Coffee Retail Industry Analysis

Although the coffee retail industry forms a subsection of the food and drink industry, it has expanded and exhibited stiff competition from the different players involved. In 2016 alone, the coffee retail industry showed revenues of over $782 billion (Jaaskelaine, 2018). As such, it can no longer be ignored as just a small patch of water on the side of the road. It is becoming mainstream food component and hence, has generated massive interest from people who have a keen eye for investment including myself. Generally, the coffee retail industry entails businesses which provide hot beverages, tea, and coffee as the main products. However, more recently, the menu has been expanded to include salads, sandwiches, baked goods, and snack items thereby intensifying competition between the coffee houses and food chain restaurants. At the same time, the industry products’ incorporate various drinks such as wines, appetizers, bottled drinks, and even ice cream (Jaaskelaine, 2018). Some of the five key organizations in the coffee retail industry include Starbucks, Dunkin’ Donuts, McDonald’s McCafe, Café Coffee Day, and Costa Coffee.

Step 2: Company Overview

From the 5 coffeehouses listed in step 1, Starbucks was chosen for analysis and focus for the rest of the report. Starbucks Inc. was formed by three partners including Zev Sigl, Gordon Bowker, and Jerry Baldwin in 1971. The company’s headquarter from the very beginning was located in Seattle, Washington and has remained there ever since. The three initial owners operated few Starbucks coffeehouses in Seattle and were complacent to expand. However, in 1987, the company was sold to Howard Schultz and the company immediately began to rise from the ashes to become the largest player in the industry. To capture the magnitude of its influence and size, a 2016 poll by Nielsen Scarborough revealed that the average number of customer serviced by Starbucks in the U.S is 35.7 million monthly.

The main products offered by Starbucks include premium priced high quality coffee, roasted coffee, tea, and different fresh food products. In the U.S, the company uses different brand names to market itself including Starbucks Refreshers, Starbucks VI, Seattle’s Best Coffee, Tazo, Teavana, and Verismo. By 2013, Starbucks Inc. had expanded to 62 countries globally with 19,767 under its management and 182,000 employees working in them (Geereddy, 2015). By 2018, the C-Suite of the company consisted of Howard Schultz as the executive chairman, supported by Kevin Johnson the prevailing Chief Executive Officer. Of worthy to note too are the two vice presidents; Luigi Bonini leading the global product innovation and Andy Adams responsible for store development. Although 50% of Starbucks stores are located in the U.S, the company has expanded its operations to Canada, Asia, South America, Europe, and Africa. In fact, existing statistics indicate that roughly 20% of the company’s income are generated abroad with the main market segments identified in China, Canada, and Japan (Geereddy, 2015). According to Bean (2018), the target customers of Starbucks are mostly those with high income of over $90,000 and are willing to plunk down up to $10 for beverage and snacks. Often, they are people who do not worry about cost but instead, desire to experience an exceptional customer service consisting of premium coffee, snacks, breakfast sandwich, and dessert.

The mission statement of Starbucks Company is “To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” (Starbucks, 2013). The underlying message that the company seeks to relay through its mission statement is that more than just making profits, it is interest in cultivating a culture of warmth and sense of belonging in which everyone is welcome at its premises. As much as it strives for high financial performance, it always ensures it operates through the lens of humanity thereby promoting values of transparency, respect, and dignity (Starbucks, 2013). As such, the company demonstrates codes of ethics in its operations through various ways. Some of them include: positively contributing to the community by training coffee farmers on the best ways to improve productivity as well as embracing diversity and employing people from different racial and ethnic backgrounds. The company also uses the best standards of purchasing, roasting, and supply to ensure everyone in the chain benefits from the farmer to the consumer (Starbucks, 2013). The other value esteemed by Starbucks is acting courageously so as to grow the company and challenge the status quo in the sector and enable consumers to enjoy better services at affordable costs.

Step 3: Current News

Two news reports about Starbucks caught my attention during the course of the semester. The first report by Stevens (2018) which was published on The New York Times on April 15 involves accusation of racial discrimination by the company. The report entails two black men who entered the Starbucks restaurant located in Philadelphia and then requested the employees of the restaurant to allow them use the rest room before they had ordered any drinks. The employees declined their offer and instead requested them to leave the premises. The black men refused to obey and police were called to arrest the two black men for suspicion of trespassing. Overall, the news triggered an uproar in the social media with the hashtag #BoycottStarbucks trending within an hour of airing the story. Looking at it, the story portrayed Starbucks as one engaged in racial profiling. Yet, other people have pinpointed the training practices of the company as being biased hence contributing to the outcome of the incident. Soon after the incident, top Starbucks managers including the CEO Kevin Johnson expressed their regret and sincere apologies to the two black men for the incident. In fact, Mr. Johnson insisted that he will try and make “face-to-face apology” to the two men (Stevens, 2018). The company also apologized on its twitter page with the following remark.

