Starbucks

Starbucks

Type	Public (NASDAQ: SBUX)
Founded	In 1971 across from Pike Place Market in Seattle, Washington
Founder(s)	Zev Siegl, Jerry Baldwin and Gordon Bowker
Headquarters	Seattle, Washington, USA
Key people	Howard Schultz, Chairman, President and CEO Martin Coles, President, Starbucks International Troy Alstead, Chief Financial Officer Stephen Gillett, Chief Information Officer
Industry	Restaurants Retail Coffee and Tea Retail Beverages Entertainment
Products	Whole Bean Coffee Boxed Tea Made-to-order beverages Bottled beverages Baked Goods Merchandise Frappuccino beverages Smoothies
Services	Coffee
Revenue	▲ US$9.411 billion (2007)
Operating income	▲ US$1.053 billion (2007)
Net income	▲ US$672.64 million (2007)
Total assets	US$5.343 billion (2007)
Total equity	US$2.284 billion (2007)
Employees	172,000 (2008)¹
Subsidiaries	Starbucks Coffee Company Tazo Tea Company Seattle's Best Coffee Torrefazione Italia Hear Music Ethos Water
Website	Starbucks.com

Starbucks Corporation (NASDAQ: SBUX) is an international coffee and coffeehouse chain based in Seattle, Washington, USA. Starbucks is the largest coffeehouse company in the world,² with 15,012 stores in 44 countries.³ Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also sold at grocery stores.

From Starbucks' founding in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. Domestic growth has since slowed, although the company continues to expand in foreign markets and will open a net of 900 new stores outside of the U.S. in 2009.⁴ The first location outside of the United States and Canada was established in 1990s, and they now constitute almost one third of Starbucks' stores.⁵

By late March 2008, Starbucks had more than 16,226 stores worldwide, including 11,434 stores located in the United States. On July 1, 2008, the company announced it was closing 600 under-performing company-owned stores and cutting U.S. expansion plans amid growing economic uncertainty.⁶⁷ On July 29, 2008, Starbucks also cut almost 1,000 non-retail jobs as part of its bid to re-energize the brand and boost its profit. Of the new cuts, 550 of the positions are layoffs and the rest are unfilled jobs.⁸ These closings and layoffs have effectively ended the company’s period of prolific growth and expansion that began in the mid-1990s.

Starbucks store ownership

As of October 2007, Starbucks had 10,200 company-owned outlets worldwide: 6,893 of them in the United States and 1,722 in other countries and U.S. territories. In addition, the company has 6,506 joint-venture and licensed outlets, 3,891 of them in the United States and 2,615 in other countries and U.S. territories.^{citation needed} These joint ventures most notably include Barnes & Noble bookstores, Target Corporation retail centers, and Safeway Inc. grocery stores. This brings the total locations (as of November 2007) to 15,011 worldwide.³ Starbucks can be found in many popular grocery chains in the U.S., Canada and the UK, as well as in many airports.

There is growing concern, however, that many licensed stores are hurting the image of the Starbucks brand. Employees at these stores are not employees of Starbucks, but rather the locale in which they're located. Customers complain that these stores do not meet expectations by citing poor customer service, sub-standard drink quality, and an unfriendly atmosphere. ⁹ Since most customers do not differentiate between a licensed and corporate location, Starbucks takes these complaints seriously. In April 2008, Starbucks closed 45 licensed locations in Nevada and Northern California, and a Starbucks spokeswoman did not deny plans to end license relationships at other sites in the future. ¹⁰

History

The original Starbucks was opened in Pike Place Market in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker. The three were inspired by Alfred Peet, whom they knew personally, to open their first store in Pike Place Market to sell high-quality coffee beans and equipment. The original Starbucks location was at 2000 Western Avenue from 1971-1976. That store then moved to 1912 Pike Place; it is still open. During their first year of operation, they purchased green coffee beans from Peet's, then began buying directly from growers.

