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Thursday, September 17, 1998 Published at 11:09 GMT 12:09 UK

Business: The Company File

Starbucks storms into UK

The American coffee invasion begins

Starbucks, the American coffee bar giant, has opened its first store in London.

The new store, based in the King's Road, Chelsea, is intended to be the first of 500 stores in Europe.

Howard Schultz, the chairman of Starbucks, told BBC News Online during a visit to London that he was aiming for 4000 stores worldwide.

"Every store opening brings us closer towards our goal of building an enduring global brand," he said.

[ image: Making coffee drinking a social occasion]
Making coffee drinking a social occasion
The company hopes to capitalise on the growing attraction of coffee houses in Britain, where customers pay up to 2 ($3) for a cappuccino or mocha latte.

The UK speciality coffee market has been growing rapidly, with chains like Coffee Republic and Costas springing up throughout metropolitan areas.

Taking over Seattle

Scott Svenson on why the recession won't hurt business
The company has begun its expansion by acquiring the Seattle Coffee Company, a UK-based chain of 64 shops run by two Americans, Scott and Ally Svenson.

They launched the company after moving from Seattle to London, and now stand to gain $20m (12.5m) from the sale.

Their shops will be rebranded by Starbucks over the next year, and the Svensons will continue to have management responsibility for UK operations.

Howard Behar, President of Starbucks Coffee International, told BBC News Online that taking account of local conditions was very important.

"We don't believe we are an American company, but an international brand," he said. "We hope to benefit from the pub culture in the UK to make Starbucks a natural meeting place for people."

The company says that the average Briton drinks five cups of tea or coffee a day, compared to one alcoholic drink.

Big in the USA

[ image: Will coffee stay in fashion?]
Will coffee stay in fashion?
Starbucks is big business in the US, as the largest retailer in the $5 billion a year luxury coffee business. In less than a decade the company has grown from a small group of coffee houses in the Pacific Northwest to a retail giant with a 25% market share.

The company already operates 1,600 stores in North America and has been opening new stores at the rate one a day- with 350 planned for this financial year.

It also operates franchises at most US airports, and in-store coffee bars at other retailers, like booksellers Barnes & Noble.

One quarter of its sales comes from selling coffee beans and coffee making equipment.

It has also been experimenting with other products, like coffee ice cream and a "frapucinno" cold drink.

The company launched its first international operations in Asia in 1996, and now has 30 stores in Japan and the Far East.

.Repositioning the coffee bean

[ image: The culture of the coffee bean]
The culture of the coffee bean
The company's strategy is to reposition coffee as a luxury good, comparable to a good wine.

It believes that just as in the US the taste for good wine had to be cultivated before the wine-growing business could expand, that developing a palate for fine coffee is essential for its own expansion.

It carries out its own buying and roasting operations to ensure quality.

The company places great emphasis on staff development and training, with share options even for its 25,000 part-time employees.

And it is has tried to foster a coffee house culture in its stores, sponsoring music groups and charity fundraising.


Callum Lumsden on the future of speciality coffee
But some observers believe that the expansion of luxury coffee market will be difficult to sustain if the UK economy goes into recession.

Callum Lumsden, who runs his own brand consultancy, says that only the stronger brands will survive.

And Starbucks may find it more difficult to expand into continental Europe, where coffee drinking is already a well-established habit.

Indeed the founder of Starbucks said he took his inspiration from the 200,000 coffee bars in Italy.

If the company succeeds in establishing a major foothold in Europe, it will indeed be the US equivalent of carrying coals to Newcastle.

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