Starbucks 2011

by Dan Harrington on April 3, 2011

Starbucks CEO Howard Schultz is a rare case in the corporate world, a CEO who founded a company, left when it was successful, and then returned when it was failing and turned it around again to achieve record new success.

If you ask Schultz, or read his new book “Onward: How Starbucks Fought For Its Life without Losing Its Soul,” he will tell you the secret is staying true to the company’s core principles while also pushing for reinvention.

Sense of Entitlement Plagued Starbucks Success

From the time of its low point in 2008 Starbucks stock has now climbed 350%. Schultz said the company was suffering from a sense of entitlement that it acquired after fifteen years of remarkable growth and success.

In his new book Schultz reflects on bringing the company back after its low in 2008, and navigating the years of financial crisis to just have recently achieved its best quarter ever. The turn around involved refocusing on the core customer of Starbucks

Starbucks 2011 Update:

Starbucks Raises Prices for Packaged Coffees

Starbucks recently raised prices for its packaged coffee in an effort to preserve profits at a time when the price of green coffee beans (unroasted coffee beans) has been skyrocketing, nearly doubling in the last year.

Also helping to protect profits is the fact that Starbucks has already bought all of the coffee beans it will need for 2011 and part of 2012. The company is also affected by the rise in price of other commodities affecting prices for milk, bread and other products.

Major Coffee Companies Raising Prices – Consumers Feeling the Pinch

Coffee prices rises of about twelve percent were announced both Seattle’s Best Coffee brand and Starbucks brand coffee. Along with Starbucks a host of other top coffee companies have also repeatedly announced price increases in the last nine months including J.M. Smucker Company (Dunkin’ Donuts and Folgers), Kraft (Yuban and Maxwell House coffees),  Green Mountain Coffee Roasters (which sells Keurig brewers and Coffee K-Cups), Nestle, and the Sara Lee Corp.

Coffee Futures Trading Drives Up Coffee Prices

Starbucks CEO Howard Schultz had lamented the upward pressure on coffee prices that has been caused by speculative trading in coffee futures markets which has not only exacerbated coffee price increases but has also disrupted supplies due to the undue burden the price spikes have placed on coffee exporters and importers who cannot afford to pay the high margins necessary to protect their investments.

Low interest rates maintained by the U.S. Federal Reserve have led to huge infusions of money into commodity markets driving up futures prices in an inflationary environment.

Starbucks 2011 continued:

Underlying the coffee price rises, however, is a fundamental supply and demand disjunct in which low supplies are being outpaced by growing worldwide demand.

Emerging Markets Desire Arabica Coffee and Specialty Coffee Drinks

Starbucks and other fine coffee houses have created a growing new breed of fine Arabica coffee lovers leading to a distinct Arabica coffee shortage. Emerging markets are driving up the price of Arabica beans.

The demand is primarily for the higher grade Arabica coffee which is served by Starbucks and other gourmet coffee chains and increasingly desired by a new breed of specialty coffee lovers worldwide. Brazil, India and China all have a large growing demand for Arabica coffee driven by their large and growing middle classes.

Consumers increasingly want a cup of premium fresh-brewed whole bean Arabica coffee as well as various specialty coffee drinks like Lattes and Cappuccinos.

Demand for Coffee Rising

India’s demand for coffee is rising about 5% each year, two and one half times as fast as the worldwide increase in coffee demand of about 2% annually.

Starbucks has a 70% market share in China and announced plans to open 1,000 new stores there.

Starbucks 2011 continued:

The coffee crop of Brazil has been lower while the country’s coffee consumption is increasing rapidly, expected to surpass the U.S. by 2012. Brazil will be keeping half of its own harvest by 2015.

Starbucks Enters the Single Serve Coffee Market

Starbucks also recently announced a partnership with Green Mountain Coffee Roasters to enter the single-serve coffee market. Starbucks will be selling the Keurig brand single-serve machines in its stores and Green Mountain will be selling Starbucks K-Cups.

Starbucks has been involved in a sector of the single serve market already with its VIA instant coffee product that is sold at Starbucks stores and in many other retail outlets, with a projected growth of up to 500% by 2015.

All About Starbucks In 2011

Starbucks K-Cup and Single-Serve Machines In Starbucks Cafes

Starbucks and Green Mountain will be selling and Starbucks will sell Tazo tea pods and Starbucks coffee K-Cups (K-Cup single-cup pods) to be brewed in the Keurig single serve coffee brewing machines.

The Starbucks K-Cups will be sold at North American drugstores, department stores, grocery stores and wholesale clubs. The Keurig single serve brewing machines will be offered in Starbucks cafes in 2012.

Starbucks K-Cup pods and Keurig brewing systems will be available in Starbucks stores and the Starbucks Pods will also be offered in multiple flavors. The pods will also be sold on the Green Mountain Coffee Roasters website.

Green Mountain dominates America’s single-serve market though some competition is provided by Kraft as well as Sara Lee’s Senseo brewer and Nestle’s Nespresso brewing system which dominates the European market.

Thank You For Visiting Gourmet Coffee Lovers and Reading Starbucks 2011. Love Your Espresso and Coffee!

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