Entrepreneur Howard Schultz joined the company in 1983, and, after a trip to Milan, Italy, advised that the company sell coffee and espresso drinks as well as beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home. Certain that there was much money to be made selling drinks to on-the-go Americans, Schultz started the Il Giornale coffee bar chain in 1985.

In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's (Baldwin still works there today). In 1987, they sold the Starbucks chain to Schultz's Il Giornale, which rebranded the Il Giornale outlets as Starbucks and quickly began to expand. Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois, that same year. At the time of its initial public offering on the stock market in 1992, Starbucks had grown to 165 outlets.

The first Starbucks location outside of North America opened in Tokyo in 1996. Starbucks entered the U.K. market in 1998 with the acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all its stores as Starbucks. By November 2005, London had more outlets than Manhattan,¹¹ a sign of Starbucks becoming an international brand.

In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia.¹² These restaurants were soon "outed" as Starbucks establishments and converted to Starbucks cafes.

In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks-operated locations worldwide to more than 6,400. On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company-owned locations of the Oregon-based Coffee People chain. Starbucks has converted the Diedrich Coffee and Coffee People locations to Starbucks as of summer 2007, although the Portland airport Coffee People locations were excluded from the sale. ¹³¹⁴

Starbucks' chairman, Howard Schultz, has talked about making sure growth does not dilute the company's culture ¹⁵ and the common goal of the company's leadership to act like a small company.

In January 2008, Chairman Howard Schultz resumed his roles as President and Chief Executive Officer after an eight year hiatus, and replaced Jim Donald, who took those posts in 2005 but decided to leave the company in late 2007. Schultz's principal challenge is to restore what he calls the "distinctive Starbucks experience" in the face of rapid expansion. Analysts believe that Schultz must determine how to contend with higher materials prices and enhanced competition from lower-price fast food chains, including McDonald's and Dunkin' Donuts. On January 31, 2008, Schultz announced that Starbucks would discontinue its warm breakfast sandwich products, originally scheduled to launch nationwide in 2008, in order to refocus the brand on all things coffee.

As Starbucks often tests new products as part of its ongoing innovation and transformation, Starbucks started testing selling an 8 oz "short" brewed coffee for $1 and giving free refills on all brewed coffee. This test was limited to the greater Seattle market, with no plans for expansion to national markets. Per an internal email this program was cancelled in late March 2008.

In March 2008, Schultz made several announcements to Starbucks shareholders. Shultz introduced Starbucks' "state of the art espresso system",¹⁶ the Thermoplan AG manufactured Mastrena, which will replace the Verismo 801. Starbucks also announced that the company hopes to enter the energy drink market and introduce a customer reward program. Pre-ground beans will also no longer be used, in order that the additional grinding of all whole bean coffee will "bring aroma, romance and theater" to American stores. ¹⁷ The company also announced the recent acquisition of The Coffee Equipment Company,¹⁶ the manufacturer of the Clover Brewing System. They are currently test marketing this unique "fresh-pressed" coffee system at six Starbucks locations, three in Seattle, and three in Boston.¹⁸

In May 2008, a rewards program was initiated for registered users of the Starbucks Card. Previously simply a gift card, the Starbucks Card has undergone a transition into a rewards card, similar to cards offered by other retail outlets. Perks and rewards offered to registered users are 2 hours of free Wi-Fi Internet service per day, free refills of brewed coffee, a free tall beverage with the purchase of 1 lb. of whole bean coffee, as well as free milk (e.g. soy) and syrup drink modifiers. ¹⁹ This is a new and aggressive approach by Starbucks to create and strengthen customer loyalty.

Products

Starbucks serves a variety of beverages including brewed coffee, hot chocolate, espresso and espresso-based drinks, teas, Frappuccinos and, in some branches, fruit smoothies known as Vivanno Nourishing Blends. Also available are bottled beverages, sometimes including Naked Juice, Ethos water, San Pellegrino, Izze soda, and Horizon Organic Milk.