However, the mayor of Philadelphia, Jim Kennedy, pointed an accusing finger at Starbucks commenting that the whole incident “appears to exemplify what racial discrimination looks like in 2018” (Stevens, 2018). The story left a poor reflection about Starbucks as one that only cares for a certain click of customers. The anger that the story caused in the public domain may affect Starbucks going into the future and as Mr. Johnson recognized, the company may have to learn the hard way about proper customer service before it provides better services.

The second story about Starbucks Inc. was a ripple effect of the first story. The story by Abrams (2018) entails news that Starbucks Company is set to offer fresh training to its 175,000 employees in more than 8,000 stores and hence, the stores were to be closed starting on May 29. Certainly, this step was intended to erase the negative image that the company had received from the initial incident. On the surface, Starbucks appears committed to implementing changes that would help avoid such conflicts between customers and employees in future. Some managers such as Andrew Gilman of CommCore Consulting Group have noted on the response by Starbucks that “This move goes beyond the playbook…That’s sending a big statement” (Abrams, 2018). According to Starbuck’s CEO Kevin Johnson, the training will mainly focus on training to address the issue of implicit bias in service delivery. Reviewing the second story, one feels that Starbucks has somehow managed to win a few hearts of those that were angered by the incident. Even though the workers involved are still employed, the training marks a unique turnaround in the way customers are handled by the retailers and other service providers. By the time one reads the last line of the second story, the resentment subsides and the image of Starbucks is regained as one that truly cares because it took concrete steps to address the problems which arose. Eventually, the sincere remorse of the company’s CEO coupled with messages of apologies and regret on its various social media site helped to tame the growing animosity towards Starbucks.

Step 4: Website Review

Generally, Starbuck’s website is a simple and easy to maneuver page with few headings which open up to many other new spaces. The news forum for the Starbucks on the website is under the subheading “Starbucks Channel.” On the channel, Starbucks gives press releases on its various programs as well as upcoming activities. It also posts videos on the different people who have made an impact in the coffee industry, either by being an exemplary employee at the company or giving back to the community. One of the recent topics which I found interesting on the site is about the “future of coffee – Starbucks farm is research hub” (Starbucks Corporation, 2018). The article explores how climate change such as windier and warmer weather has negatively affected the productivity of coffee farmers.  To address the problem, Starbucks director of global agronomy, Carlos Rodriguez initiated a research project in Sabanilla, Costa Rica to analyze the combination of coffee hybrids, soil variety, and pruning methods which can lead to high coffee productivity. Reading through the article, one realized that the program which was initiated by Starbucks is set to help all farmers of coffee even those who do not collaborate with the company. The other recent story on Starbuck’s website which caught my attention is about the film being made by the company called “Upstanders Season 2” (Starbucks Corporation, 2018). The film involves documenting the different stories of ordinary people who do outstanding things in their communities. Moreover, the stories are anchored on values such as courage and humility to resonate with the company’s mission statement. A video trailer of the film is uploaded on the Company’s news channel. In Upstanders Season 2, the narrators tell stories of overcoming loss and pain, embracing diversity of America’s culture, and extending forgiveness to others who have caused pain and damage to a person’s life.

At the same time, the Starbucks channel explores its Corporate Social Responsibility through the news bulletin “Giving Back”. In the section, Starbucks gives stories on the ways that it has helped improve lives of coffee-growing communities. For instance, Starbucks in 2014 contributed $300,000 to a foundation called Seeds for Progress in Nicaragua to help the coffee-growing region to support its various projects (Starbucks Corporation, 2018). The foundation’s key projects include improving the skills of over 2,700 students in writing, reading, and math by adoption of new technologies in education. In addition, Starbucks has been at a key stakeholder in helping to revitalize the coffee industry in the war-torn Democratic Republic of Congo. The company has forged a partnership with Eastern Congo Initiative so as to uplift young adults in Congo by sponsoring them to study agriculture in colleges (Starbucks Corporation, 2018). Moreover, the company has set up the infrastructure to help local farmers easily export their coffee. In addition, Starbucks channel highlights the different projects which have been supported by Starbucks in 12 countries the past. Some of them include rebuilding a school in coffee growing area of Yirgacheffe, Ethiopia, construction of a health clinic in East Timor, and constructing a clean water supply for the coffee community of Henganofi district in Papua Guinea (Starbucks Corporation, 2018). To ensure sustainability in the industry, Starbucks uses a bottom up approach in its supply chain management. This implies that Starbucks does not merely demand certain standards from coffee farmers and suppliers. Instead, it collaborates with the farmers by supplying them with high quality seeds, training them on best agricultural practices, and helping farmers to export their produce. This ensures that a strong bond and unity is achieved from the farm to the Starbucks coffeehouses. It is this seamless collaboration which has ensured superior services and products from Starbucks hence, increased number of customers over the decades.

