of Frappuccino. 

3. "To mean something to customers, you should assume intelligence and sophistication and inform those who are eager to learn. If you do, what may seem to be a niche market could very well appeal to far more people than you imagine." The baristas explained to the new curious customers what the beverage was, in sophisticated and knowledgeable manners and the customer believed that they could walk in everytime and learn something or experience something new. 

INNOVATION 

Howard, as an entrepreneur, has been a strong pioneer of Innovation. He felt this was needed to change with the times and yet stay true to their roots. To look at it from a pinhole point of view, the rapid urge of expansion is what brought about the different bouts of innovation.

When they were opening stores far away from their roasting sites, they needed to transport their coffee beans to far distances and yet retain their freshness. A brand new Ziplock technology was developed as a solution.

They started an instant coffee brand called VIA which would replicate the taste of freshly brewed coffee without the hassle.

Started coffee flavoured beer, ice creams, bottled beverages all from the high quality coffee concentrate the R&D team of Starbucks developed. 

EMPLOYEES

Howard always emphasizes on the importance of reaching the finish line with everyone and not alone, because he believes in winning together. Because of this reason, he loved his employees dearly to the core. He always treated them with utmost respect and everyone in the company, right from the warehouse workers and part time workers to high executives, everyone was meted out the same kind of treatment. He hates cutting off people. He never viewed employees as objects that eat into his profits and he believed treating them well acted as an energizer. Howard prioritised his employee's trust on the company. He wanted to give them a safe and secure place where they would be treated with equality and be proud of working. Also, Starbucks was the first company to give health benefits to every worker associated with them right down to even the part time baristas AND gave every employee, read it once again, EVERY EMPLOYEE shares. His philosophy was that if he linked everybody in Starbucks to the performance of the whole company, every employee would bring in the same attitude as the CEO who himself is a shareholder as well. In fact, he wanted to make the work environment of Starbucks of such a kind where he wished his father could have worked. 

PARTNER SELECTION

Starbucks didn't chase partners, partners chased them and they would single out people from hoards of offers. 

Howards had a policy - when you take on a partner and when you select an employee, be sure to choose people who share your passion and commitment and goals. If you share your mission with like-minded souls, it will have a far greater impact. 

So the procedure of selecting high quality partnership in the goal of letting people have coffee everywhere went something like as follows:

1. Brand name and recognition of P

2. Good reputation of P in its field

3. P has a strong commitment towards quality and customer service

4. P must have people who understand the values of Starbucks

5. P must promise to protect the Starbucks brand and must be equally rigorous over the quality of coffee

I believe something of this sort went behind the Starbucks and Tata partnership that brought Starbucks stores to India. Given Tata's reputation of being a venerable man, it is a no-brainer Starbucks is brought to India under The Tata Alliance. 

MARKETING STRATEGY

NOT A FIRM BELIEVER OF TRADITIONAL ADVERTISING

Posters, banners, pamphlets, TVCs, radio ads were not the Starbucks style. Starbucks believed in setting their brand as a marketing strategy. Starbucks is not  marketing driven, it is people driven, it is product driven and value driven.

According to them great brands had a formula :

Create a distinctive memorable identity 

A product that makes people look or feel better

A strong and comfortable delivery channel, i.e, Starbucks Store

And to Succeed :

Be in a category large enough to be robust and vibrant and clear with an original vision.

Starbucks always wanted to build brand loyalty. Build brand loyalty one cup and one customer at a time, communicate through their own people in the setting of their company owned retail stores. 

However with changing times, they have had to resort to making their presence felt online, leading to digital marketing and even had a couple of TVCs here and there. But finding Starbucks billboards is going to be something of a rare find. 