Cappuccinos, and all other beverages with steamed-milk and/or foam can be customized to order with pumps of flavored syrups, reasonable temperature changes and additional espresso shots. Starbucks also offers blended beverages, such as the "Frappuccino Blended Coffee", a flavored drink of coffee, milk, and sugar blended with ice. However, coffee is optional in the Frappuccinos. The name is a portmanteau of frappé and cappuccino and was introduced in 1995. Starbucks markets seasonal beverages as well, such as the Pumpkin Spice Latte (September to January) and Eggnog Latte (November to January). There is also seasonal brewed coffee, like the "Christmas/Holiday Blend" of whole bean coffee.

Starbucks supplements the beverage offerings with pastries, ready-to-eat salads and sandwiches, coffee merchandise, at-home brewing equipment, and whole bean coffee.

Starbucks sells a variety of ready-to-eat and drink products that are kosher, but due to business hours and sandwich products a Starbucks store cannot be certified 'kosher' according to Jewish law.²⁰

Starbucks does not franchise with individuals within North America but does enter into licensing arrangements with some companies.²¹ One example is of Starbucks store locations in airports, most of which are operated by HMSHost, owned by the Italian Autogrill group. Other licensed locations include grocery stores, theme parks, major food services corporations, university campuses and hospitals. In addition, Starbucks has partnered with Magic Johnson's Johnson Development Corporation to form Urban Coffee Opportunities, which opens retail locations in low-income urban areas.²²

Staffing

There are usually from two to six partners (as Starbucks employees are called), all of them trained baristas, in each retail store at any one time. Black aprons labeled "Coffee Master" are worn by employees who have completed the Coffee Master course, which educates employees in not only the tasting, but also growing regions, roasting, and purchasing (including fair trade practices) aspects of the coffee industry.

In the United States and Canada Starbucks offers full benefits such as health, dental, and vision insurance, as well as stock-option grants and 401(k)/RRSP with matching to employees who work an average of 20 hours per week over a three month period. Each employee can receive a box of tea or a pound (0.45kg) of coffee each week if they choose. Many of these benefits, including the weekly free coffee or tea, continue in the case of temporary disability or familial leave. Employees also enjoy a 20% discount on all regular and sale-price merchandise. Beginning May 2008, all Starbucks employees receive complimentary wifi Internet access at any U.S. Starbucks through the new Starbucks/AT&T partnership. As of 2008, Starbucks was ranked by Fortune magazine as the 7th best company to work for in the United States, up from 16th in 2007. In 2006 it was ranked 29th and in 2005 it was 11th.²³ Starbucks was also voted as one of the top ten UK workplaces by the Financial Times in 2007.

In February 2008, Howard Schultz announced that he would eliminate over 600 positions within the Starbucks Corporation (the majority of which were unfilled "openings" in the company which were taken off the job market). Schultz said that the company needed restructuring, and "unfortunately, we have not been organized in a manner that allowed us to have a laser focus on the customer."²⁴ “I am responsible for ensuring the success of the company for the long term, which means that difficult decisions must be made. Personally, I continue to struggle with the outcome, because I realize how painful it will be for some partners” said Schultz.²⁵

"The Third Place"

Starbucks envisions local outlets as a "third place" (besides home and work) to spend time, and store design is intended to achieve this. The café section of the store is often outfitted with stuffed chairs and tables with hard-backed chairs. Most stores provide free electricity for customers, and many stores also provide wireless Internet access (provided in American stores by AT&T,²⁶ in Canadian stores by Bell Mobility,²⁷ in New Zealand outlets by Telecom NZ,²⁸, T-Mobile in the UK, Germany, Austria & Switzerland, in Mexico by Telmex and in Australia by Telstra).

The company operates a non-smoking policy at almost all of its outlets, despite predictions that this would never succeed in markets such as Germany, which used to have few restrictions on smoking. This has changed in 2007 with many German states issuing smoking bans for restaurants and bars. Outlets in Vienna and Mexico City, which have smoking rooms separated by double doors from the coffee shop itself, and a smoking room upstairs in the Largo do Senado, Macau, branch are the closest the company has come to making exceptions. Starbucks generally does not prohibit smoking in outside seating areas, unless required by local codes.

