Coffee and Starbucks

had enjoyed phenomenal growth and become one of the great retailing stories of recent history by making exceptional coffee drinks and selling dark-roasted coffee beans and coffee-making equipment that would allow customers to brew an exceptional cup of coffee at home. The Starbucks brand was regarded as one of the best known and most potent brand names in America and the company had firmly established itself as the dominant retailer, roaster, and brand of specialty coffee in North America. It already had over 1,500 stores in North America and the Pacific Rim and was opening new ones at a rate of more than one per day. Sales in fiscal year 1997 were a record $967 million and profits reached an all-time high of $57.4 million. The company's closest competitor had fewer than 300 retail locations. And since going public in 1992, Starbucks has seen its stock price increase nearly ninefold.
Exhibit 1 contains a summary of Starbucks key performance statistics for the 1992–97 period.
Company Background

Starbucks began in 1971 when three academics—English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker—opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle. The three partners shared a love of fine coffees and exotic teas and believed they could build a clientele in Seattle much like that which had already emerged in the San Francisco Bay area. Each invested $1,350 and borrowed another $5,000 from a bank to open the Pikes Place store. Baldwin, Siegel, and Bowker chose the name Starbucks in honor of Starbuck, the coffee-loving first mate in Herman Melville's Moby Dick(so company legend has it), and because they thought the name evoked the romance of the high seas and the seafaring tradition of the early coffee traders. The new company's logo, designed by an artist friend, was a two-tailed mermaid encircled by the store's name.
The inspiration for the Starbucks enterprise was a Dutch immigrant,