Marketing Strategy : 

1. Educate Customers about Coffee through Baristas 

2. Build a relationship between Baristas and Customers through their service

3. Spread everywhere and choose Retail Locations in highly visible, high traffic downtown sites, residential neighbourhoods, lobbies and on the going-to-work side of the street. - treat the Stores as their Billboards

4. Build a reputation through Retail Stores with high elegance, relevant local influential designs - treat Ambience Building as Brand Building

That is, use the Starbucks Experience as their Selling Point

They lived mostly on word-of-mouth advertising and the procedure they imagined is something s follows : 

Customer enters the store 

“Wow”

“I am treated so well over here”

“The Baristas know my name and my favourite drink when I come back the next time”

“I can sit here”

“That’s some great Jazz playing at the back”

“Can just close my eyes and relax a bit”

“I can get this entire experience for just $1.5 or $2”

“Can’t go to Hawaii but can treat myself to this”

Marketing Strategy While Opening In A New City

Every time they opened their doors to the public of a new city, they had a market entry strategy :

 1. Hire a PR to understand heritage and concerns of a city

2. Pick a flagship site, a very visible location in a busy part of the city

3. Build a swanky, high profile store exuding the elegant and classic signature Starbucks decor

4. Creative people designed artwork that celebrated each city's personality in their merchandise or store decor or even the cups. For example - a peach shaped coffee cup for Atlanta, or the Statue of Liberty drinking coffee and many more

5. They would send out invitations to Investors and Partners and the regular mail-order customers from that city to the Store Launch. 

6.They always opened their store on a famous community event

7. Before opening they always assembled a list of people who could serve as local ambassadors and that list would include : 

a. Partners and their friends

b. Local Shareholders

c. Mail order customers

d. Sponsors of charities they supported with their opening night proceeds

8. Held tastings with local reporters, food critics, chefs and owners of restaurants

9. Printed material to educate people about coffee

Drafting the Mission Statement 

For a man like Howard, who entwined emotions with his business to a great deal, drafting the mission statement for Starbucks was something very close to his heart.  

It was a part of the Strategic Planning Process and aimed to articulate a powerful message of purpose and translate that into a set of guidelines to help them gauge the appropriateness of each decision they made at all levels of the company. In fact a draft was submitted and circulated for all to review and make changes if they desired.

What Starbucks Essentially Stands For :

"I wanted to blend coffee with romance, to dare to achieve what others said was impossible, to defy the odds with innovative ideas and to do all that with elegance and style"

High Quality Whole Bean Coffee Dark Roasted to Perfection

The numero uno responsibility of Starbucks, as they felt, was to bring the highest quality whole bean coffee to people and that the beans should be dark roasted to perfection. Starbucks holds it as a part of their policy that they will not, at any cost, compromise with the quality of the beans used and will avoid tampering with the authenticity of beans. By tampering I mean bringing in artificially flavoured coffee beans. For many customers who enjoy a nice hazelnut brew, they have often asked Starbucks to sell Hazelnut Flavoured Coffee beans, but Starbucks held its ground. It is ready to use Hazelnut syrup after the raw brew is done, but it will never bring in chemicals to the whole beans. Even when Starbucks was hit by the rising price of coffee, the idea of mixing high quality beans with that of a lower quality never struck them, because compromising with the quality would go against their values, and even if the initial round of customers wouldn't realise the variance, they themselves would know the difference, and would be ashamed in their own eyes. I guess for a company which has also ventured itself into avenues from just pure espresso based drinks, it is important that they hold on to certain grass root level principles. 

No Franchisee

In fact, due to their obsession for quality, they refused to have any franchisees! Having a franchisee would mean that they cannot keep a strict watch over their quality, and if the franchisee didn't take care of the quality of their beans, of their merchandise, of their top class ambiance and service, the brand itself would falter and that is something Howard Schultz was absolutely dead against. Starbucks controlled their own distributions so that they weren't under the mercy of retailers who did not understand their product. In fact most of the Starbucks stores that you see are owned by Starbucks themselves and very few are by Starbucks Partners. They have a rigorous procedure for selecting Starbucks partners which I have later described in this essay.

