STARBUCKS

1. STARBUCKS BS3 Eng Ann Chu Ines Furtmayr Paz Nachón Luc Pivette

2. Starbucks’ business Starbucks’ products and clients Why did Starbucks come to France Do Starbucks values fit the French culture? Constraints in France Adaptation to France Key Constraint Costs Key Benefit Numbers Essential Advice Executive Overview

3. Starbucks Coffee France SAS • JV between Starbucks Coffee Company and Grupo Vips (Spain) • First Shop opened on January 16th, 2004 • Starbucks purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, and coffee-related accessories and equipment -- primarily through its company-operated retail stores • Starbucks Corporation is the leading retailer, roaster and brand of specialty coffee in the world • Consolidated net revenues of $5,3 Billion (increase of 30% compared to fiscal 2003), Net earnings for fiscal 2004 increased 46 % to $392 million from $268 million for fiscal 2003. • French sales are unavailable

4. Starbucks Products • Starbucks sells mainly rich-brewed coffees • Coffee beans cannot be cultivated in France (due to weather & geographic conditions) • Roasting is done in 4 places (management decision) : • Kent (Washington DC) • York (Pennsylvania) • Carson Valley (Nevada) • Amsterdam (Netherlands) • The Amsterdam site supplies all EMEA (Europe, Middle East and Africa) markets. Delivery of products in under 24 hours • No products produced in France • Retailing is done in France

5. Starbucks Products • Starbucks does not see itself in the coffee business, but rather in the “people business selling coffee.” • More than the product itself, Starbucks offers a complete experience, a social moment: -product -environment -atmosphere -Wi-Fi • Product strategy in France: begin with the core assortment of products, and later move to the full assortment as it is found in the United States. • Minimal concessions made to product offering in France: • No recipe change. • The only change made to product offering is the name of drink sizes: “petit, moyen, grand venti” in France, vs. “short, tall, grande, venti” in the United States.

6. Starbucks's clients • Starbucks clients are people under 50 • Clientele varies between locations (as do opening hours, etc.): the store in La Défenseis open only during business hours. • Starbucks stays close to its clients by using the comment cards, listening to expectations and recommendations In May 2004, Starbucks did an internal survey in 3 Paris locations: over 75% of customers were French, which was a pleasant surprise.

7. Why Starbucks came to France • Starbucks aims and claims to be the leading retailer, roaster and brand of specialty coffee in the world and has a progressive approach to its international growth • 1996 : Japan, Hawaii, Singapore • 1998 : UK • 2001 : Switzerland, Austria, Spain • 2002 : Germany, Greece • 2003 : Turkey, Cyprus • France was a key target location since French people appreciate good food and have a distinct “coffee culture”. • France is considered a very important market, so it was critical to find the appropriate JV partner. • Starbucks found this partner in Grupo Vips, one of the leading Spanish groups in food retail, with whom they already had a working relationship in Spain.

8. Starbucks values • Starbucks’ values are summarized in the 6 guidelines which form the company’s mission statement: 1)Provide a great work environment and treat each other with respect and dignity. 2)Embrace diversity as an essential component in the way we do business. 3)Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4)Develop enthusiastically satisfied customers all of the time. 5)Contribute positively to our communities and our environment. 6)Recognize that profitability is essential to our future success. • In France, as elsewhere, Starbucks selects staff who adhere to these values. For example, the company uses group interviews to identify team players. • The company values resonate with the hired French partners. • To instill the company spirit, all managers work in the stores one day a year to find what the work is really like.

9. Constraints in France • Principal constraints foreseen before coming to France were : • The slowness of the administration • The difficulty of the HR process • The “specificity” or the “exception” of the French in terms of expectation and taste which resulted in several debates regarding the assortment to offer and the required adaptation • The administrative complexity was discovered afterwards • The most important constraint turned out to be the administrative complexity (eg. Authorizations required in order to open a retail store) • These constraints differed from the other locations in that the number of documents as well as the time frame required to obtain them is much more important in France. • As a result of this complexity, the opening of several stores was delayed but this did not cause adverse consequences to other subsidiaries

10. Adaptation to France • Little adaptation has been made by Starbucks in its people management system : • Get a local adaptation to the law and the tools • Put in place a safeguard from Starbucks within the JV for 3 years • All the remaining aspects were identical to the international development: • Recruitment/Selection (Group interviews) • Compensation • Management Development (promotion from within) • Workforce Planning (according to the development of the business) • Performance Appraisal • Motivation • Job Design, Job Assignment • Communication Policies • Training

11. Key Constraint Costs • Most specific key costs to coming to France are the same as operating in other locations. • Exceptions to this include: • Labor model challenge – eg. being in a mall which is open only 6 days a week when the rent is 7 days a week. Costs are fixed but can only leverage 6 days a week. • Paying cost: wages are higher in France than in other countries. • 35-hour working week

12. Key Benefit Numbers • What are the key benefits of being in France? • Flexibility is the top key benefit of being in France. There is a lot of evolution in the laws or the collective labor agreement, which allows much more flexibility than apparent at first glance. • After only one year, figures are better than in Spain where Starbucks is profitable • 73% of the customers were French which was beyond expectation where a higher number of foreigners was expected • A good surprise: business “to go” is more important than predicted, and expected to develop fast. • Market potential: growth potential in France is huge. It is a “coffee culture,” where people already love and understand the product.

13. Essential Advice • Advice to a company in this sector who was thinking of coming to France would be : “Go back to your roots” - do not try to reinvent the concepts that made the business successful in the first place. If the product is well made, it will be liked in France. • Adaptation while in France : “Learn as much as possible about the administration” – each country has its own laws, and France is particularly complex from the point of view of administration.

14. We Thank • Barbara Le Marrec, Vice-President Operations 26 Avenue de l’Opéra, 75001, PARIS blemarrec@starbucks.fr Tel : +33(0) 1 44 86 09 43 • David Lamy, HR Director 26 Avenue de l’Opéra, 75001, PARIS dlamy@starbucks.fr • Álvaro Salafranca Grupo Vips Calle Edison, 4 28006, MADRID asalafranca@grupovips.com

15. Bibliography • Dossier de presse Décembre 2004 • Starbucks mission Statement • Environmental mission Statement

16. Our Team • Eng Ann Chu, #70 Résidence Expansiel, 1 rue de la Libération, 78350 Jouy en Josas • Ines Furtmayr, #191 Résidence Expansiel, 1 rue de la Libération, 78350 Jouy en Josas • Paz Nachón, #175 Résidence Expansiel, 1 rue de la Libération, 78350 Jouy en Josas • Luc Pivette, #160 Résidence Expansiel, 1 rue de la Libération, 78350 Jouy en Josas