By bringing chic Euro coffee culture to the strip-mall, Starbucks has done more than merely sell a product: this retailing giant has ushered in a new lifestyle. Starbucks is the leading gourmet coffee dealer in the U.S., serving nearly 10 million customers each week in over 2,800 stores. Named after the first-mate in Herman Melville's Moby Dick (who never actually drinks coffee in the novel), Starbucks was founded in 1971 by three Seattle coffee lovers. Since the late 1980s, the company has succeeded through a carefully planned expansion strategy, due in part to CEO Howard Schultz, who joined the company in 1982. Rather than put a single store in every market, Starbucks has chosen its markets carefully and saturated them. The company plans to continue the pattern, aiming to eventually operate 20,000 stores worldwide. As chairman and chief global strategist, Schultz will continue to aid the company in its expansion plans, but announced his retirment as the company's CEO in mid-2000.

What's in a name?

Starbucks is also trying to capitalize on its name recognition by entering into new markets; it currently sells bottled versions of its coffee drinks, including its flagship Frappucino, in a partnership with PepsiCo. Starbucks is also cashing in on its variety of coffee flavored ice creams, made in conjunction with Dreyers. In addition, the company has signed an agreement with United Airlines under which Starbucks is the coffee served on most flights.

An Asian presence

Speaking of travel, Starbucks is on the move. The company began its expansion into China in 1999 and quickly gained a strong presence in Beijing. Now, with strongholds in Seoul, Hong Kong, and Shanghai as well, Starbucks hopes to have 500 stores in the Pacific Rim by 2003, in addition to another 500 in Europe. The company still has a ways to go, currently holding a little over 250 stores throughout Asia, but customers seem to be responsive. Coffee may never take the place of tea in the region, but right now the market is making room for both hot beverages.

Morale boosting

The company is bent on boosting employee morale and enthusiasm. The Starbucks Support Center, located in the Starbucks Coffee International headquarters in Seattle, Washington, works hard to improve the company's teamwork and sense of mission. At this office, Starbucks' employees routinely begin meetings with coffee tasting. The Seattle corporate conference rooms resemble "contemporary European cafes," reports one insider. Associates are invited to recline on sofas, sip lattes, and speak easily with their "partners" and colleagues. Not only that, but Starbucks' benefits include full medical insurance to even the spouses of part-time employees working more than 20 hours a week. No wonder Starbucks was named one of Fortune's "100 Best Companies to Work For in America" for three consecutive years.

Partnerships and subsidies

In 1998, Kraft Foods agreed to market and distribute Starbucks coffee beans to more than 25,000 grocery stores in the United States. With $16.7 billion in annual sales, Kraft is the largest packaged-foods company in North America and the second largest in the world, behind Nestle. Starbucks chairman Howard Schultz called the agreement with Kraft one of the milestones in his company's history.

Meanwhile, a Starbucks' subsidiary, Circadia, is trying to gain a foothold in the cyber-caffeine industry. Mixing coffee house charm with powerful Web kiosks and 36-inch computer displays for presentations, Circadia has been called a futuristic Starbucks. The company denies this comparison, however. "The Internet is what the world is today," proclaimed concept manager Gail DiSantis in a 1999 announcement. "So we just added those (connections) after everything was done. We didn't go out to create an Internet cafe, on any level." DiSantis continues, "We are a separate corporation, wholly owned by Starbucks. But we are not a Starbucks. We are Circadia."