Educating People About Coffee

Starbucks has long held a passion of educating people about Coffee. That was the reason why they started Starbucks in the first place right? They taught Americans what good coffee is. Took them out of their days of horrible Robusta and supermarket aisles and introduced them to the finer pleasures of coffee. This is primarily because Starbucks gets their coffee beans from different parts of the world. They get it from Sumatra, Kenya, Ethiopia, Costa Rica and several other places. So how would a customer, who is going to buy coffee by the bag, know the difference between coffee from Sumatra and that from Kenya? You need to tell them the difference, tell  them why they are different, tell them about the flavour profiles and tell them which coffee will give them what they want. Starbucks wanted people to know about the coffee they were serving them. After all coffee is not just a coloured beverage, right. They can't taste the same. When even the water tastes different in different parts of the world, how does one expect coffee, that is grown on different kinds of soil and in myriad climates, taste the same? So they made sure that their baristas were very well trained and apart from making people more informed about the coffee from their baristas, Starbucks decided to make stamps indicating a local specialty from the region where the coffee has come from to give people a lingering feel about the region the coffee represents. These stamps were designed with great care to make people not forget what they learnt from Starbucks. 

Design - Elegance and Style

Talking of the stamps and their design, brings me to the topic of design in relation to Starbucks. Howard Schultz was meticulous about every design aspect of Starbucks, right from their store design, to logo design, to their to-go cup design and even their coffee bag design. He keeps emphasizing the need for being elegant and stylish in everything. He believes that is what sets Starbucks apart from any other coffee retailer or cafe. For every store opened in a new neighbourhood, in a new city, in a new country, he wanted the Starbucks store to retain its signature style of wooden decor with  a mild Italian Coffee Bar vibe mingled with the culture of the new space they were opening in. The store ambiance had to be a perfect balance between the elegance Starbucks stood for and the culture of the locality they were situated in, because they didn't want to lose their Starbucks touch and neither did they want their customers to feel that they had entered an alien store. 

Starbucks is one of the few companies who can boast of an in-house design team, an in-house marketing team and an in-house team of architectures. Howard goes onto define the kind of work each team did, and even talks about the new automated systems their architects came up with to reduce cost and make the matter of incorporating the signature Starbucks style a seamless process. He was picky even about using styrofoam cups as to-go cups and they never made the move from paper to plastic. Their in-house R&D team is still working on making a more eco-friendly option, even though they try to recycle their cups as much as possible.

Apart from Howard's crazy obsession for maintaining quality, he had a crazy obsession for elegance and style that should be reflected from every molecule that went into building the Starbucks brand. 

Coffee Is A Romantic Affair And The Quest For A Third Place

For Howard, drinking coffee is a romantic affair. He wanted people to come to Starbucks and enjoy. His philosophy was, if a person cannot afford a trip to Hawaii, he should be able to come to Starbucks and be transported to a land elsewhere. 

The moment one would walk in through the doors of Starbucks, he would be greeted by a waft of dark roasted coffee beans. They would go to the barista, who would greet him with a smile and be enlightened about the different espresso based drinks that are available and why they are different. He will order a cup of excellent coffee, made from the finest beans. And while we would wait for his cup to arrive, he would soak in the immaculate style of his surroundings and enjoy the great music that would be playing in the background (Starbucks played great Blues and Jazz numbers, and people loved their song selection so much that they even had a brief successful stint of producing a collection of Blues CDs). When his coffee would arrive, his taste buds would be subjected to an elegant smooth velvety coffee and he would be able to sit down, and have a relaxed and joyful conversation with other people in the store or with his companion. - This was Howard's dream and this is what he built. 

Howard clearly specifies that he wants his stores to be a Third Place. For every being the First Place is their home and the Second Place their office. The Third Place is somewhere that is warm, welcoming, where people can come and relax and enjoy themselves.