Starbucks SWOT Analysis (2021)

Starbucks is one of the largest foodservice companies in the world and is one of the most recognizable brands across the globe. It has become synonymous with high-end coffee-based drinks and an affluent lifestyle. It experienced explosive growth over recent decades and has continued to solidify its place in the market through its premium selection of beverages, marketing savvy, and high customer loyalty.

Here we look into the unique strengths, weaknesses, opportunities, and threats for this company.

Strengths

1. Strong brand correlation and public image
Starbucks is one of the most well-loved consumer brands on the market. With nearly countless stores across the United States and lines around the corner for most drive-thrus, customers are fiercely loyal to this chain and continue to contribute to its longevity. In many ways, it was responsible for making coffee a “premium” product instead of a common commodity. Furthermore, it continues to maintain a strong brand presence through favorite products and aggressive PR efforts.

Starbucks is one of the top five most admired companies in the world. (Fortune)

2. Strong financial performance over time
All of this consumer buzz has led to powerful sales figures year over year, which has allowed Starbucks to explode in the number and density of stores in its key markets. Starbucks would often open thousands of stores in a given year, saturating the market and pushing out competition. Even emerging markets like China have seen aggressive expansion over the past few years.

Starbucks operated over 31,000 stores worldwide. (Statista)

3. Global supply chain
A high volume of business requires an equally high volume of product, and Starbucks has mastered the art of supply chain management. It sources its coffee beans from regions across the globe, ensuring that consumer demand can always be met.

Starbucks sources its coffee beans from 30 countries across the globe, including countries in Central and South America, Asia, and the Pacific Islands. (Business Insider)

4. Acquisitions
Smart corporate acquisitions can reinforce an already solid company, and Starbucks is no exception. Its purchase of existing brands like Seattle’s Best Coffee, Teavana, Tazo, and Ethos Water are just a few of the ways it has brought existing brands into the corporate fold in a seamless way, providing additional revenue streams and offerings for other product classes in its stores.

Starbucks held $19.22 billion in total assets. (Statista)

5. Diverse product offerings
For such a basic food item as coffee, Starbucks has created dozens of proprietary beverage options that are tightly bound up with the overall brand, such as the ever-popular pumpkin spice latte. Branded merchandise further allows consumers to promote their loyalty to the company, and moving into supermarket goods allowed consumers to bring their favorite blends to their homes or offices instead of relying solely on the restaurant.

Starbucks’ pumpkin spice latte has sold over 350 million cups. (Mashable)

6. Treating employees well
The company is known for treating its employees well, focusing on respect and well-being. It has garnered industry accolades for its treatment of employees and has often made headlines for its quest for higher pay for its frontline workers.

Starbucks is one of the top-regarded companies. (Forbes)

Weaknesses

1. Volatile supply costs
Starbucks’ prices are directly tied to the cost of its coffee beans. Since it touts itself as a purveyor of fine coffee products, it presumably purchases higher-quality beans, and when any increase occurs in procuring the raw coffee beans themselves, that cost must be passed on to the consumer in some way. Continued increases in coffee prices may result in even higher prices at the register, which could turn some customers away.

Coffee bean prices have changed dramatically over time, with a 164% price increase from 2007 to 2011, and an overall 20% increase from 2007 to 2021. (Business Insider)

2. High product prices
Even a regular cup of coffee is far more expensive than at competing restaurants, and there are dozens of drinks and options for customization that add up. Additionally, brewing coffee from home or at the office is much cheaper for those who see coffee as a staple instead of a luxury. Beating this perception and justifying high prices can be difficult and is a hurdle that Starbucks must jump over every day.

Starbucks products cost an average of 38% more than products sold by competitors. (Business Insider)

3. Product can be easily imitated
Despite its close association with coffee, the product itself is considered a staple in many parts of the world. Coffee is consumed nearly everywhere, with dozens of large chains and thousands of smaller restaurants serving coffee as part of its menu in addition to consumers purchasing directly from a supermarket.

In this way, Starbucks needs to work harder to promote itself as the preferred choice over options that may cost far less or not appeal to those who simply want a “normal” cup without customizations.

Starbucks has held two-thirds of the market share for specialty coffeehouses. (Forbes)

4. Unhealthy choices
Many drinks offered by Starbucks are high in calories and sugars, making them dangerously unhealthy if consumed on a frequent basis. The simple alternative for consumers would be to select an option with fewer additives, but the company has made its reputation on flavored and sweetened products that appeal to consumers’ taste buds. Providing healthier alternatives and modifications to its recipes will be key in sidestepping this problem.

A Starbucks cinnamon roll Frappuccino contains 510 calories and 85 grams of sugar. (Business Insider)

5. Product recalls
As with any food and beverage company, product recalls can be devastating if they are not handled swiftly and properly. Selling a product containing foreign contaminants or allergens can not only bring harm to its customers, but also result in a PR nightmare. Error prevention and correcting mistakes are key action steps to avoid further dings to its brand reputation.

Starbucks recalled two food products in 2016 due to allergen contamination. (CNN)

6. Avoidance of European taxes
Starbucks has faced criticism for its failure to pay product taxes in some European markets. This caused a massive PR nightmare and could have caused lasting damage to its brand reputation. While no lasting repercussions came that affected the company at large, other worse missteps could cost the company significant social and financial capital.

