A Closer Look at the History of Starbucks

These days you can find Starbucks just about anywhere, but if you study the history of Starbucks you’ll see this wasn’t always the case, and a review of its past will show how entrepreneurship and determination can lead to success.

What began as an idea to sell coffee beans by three friends has become the largest coffeehouse chain on the planet.

The History of Starbucks Started in Seattle

History of StarbucksThe first Starbucks restaurant opened on March 30, 1971 in Seattle, Washington, and was the brainchild of three friends, writer Gordon Bowker, history teacher Zev Siegl and English teacher Jerry Baldwin, who were inspired to sell high grade coffee beans after being taught by Alfred Peet, a coffee business entrepreneur. The restaurant’s name was supposed to be named Pequod after the whaling vessel in Moby Dick, but it was changed to “Starbuck,” the name of the Pequod’s chief mate.

During its first five years from 1971 to 1976, they were located at 2000 Western Avenue before moving to 1912 Pike Place Market where it remains to this day. During this period, the company limited itself to selling roasted coffee and hadn’t yet ventured into coffee brewing. During Starbucks’ first year, the company bought their coffee beans from Peet’s but eventually began purchasing from growers directly, and by 1984 had grown to the extent they were able to buy Peet’s.

By the 1980s Starbucks had taken off in Seattle, so while coffee sales in the US slowed down, demands for specialty coffee increased and by 1989 comprised 10% of the market share. By 1986, Starbucks had opened half a dozen restaurants and began selling espresso coffee. The following year Baldwin and the other owners sold the company to Howard Schultz, their former employee. After the purchase, Schultz renamed his Il Giornale coffee outlets into Starbucks and the company began to expand rapidly.

Starbucks Takes Off

The same year Schultz made the purchase Starbucks opened its first restaurants outside Seattle in Chicago, Illinois and the Waterfront Station at Vancouver, British Columbia. By 1989, Starbucks had 46 restaurants spread throughout the Midwest and Northwest. As a testament to the huge demand for its coffee products, the company roasted more than 2 million pounds of coffee in 1989, a number that would increase year after year.

In June 1992 Starbucks had its IPO, and by this time had 140 outlets all over the US. From revenues of $1.3 million in 1987 when Schultz bought the company, revenue grew to $73.5 million in 1992 and was valued at $271 million. Following the IPO, Schultz was able to raise the funds necessary to open more stores, and its outlets doubled in the next two years. As further proof of its profitability, Starbucks’ share price in September 1992 grew more than a hundred times what the shares earned the previous year. Starbucks in addition, also holds the distinction of being among the first to offer stock options for its employees.  The company is of course best known for their coffee, but they also sell sandwiches, pastries, snacks and other beverages, and a few of their stores sell wine and beer.

From Seattle to the Rest of the World

Starbucks opened its first branch outside North America in 1996 in Tokyo, Japan and in 1998 opened their first location in the UK after acquiring and rebranding the Seattle Coffee Company. This was soon followed with restaurant openings in Lima, Peru in 2003, and in 2007 opened in Russia. Today the company has nearly 21,000 restaurants around the world in 62 countries. There are currently more than 13,000 Starbucks locations in the US, 989 in Japan, more than 800 in China, 800 in the UK and more than 500 in South Korea. The company also has hundreds of locations in Mexico, Germany, the Philippines, Thailand and other countries.

Since Starbucks was acquired by Schultz in 1987, the company has expanded at a very rapid pace to the point they’re averaging two new stores daily. Since its expansion began in the early 1980s, the company has turned in profits, except for a period in the late 1980s when it lost money as the business expanded into British Columbia and the Midwest. But by the time the time Starbucks opened in California in 1990, it had become very popular and trendy.

In 2010, Starbucks and Southern Sun Hotels South Africa reached an agreement whereby Starbucks would brew coffees in some of their South African hotels, and that same year saw the company open its first restaurant in El Salvador. Later that same year in December, Starbucks entered into a deal with Royal Caribbean International for the very first Starbucks at sea. Under this venture, the company was able to open a restaurant in the Allure of the Seas, the second largest cruise ship in the world.

Immediately the following year in 2011, Starbucks announced that they were teaming up with Tata Coffee, the largest coffee plantation company in Asia in an effort to bring the company to India. Their agreement was formalized in January 2012 with Tata and Starbucks having a 50-50 joint venture.  On October 19, 2012, its first store in Mumbai opened.

2012 also saw Starbucks open its first restaurant in San Jose Costa Rica as well as a store in Finland near the Helsinki-Vantaa airport. While the company is setting up locations in many countries it has hitherto not yet opened, the company also plans to expand its operations in China, and bring the stores to over 1500 by 2015.

Today Starbucks continues to innovate, and it doesn’t hesitate to use the latest technologies to expand its customer base. A good example of this is their new mobile app, which surveys show, is now used by 10% of customers to order store purchases. When you look at the history of Starbucks, it’s evident that innovation has always been key to its success, which is why to this day the company continues to release new and exciting products.

Leave a Reply