Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the coffee industry. However, analyzing Starbucks is a measure all its own. This once primary café for coffee lovers has exploded far beyond its Italian café theme expanding into areas such as the soft drink industry, retail coffee bean sales, ice-cream and music.
Soft drink consumption has a market share of 46.8% (within the nonalcoholic drink industry) with the tea and coffee sector maintaining an 11.8% market share. However, within the specialty coffee industry Starbucks bolsters a market share of 16%. Since 1998 sales through U.S. coffeehouses have increase approximately 77% reaching $6.9 billion in 2003. Starbucks re-creation of an authentic Italian coffee bar culture, its focus on top quality, fresh-roasted, whole bean coffee and educating its customers in appreciating the quality of specialty coffees are just a few of its differentiating factors.
Starbucks' competitive forces were and remain strong. Howard Schultz was strategic and persistent in his mission to establish Starbucks as the most recognized and respected brand in the world. In doing so, he pursued a unique purchasing strategy. He established Starbucks as a major contributor to the sustainability of coffee growers while helping to conserve the environment. He also established three to five year contracts with his suppliers at predictable prices.
In 2004 the number of coffeehouses exceeded 17,000 with 40% being chains of more then ten units. Primary factors driving this growth included the perception that coffeehouses served superior coffee, an interest in the wide variety of flavors, blends and drinks offered, as ...