According to the company, the smoking ban is to ensure that the coffee aroma is not adulterated. The company asks its employees to refrain from wearing strong perfumes for similar reasons.²⁹ The aroma issue was also mentioned when the company announced it would stop serving hot breakfast sandwiches in early 2008, although in the end the sandwiches were retained in less-odorous versions.

Howard Schultz has said, "We're in the business of human connection and humanity, creating communities in a third place between home and work."

Employee benefits

Starbucks is #7 on Fortune Magazine's "100 Best Companies To Work For" for 2008. ³⁰ One reason for this is that Starbucks is one of the few companies to offer "full-time" benefits to part-time partners. As long as a partner is paid for at least 240 hours each quarter (quarters range anywhere from 12-14 weeks), the partner is eligible for benefits. This is roughly 18.5 hours per week. Benefits include full medical, dental, and vision insurance for the partner and any applicable family members, as well as very inexpensive supplemental life insurance and disability insurance. Premiums vary widely by region, but a partner covering himself/herself usually pays $20-$35 per paycheck for the full health insurance package.

Stock benefits offered are a 401(k) retirement plan, a stock investment plan where partners can use paycheck deductions to buy Starbucks stock at a discount, and yearly granted stock options to all eligible partners. Other benefits include a tuition reimbursement program, adoption assistance, and an Employee Assistance Program, which supports all partners in need. After the first six months of employment, part-time partners also receive paid vacation that accrues based on the amount worked per week. Based on the partner's average weekly hours, this averages to about 2 weeks of paid vacation per year. Plus, all partners can receive discounts on anything from cell phone service to auto insurance through the PerksCard program. This is all in addition to partners' receiving one free pound of coffee per week. ³¹

International operations

Twenty-nine percent of all Starbucks stores are now outside the United States.³²

On July 29, 2008, Starbucks announced that 61 of its 84 Australian stores would be closing, with the company refocusing its business in the three main capital cities of Sydney, Melbourne, and Brisbane, and withdrawing from Tasmania, South Australia, and Australian Capital Territory.³⁵ Starbucks spokespersons claim the closures are unrelated to other recent closures in the United States, while commentators suggested that in a country with a rich coffee culture, Starbucks had failed to understand the Australian market and struggled to compete.³⁶

Starbucks plans to settle in Algeria in 2009 through Starbucks France. It is planned to open its first coffee in Algiers in the new shopping center Bab Ezzouar. Starbucks supports an expansion of more than 30 cafes in Algerian territory before 2012.

Intellectual property

Starbucks U.S. Brands, LLC, is a Starbucks-owned company that currently holds and owns the property rights to approximately 120 Starbucks Coffee Company patents and trademarks. It is located at 2525 Starbucks Way in Minden, Nevada.³⁷

Name

The company is named in part after Starbuck, Captain Ahab's first mate in the book Moby-Dick, as well as a turn-of-the-century mining camp (Starbo or Storbo) on Mount Rainier. According to Howard Schultz's book Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, the name of the company was derived from Moby-Dick, although not in as direct a fashion as many assume. Gordon Bowker liked the name "Pequod" (the ship in the novel), but his then creative partner Terry Heckler responded, "No one's going to drink a cup of Pee-quod!" Heckler suggested "Starbo." Brainstorming with these two ideas resulted in the company being named for the Pequod's first mate, Starbuck.³⁸

Logo

The logo is an image of a "twin-tailed siren" (the siren of Greek mythology).⁴⁰ The logo has been significantly streamlined over the years. In the first version, which gave the impression of an authentic 15th century European woodcut, the Starbucks siren was topless and had a fully visible double fish tail. The image also had a rough visual texture. In the second version, which was used from 1987-92, her breasts were covered by her flowing hair, but her navel was still visible, and the fish tail was cropped slightly. In the current version, used since 1992, her navel and breasts are not visible at all, and only vestiges remain of the fish tails. The original "woodcut" logo can still be seen on the Starbucks store in Seattle's Pike Place Market, and on both the House Blend and Decaf House Blend packaging.

