Brew

Starbucks turns 50: the past, present, and future of the world's largest coffee chain

Wednesday, October 13, 2021 by Robinhood Snacks | Disclosures
Go oat, brew cold [Adam Hester/The Image Bank via Getty Images]

Go oat, brew cold Adam Hester/The Image Bank via Getty Images

A tall vanilla latte walks into a Porsche… Midlife crisis, Starbucks edition. The chain is celebrating its 50th birthday. Today, it's a corporate giant worth $131B that accounts for 40% of US coffeehouses. In honor of the big 50, we're taking a look back:

  • 1971: The first Starbucks opened in Seattle’s Pike Place Market. But it only sold beans and equipment for DIY brews.
  • 1982: Howard Schultz, a sales rep for a Starbs supplier, became Starbucks' marketing chief. He believed it could become “synonymous with great coffee.”
  • 1987: Schultz ended up buying Starbucks, with a vision of turning it into a nationwide café chain inspired by Milan coffee bars.
  • 1991: A year after turning its first profit, Starbs started a national rollout. LA stores were instant hits, with celebs like Paula Abdul rolling up for nonfat lattes.

Cold brew, hot growth... Today Starbucks has over 33K stores around the globe, up from 1K in 1996 and double what it had in 2010. Most Americans had never experienced "café culture" pre-Starbs. Now the US has 37K+ coffeehouses — Starbs accounts for a whopping ~15K. Since going public in 1992, Starbucks stock is up more than 300X, and has doubled over the past five years. It's the world's second most valuable restaurant brand, trailing only McDonald's. Two recent areas of focus:

  • Digital: Starbs has doubled down on store pickup, delivery, and drive-thru. Last quarter, more than 25% of transactions came from app mobile orders, and rewards members accounted for more than half of US sales.
  • Product line up: Since Starbs acquired the Frappuccino in 1994, it's expanded from hot coffee to fancy foods and premium cold bevs, including egg-white bites and Mango Dragonfruit Refreshers.
THE TAKEAWAY

"Premiumization" could be a frothy growth opp... Starbs has upped the dividend it pays to investors since 2010, when it first intro'd dividends. But to keep growing profit in the face of hot competition, Starbs might need more premiumization — fancy-fied products it can charge extra for. That's why it’s pushing premium treats like Beyond Meat breakfast sammies and Oatly iced coffees. We'll see if the premium push is still working when Starbucks reports earnings this month.