Starbucks has announced its 2002 results and growth plans for 2003. Strong 2002 results and high hopes for 2003 were key messages to stockholders at Starbucks’ recent AGM. Through full use of modern technology, innovative rewards programs and old-fashioned physical expansion, Starbucks looks set for further growth despite current economic and political instabilities.
Starbucks’ annual general meetings are usually glitzy affairs, and this year was no exception. Part of the exuberance is because Starbucks has had steady growth since its IPO ten years ago, with the stock price rising at an average of 25% each year. At this year’s meeting, chairman Howard Schultz announced 2002 financial results of US$3.3bn in sales and $215m in profits. CEO Orin Smith mentioned the company is expecting to post revenues of $3.9bn in fiscal year 2003. Early indicators support Smith’s hopes – Starbucks posted its first ever $1bn quarter in January 2003.
Neither the war in Iraq, economic uncertainty, nor consistent criticisms from environmental groups are causing Starbucks to falter. Boycotts of American products across Europe have not yet had significant impact on American businesses, although it is possible that this is only the beginning. Whether they will truly gather steam remains to be seen.
Regarding consumer economic cutbacks, the 2002 results have shown that consumers still need coffee and either regard a Starbucks visit as a vital part of their day or fundamental to their concept of self-rewarding. To satisfy and maintain loyalty of these consumers, Starbucks will introduce a “next generation” rewards program later this year, whereby spending on a new Starbucks’ credit card will earn store credit on a combined credit/stored-value card. This scheme is backed by partners Visa USA and Bank One and will be the first of its kind.
Other plans include 1,200 new stores worldwide, more drive-thru locations, new products for summer 2003 and increased focus on leveraging additional opportunities in distribution channels, whether in foodservice, grocery, licensed stores or through business alliances.
If Starbucks’ claims that the market for coffee is not yet nearly saturated are true, then Starbucks is well positioned to make the most of the coffee buzz – achieving, if not surpassing, growth targets for 2003.
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