At the beginning of September 2006 and then again in Spring 2008, Starbucks temporarily reintroduced its original brown logo on paper hot drink cups. Starbucks has stated that this was done to show the company's heritage from the Pacific Northwest and to celebrate 35 years of business. The vintage logo sparked some controversy due in part to the siren's bare breasts,⁴¹ but the temporary switch garnered little attention from the media.

Parodies and infringements

In 2000, San Francisco cartoonist Kieron Dwyer was sued by Starbucks for copyright and trademark infringement after creating a parody of its siren logo and putting it on coffee mugs, t-shirts, and stickers that he sold on his website and at comic book conventions. Dwyer felt that since his work was a parody it was protected by his right to free speech under U.S. law. The judge agreed that Dwyer's work was a parody and thus enjoyed constitutional protection; however, he was forbidden from financially "profiting" from using a "confusingly similar" image of the Starbucks siren logo. Dwyer is currently allowed to display the image as an expression of free speech, but he can no longer sell it.⁴²

In 2003, Starbucks successfully sued a Shanghai competitor in China for trademark infringement, because that chain used a green-and-white logo with a similar sounding Chinese name.⁴³

Also in 2003, Starbucks sent a cease-and-desist letter to "HaidaBucks Coffee House" in Masset, British Columbia, Canada. The store was owned by a group of young Haida men, commonly referred to as "bucks." After facing criticism, Starbucks dropped its demand after HaidaBucks dropped "coffee house" from its name.⁴⁴

In 2005 Starbucks lost a trademark infringement case against a smaller coffee vendor in South Korea that operates coffee stations under the name and style Starpreya. The company, Elpreya, says Starpreya is named after the Norse goddess, Freja, with the letters of that name changed to ease pronunciation by Koreans. The court rejected the Seattle-based retailer's claim that the logo of Starpreya is too similar to the famous Starbucks logo.⁴⁵

In 2008, Starbucks disputed the copyright application for Seattle’s Rat City Rollergirls logo after the paperwork was filed with the U.S. Patent and Trademark Office.⁴⁶ The corporation claimed the roller derby league’s logo, by Port Orchard, Washington artist Krysztof Nemeth,⁴⁷ was too similar to Starbucks’. Starbucks requested an extension to further examine the issue and possibly issue a complaint, which was granted by the Trademark Office. The July 16, 2008 deadline passed without action by the corporation.⁴⁸

Environmental record

In 1999, Starbucks started "Grounds for your Garden" to make their business more environment friendly. "Grounds for your Garden" is a year round program that gives leftover coffee grounds to anyone requesting it for composting. Although not all stores and regions participate, customers can request and rally their local Starbucks to begin the practice. In 2004, Starbucks made another contribution to improving the environment by reducing the size of their paper napkins and reducing the size of their store garbage bags. In 2004 alone they reduced over 1.8 million pounds of solid waste.⁴⁹The U.S. Food and Drug Administration granted the first-ever approval to use recycled content in food packaging for Starbucks coffee cups. In 2005 the National Recycling Coalition Recycling Works Award went to Starbucks because of their major contributions to the environment.⁵⁰Coffee and Farmer Equity (C.A.F.E) practices guidelines that are economically beneficial. Starbucks gets all of their coffee beans from farms; this basically ensures that farmers are not negatively affecting the environment while producing coffee beans for Starbucks.⁵¹ On a different note, environmentalists argue that Starbucks is not doing all they can to make it the most environment friendly place it can be. "Dr. Allen Hershkowitz, a senior scientist at the Natural Resources Defense Council, says that Starbucks claimed they were using only 10 percent recycled material partly because the recycled material costs more."⁵²

In 2008, Starbucks was ranked #15 on the U.S. Environmental Protection Agency's list of Top 25 Green Power Partners for purchases of renewable energy.⁵³

In October 2008, The UK newspaper The Sun reported that Starbucks was wasting 23.4 million litres of water a day by leaving a tap constantly running for rinsing utensils in a 'dipper well' in each of its stores worldwide.⁵⁴

Criticism and controversy

Several activist groups maintain websites criticizing the company's fair-trade policies, labor relations, and environmental impact, and hold it as a prime example of U.S. cultural and economic imperialism. Several Starbucks locations were vandalized during the WTO meeting held in Seattle in late 1999. No organization claimed responsibility for the vandalism.

