Page 18 - The Starbucks Experience

Introduction

has been with us for centuries, and there seemed to be little
impetus for a major shift in customers’ preferences.
How do you inspire a coffee drinker to give up her regu-
lar routine while also getting her to pay six or eight times
more for rich, exotic coffee blends when “ordinary” is all
she’s ever known? Besides, who would make time for a Euro-
pean-style coffeehouse experience when one could grab a cup
while buying milk, gasoline, and a newspaper?
Early critics of Schultz’s vision maintained that he had hap-
pened upon a short-lived gimmick that would quickly fizzle.
Others could not grasp what all the fuss was about. As Cora
Daniels noted in a Fortune magazine article, “The Starbucks
story epitomizes ‘imagine that’ in every sense. When the com-
pany went public . . . it had just 165 stores clustered around
Seattle and in neighboring states. . . . Skeptics ridiculed the
idea of $3 coffee as a West Coast yuppie fad.” 3
Could Howard Schultz’s wild “yuppie fad” really work?
Clearly he must have been on the right track, for much of the
world has embraced his concept of serving gourmet coffee in
a relaxed and comfortable environment. In fact, today Star-
bucks has stores in over 37 countries, averages more than 35
million customer visits each week, and has loyal patrons who
typically return 18 times a month. Contrary to the bearish
predictions of so-called industry analysts, Starbucks has done
fairly well for itself.
What is the true scale of Starbucks success? If you had
invested $10,000 in the Starbucks IPO on the Nasdaq in
1992, your investment would be worth approximately
$650,000 today. Starbucks has grown substantially faster
than the average S&P stock. To get a sense of its profitabil-
ity, one need only appreciate that since 1992, the value of the
S&P rose 200 percent, the Dow 230 percent, the Nasdaq 280