Collapse and Revival of Starbucks
- Abhas Gupta
- Jun 1, 2023
- 2 min read
The Journey of Starbucks: From peak success to insolvency to comeback
With its 51-year-old legacy, Starbucks has millions of customers ready to pay thrice as much for that average cup of coffee and has a current valuation of ~ $13 Bn. However, this success is a result of various comebacks, initiatives, and tough decisions.
#1: Siren for coffee
#2: Side-Tracked vision and collapse
#3: Revival
#1: SIREN FOR COFFEE
Starting with selling coffee beans and supplies, Starbucks came up with the concept of expresso bars in 1980's and saw an explosive success. By 2000, Starbucks became one of the most beloved brands and won awards such as "Best Business", "Most Admired Company", "100 Best Corporate Citizens" and so on.
#2: Side-tracked vision and collapse
But the growth spurt was hampered by some big challenges. In 2003, Starbucks ventured into music, books, and even movies as "Starbucks Entertainment” leading it to lose its focus.
Back-to-back losses from the Entertainment division and losing customers as they are switching to cheaper options gave Starbucks a big financial crunch.
By 2008, without the leadership on coffee, sales plummeted, and the stock price fell from $37 to $7.83. Starbucks had to cut 18,000 jobs and close 977 stores. Adding global recession to the ongoing financial meltdown, Starbucks was 7 months far from insolvency.
#3: Revival
CEO Howard Schultz came to action and took the collapse as an awakening to re-focus back on coffee and provide a customer experience.
Some Major Initiatives:
Customer engagement via social media and mobile apps much before its competitors.
Adding more items to the menu along with coffee
Freebies and customer involvement through campaigns and promotions JnJ started with demonstrative ads by Jnj that scaled the adoption of band-aids.
Since 2010, Starbucks saw double-digit growth for five straight years. Also, the stock price increased 10-fold over that period. And now Starbucks offers the perfect moment of escape between home and work or, in these days, one of the best places to go and do remote work.
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