Starbucks reportedly paid no taxes on £1.2 billion worth of sales in the United Kingdom.

Opportunities

1. Expansion into developing markets
Starbucks already has a very strong foothold in America and is growing more stable in China every year. It can use these successes as a model for expanding into other diverse markets, building on lessons learned and connecting with other populations to build an even stronger worldwide brand reputation. By becoming the first or the largest player in key markets, it can continue its amazing track record of expansion.

Starbucks is available in 83 worldwide markets. (Investopedia)

2. Further product diversification
Starbucks is well known for certain products, but the brand can do even better by exploring other avenues for specialty items. It can look into other beverage options that further customize the base coffee product or even look into completely different products like teas, sodas, and infused waters. Its food menu could also be expanded to allow for greater consumer choice.

Starbucks has a 78% customer satisfaction rating. (Statista)

3. Partnerships with other companies and brands
By co-branding some products with those from other companies, or cross-promoting other brands in its stores, Starbucks can take advantage of the benefits of a partnership with other established corporations. When this kind of collaboration is done well, it reinforces public perception of both brands and can increase sales for both parties.

Starbuck has partnered with Nestle on a line of coffee creamer products sold at commercial retailers. (CNN)

4. Diving into the latest coffee trends
Starbucks has stayed on top of consumer trends for the most part, but catering to the ever-changing demands of its customer base can be a difficult task. Robust research, the consistent gathering of consumer feedback, and rapid development of new products can help the company stay on top of the latest trends and tastes as a way to capture new customers.

Starbucks launched cold brew coffee to its consumers. (Mashed)

5. Price differentiation
Most products offered at Starbucks are priced fairly high, which can deter some consumers and force them to look for less expensive options. As it develops new premium-level products, it could also look at more cost-effective offerings that could appeal to more frugal or cost-conscious drinkers, shoring up what should be a foundational market segment.

Starbucks brought in $26.5 billion in worldwide revenue. (Statista)

6. Coffee delivery service
Food delivery services like GrubHub and Uber Eats have become increasingly popular in recent years, especially since the COVID-19 pandemic. Starbucks could take advantage of this growing consumer trend by partnering with companies like this to deliver its products or launch its own in-house delivery service to further cater to consumer preferences.

Revenues for online food delivery services are expected to reach $97 billion in the next couple of years. (Statista)

Threats

1. Issues with its supply chain (cost, strikes)
Any changes to the supply chain can cause major issues down the line – failed coffee bean crops, significant weather events, even employee strikes at third-party providers. These issues make the company beholden to even the slightest fluctuations anywhere along the line, from growing the beans to brewing them in the restaurant. Starbucks should find ways to minimize potential shortfalls wherever possible.

Coffee prices are expected to rise due to weather-related crop shortages. (Sprudge)

2. Easily imitated
As previously discussed, coffee can be found nearly everywhere, and many of the baseline menu offerings can be copied at a much lower cost. If Starbucks wants to own the market for “basic” coffee beverages, it must overcome the perception of simpler drinks as choices that cannot be easily imitated, either through highlighting the original beans or the brewing process.

Retail sales for coffee in the United States is $5.18 billion. (Statista)

3. Lower-cost coffee restaurant chains
Other chains that offer breakfast foods have coffee on their menus, and prices for a regular cup of coffee are much lower than can be found at Starbucks. Whether due to lower profit margins or a minor drop in quality, these chains present a major threat to a company that thrives on more expensive sales.

McDonald’s coffee products are far less expensive, and can be made with many of the same options as Starbucks. (Delishably)

4. Small local coffee houses
On the other end of the spectrum are smaller, locally-owned coffee shops that promote themselves as cornerstones of the community, or who promote a “shop local” atmosphere or a more welcoming social environment. The presence of a larger restaurant chain pushing out a small business can leave a bad taste in consumers’ mouths, and Starbucks should be sensitive to this market segment that can have an even more loyal following by some community members.

The United States has lost 7.3% of its coffee and tea shops. (Bloomberg)

5. After-effects of COVID-19
The COVID-19 pandemic changed spending and buying habits for the general public in drastic ways, and some effects will still be felt years from now. Restaurants were forced to operate at severely limited customer capacity, or close altogether, which led to steep drop-offs in revenue. Every company must deal with the economic fallout from the pandemic, and Starbucks will be no exception.

Almost 17% of all U.S. restaurants closed partially or permanently in 2020 due to the COVID-19 pandemic. (National Restaurant Association)

6. Global recession
Other national and international recessions will have lasting impacts on companies like Starbucks, which may suffer from its self-designed “high-end” brand image. If consumers choose to forego certain luxuries, an expensive cup of coffee may be one of the first to go. Starbucks could diversify its pricing options and offer more economical choices to prevent this kind of loss in its consumer base.

The global economy is expected to shrink by 5.2%. (World Bank)

A strong brand reputation, unique product offerings, and a solid financial base have positioned Starbucks for lasting success, and the company still has room to grow and expand even further. By mitigating supply chain issues, finding ways to keep costs down for its customers, and developing new avenues for sales and development, it can continue to shore up its role as a consumer favorite for decades to come.