Step 5: Social Media

On Twitter, Starbucks commands a following of 11.9 million users. The Company joined Twitter Community in 2006 and has since posted about 133,000 tweets. On average, Starbucks posts one tweet daily. Most of the posts are placed in the morning with comments such as “Here’s to starting every morning like a movie star.” The most common picture uploaded by Starbucks on its Twitter page is a cup of coffee with the Company’s logo on it. A sample of the photos is shown in figure 1. In addition, the Company’s tweets often receive over 500 comments for each post and over 1,000 likes and retweets. However, these values skyrocket incase the issue posted in of public interest such as the recent racial discrimination incident that smeared the company.  In that particular post, Starbucks official apology tweet received 20,320 likes, 18,000 comments, and 7,318 retweets. However, most of the comments were from angry customers with some swearing to never support the company while others felt Starbucks acted softly on the two men. Additionally, some comments were sarcastic such as the one shown in figure 2 indicating the naked ruthless opinion of the user.

Figure 1: Common picture in Starbucks twitter page.

Figure 2: A Twitter user expressing his opinion on Starbucks apology tweet.

Meanwhile, on Facebook, Starbucks commands a following of 37 million users which is significantly more than Twitter. However, the comments and likes on Facebook are relatively lower in number than in Twitter, averaging over 200 comments and 1000 likes foe every posts. The story on Facebook about Starbucks entails those of its brave and hardworking employees as well as the ugly parts of racial profiling cases strangling the Company. However, most of the posts are about enjoying the sweet aroma of Starbucks coffee and giving tips on how to brew a good cup of coffee. In addition, the Facebook page of Starbucks indicates the various upcoming events on the company’s calendar such as “The Springs Coffee Days Sale.” On the same page, customers express their displeasure at the poor service they experienced at the company’s restaurants such as the post shown in figure 3.

Figure 3: A Facebook post of a disappointed Starbucks customer.

The Facebook page of Starbucks also shows different videos regarding the company’s activities such as conferences, inspirational talks, and charitable work.

Conclusion

Overall, Starbucks is a popular company on the social media platform and this is captured by the huge following and massive posts by users on its Twitter and Facebook accounts. At the same time, Starbucks strong culture of sustainability practices and corporate social responsibility ensures it takes very seriously any problem which may affect even one of its millions of customers around the world. The company’s particularly strong response of retraining its employees after the racial discrimination incident in Philadelphia indicates its resolve and commitment to ensure all customers are treated equally and with the dignity they deserve. In addition, the news about uplifting farming communities which are posted on its channel are crucial indicators that the company is not all about profits but also genuinely cares for the people it works with in the coffee industry. As a result, all pointers indicate that Starbucks has a higher chance of bouncing back even bigger and better after the racism profiling incident.

Works Cited

Abrams, R. “Starbucks to close 8,000 U.S stores for racial-bias training after arrests”, 2018.  The New York Times. Retrieved: https://www.nytimes.com/2018/04/17/business/starbucks-arrests-racial-bias.html

Bean, B. “Who is Starbucks’ target audience?,” 2018. Retrieved: http://smallbusiness.chron.com/starbucks-target-audience-10553.html

Geereddy, N. Strategic analysis of Starbucks Corporation. Harvard University, 2015. Retrieved: https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Jaaskelaine, L.. “Coffeehouse Industry – Statistics & Facts”, 2018. Retrieved: https://www.statista.com/topics/1670/coffeehouse-chain-market/

Starbucks. “Living our values: Corporate Social Responsibility.”, 2013. Retrieved: https://globalassets.starbucks.com/assets/e31d4604b78141bfb13172aa5fd67cfa.pdf

Starbucks Corporation. “Starbacks Channel.” (2018). Retrieved: https://starbuckschannel.com/originals/

Stevens, M. “Starbucks C.E.O apologizes after arrests of 2 black men”, 2018 The New York Times. Retrieved: https://www.nytimes.com/2018/04/15/us/starbucks-philadelphia-black-men-arrest.html