How Do You Grow Your Brand Beyond Your Home Market?: The Starbucks Approach to International Expansion

Posted on Oct 23, 2016

Having seen Forbes’ latest post on the World’s Most Powerful Brands of 2016, I thought it would be a fun project to pick one of these brands and see how its business is doing globally.This exercise could be useful for Starbucks investors and even more so for other business owners who are looking for effective ways to grow their business within their own countries and internationally.

Where Starbucks Rank in the Most Powerful Brands List

Here’s a chart of the Top 10 including Starbucks (#45).

It's impressive to see how Starbucks managed to stay relevant for the past 40 years. Now, its brand is valued at $11.9 billion, a 14% lift from last year's, and is a name known to people worldwide, especially in the 73 countries where they have stores (shown below).


How does Starbucks Expand Beyond its Home Market?


Only 2 years after opening Il Giornale, offering brewed coffee and espresso beverages made from Starbucks coffee beans, Howard Schultz acquired Starbucks assets and in the same year (1987) opened stores in Chicago and in Vancouver, Canada. A decade later, Starbucks opened its first stores outside of Americas through licensing agreements. The chart above shows the company's market development and penetration strategy. Within the US, most stores are company-owned while outside its home market, it leverages on foreign partners' capital and local knowledge by forging licensing, joint venture and franchise agreements.

In-Store Sales Growth by Region


The positive sales growth rate seems to support Starbucks' expansion model.  In the past 4 years, Starbucks enjoyed a 6.7%  average sales growth rate. Applying a regional segmentation on the data reveals that the trend is not the same for all 3 regions where Starbucks operates. It's noticeable that in Europe, Middle East, & Africa (EMEA) region, sales growth is much slower even compared to the US market, which one could easily argue is a very mature and saturated market. The performance of stores in China & Asia Pacific (CAP) demonstrates that emerging markets continue to be the brand’s main source of growth.

Are Customers Buying More?


Curious to find out if sales growth was driven by customers buying more or by price increases I looked at store transaction volume trends by region in the same time frame. Surprisingly, in-store  transactions volume in the Americas region seems to be picking up.  Again, the same trend is seen in China & Asia Pacific, but at a much higher rate. Customers are buying more in-stores in CAP. Adding more stores in the region can be a good way to capitalize on this momentum. However, further performance analysis on a per country basis  should be done to help in identifying specific locations for expansion.

Are Customers Willing to Pay More?


Another interesting finding is the difference between CAP and America's growth rate drivers. Volume drives the faster sales revenue growth in China & Asia Pacific as shown by a higher percentage change in transaction volume versus very low change in store ticket rate(the amount spent in each transaction). For the Americas region, it is an increase in the ticket rate that is driving sales revenue growth. Furthermore, customers in this area remain willing to pay more for their coffee without decreasing their overall consumption volume. It would be interesting to find out what the price ceiling is for each region.

Key Takeaways

For Businesses in General:
  • Take the risk and expand your business outside your own borders. Be bold in considering whether to "lend" your brand name to foreign investors as a means for you to enter an international market by leveraging your brand with their capital and local market knowledge.
For Starbucks:
  • Explore expansion in China & Asia Pacific to take advantage of current high demand to further strengthen Starbucks' position in this region.
  • Find a balance in managing sales volume and sales price by region to get the optimum level of sales growth. In China & Asia Pacific, Starbucks implemented a slower rate of price increase, benefitting from a faster rate of transaction volume. While in the Americas, it relied more on price increases to drive sales growth.

Next Steps

  • Perform product performance analysis. Gather data from "My Starbucks Idea" website through web scraping.
  • Examine impact of customer loyalty programs by market


About Author

Chris Valle

Chris is a Digital Strategy Manager and Marketer who, for 10 years, has been combining her data-driven insights and customer-centric marketing strategies to grow her clients' business. Her forte is monetizing digital and mobile channels to drive international...
View all posts by Chris Valle >

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Leave a Comment

Hanna October 27, 2016
Good to know! Well written.

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