The Starbucks location in the former imperial palace in Beijing closed in July 2007. The coffee shop had been a source of ongoing controversy since its opening in 2000 with protesters objecting that the presence of the American chain in this location "was trampling on Chinese culture".⁵⁵⁵⁶⁵⁷⁵⁸

Anti-competitive tactics

Some of the methods Starbucks has used to expand and maintain their dominant market position include buying out competitors' leases, intentionally operating at a loss, and clustering several locations in a small geographical area (i.e., saturating the market), have been labeled anti-competitive by critics.⁵⁹ For example, Starbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company, but then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Critics claimed this was an unfair attempt to drive out small, independent competitors, who could not afford to pay inflated prices for premium real estate.⁶⁰

Labor disputes

According to a Starbucks Union press release, since then, the union membership has begun expanding to Chicago and Maryland in addition to New York City where the movement originated.⁶² On March 7, 2006, the IWW and Starbucks agreed to a National Labor Relations Board settlement in which three Starbucks workers were granted almost US$2,000 in back wages and two fired employees were offered reinstatement.⁶³⁶⁴⁶⁵ According to the Starbucks Union, on November 24, 2006, IWW members picketed Starbucks locations in more than 50 cities around the world in countries including Australia, Canada, Germany, and the UK, as well as U.S. cities including New York, Chicago, Minneapolis and San Francisco,⁶⁶ to protest the firing of five Starbucks Workers Union organizers by Starbucks and to demand their reinstatement.

Some Starbucks baristas in Canada,⁶⁷ Australia and New Zealand,⁶⁸ and the United States⁶⁹ belong to a variety of unions. In 2005, Starbucks paid out US$165,000 to eight employees at its Kent, Washington, roasting plant to settle charges that they had been retaliated against for being pro-union. At the time, the plant workers were represented by the IUOE. Starbucks admitted no wrongdoing in the settlement.⁶¹

A Starbucks strike occurred in Auckland, New Zealand, on November 23, 2005.⁶⁸ Organized by Unite Union, workers sought secure hours, a minimum wage of NZ$12 an hour, and the abolition of youth rates. The company settled with the Union in 2006, resulting in pay increases, increased security of hours, and an improvement in youth rates.⁷⁰

According to Starbucks Chairman Howard Schulz, "If they had faith in me and my motives, they wouldn't need a union."⁷¹ According to The Seattle Times, "The International Union of Operating Engineers Local 286 had trouble with Starbucks at its Kent roasting plant, where the union no longer represents workers".⁶¹

In March 2008, Starbucks was ordered to pay baristas over US$100 million in back tips in a Californian class action lawsuit launched by baristas alleging that granting shift-supervisors a portion of tips violates state labor laws. The Company plans to appeal. Similarly, an 18 year-old barista in Chestnut Hill, MA has just filed another suit with regards to the tipping policy. Massachusetts law also states that managers may not get a cut of tips. ⁷²⁷³ A similar lawsuit was also filed in Minnesota on March 27th, 2008. ⁷⁴

Coffee bean market

Of the approximately 136,000 tonnes (300 million pounds) of coffee Starbucks purchased in 2006, about 6 percent was certified as fair trade.⁷⁶

According to Starbucks, they purchased 2,180 tonnes (4.8 million pounds) of Certified Fair Trade coffee in fiscal year 2004 and 5,220 tonnes (11.5 million pounds) in 2005. They have become the largest buyer of Certified Fair Trade coffee in North America (10% of the global market). Transfair USA,⁷⁷ the only third-party certifier of Fair Trade Certified coffee in the United States, has noted the impact Starbucks has made in the area of Fair Trade and coffee farmer's lives by saying:

Groups such as Global Exchange are calling for Starbucks to further increase its sales of fair trade coffees. However, fair trade certification can cost US$2,500 to US$10,000, based on the size of the producer group and length of time the inspections take, and many growers are unwilling or unable to pay for certification.⁷⁸

Beyond Fair Trade Certification, Starbucks argues that it pays above market prices for all of its coffee. According to the company, in 2004 it paid on average $1.42 per pound ($2.64kg) for high-quality coffee beans.⁷⁹ This is in comparison to commodity prices which were as low as $0.50–$0.60 in 2003–2004.⁸⁰

Ethos water controversy

Ethos, a brand of bottled water acquired by Starbucks in 2005, is sold at locations throughout North America. Ethos bottles feature prominent labeling stating "helping children get clean water", referring to the fact that $.05 from each $1.80 bottle sold ($.10 per unit in Canada) is used to fund clean water projects in under-developed areas. Although sales of Ethos water have raised over $4,000,000 for clean water efforts, the brand is not a charity. Critics have argued that the claim on the label misleads consumers into thinking that Ethos is primarily a charitable organization, when it is actually a for-profit Starbucks brand and the vast majority of the sale price (over 94%) does not support clean-water projects.⁸¹ ⁸² The founders of Ethos have stated that the brand is intended to raise awareness of third-world clean water issues and provide socially responsible consumers with an opportunity to support the cause by choosing Ethos over other brands.⁸³ Starbucks has since redesigned the American version of the Ethos water bottles, stating the amount of money donated per bottle in the description.

Brighton store opens in breach of planning regulations

In May 2008, a branch of Starbucks was completed in Kemptown on St. James's Street, Brighton, England, despite having being refused permission by the local planning authority, Brighton and Hove City Council. They claimed there were too many coffee shops already present on the street.⁸⁴⁸⁵ Demonstrations continue to be held, with protesters organizing themselves using the social networking website Facebook.⁸⁶ Starbucks has appealed the decision, with Brighton and Hove council monitoring the situation.⁸⁷

Other ventures

Starbucks entered the music industry in 1999 with the acquisition of Hear Music, and the film industry in 2006 with the creation of Starbucks Entertainment. Starbucks Entertainment was one of the producers of the 2006 film Akeelah and the Bee. Retail stores heavily advertised the film before its release.

Hear Music is the brand name of Starbucks' retail music concept. Hear Music began as a catalog company in 1990 and was purchased by Starbucks in 1999. Nearly three years later, in 2002, they produced a Starbucks opera album, featuring artists such as Luciano Pavarotti.

Partnership with Apple

Starbucks has agreed to a partnership with Apple to collaborate on selling music as part of the coffeehouse experience. In October 2006, Apple added a Starbucks Entertainment area to the iTunes Store, selling similar music that appeared in Starbucks stores. In September 2007 Apple announced that there would be wireless communication between Apple and Starbucks. Through the AT&T Wi-Fi, a paywall is opened up to allow any individual connecting to AT&T wifi access to the iTunes Store (regardless of whether he or she is an AT&T subscriber). The partnership is primarily targeted at iPhone, iPod Touch, and Macbook users (although anyone with access to iTunes can take advantage of it). In addition, the iTunes Store will automatically detect the current and last 10 songs playing in a Starbucks and offer users connected to the store's wireless network the opportunity to download the tracks. This feature has been rolled out in Seattle, New York City, and the San Francisco Bay Area, and will slowly be offered in limited markets during 2007-2008.⁸⁸ During the fall of 2007, Starbucks also began to sell digital downloads of certain albums through iTunes. The buyer would buy the download at Starbucks, and enter the code on the download card at the iTunes Store, and then the entire album would immediately start downloading. From October 2 to November 7, 2007, Starbucks gave away 37 different songs for free download through iTunes as part of the "Song of the Day" promotion. Each day, baristas would give out download cards for a particular song which could be redeemed on iTunes. Currently, every Tuesday, a new "Pick of the Week" download card is available at Starbucks for a free song download, similar to its previous "Song of the Day."

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