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(dramatic music)
(liquid hissing)
- [Narrator] If you've ever
ordered something at Starbucks,
you've probably loaded one of these.
- Starbucks, between October and December
has had something like $3 billion of value
is loaded onto these cards.
I mean, that's a lot of money.
- [Narrator] So much money in fact,
that if Starbucks was a bank,
it would rank as the 385th
biggest in the country.
And it's money that Starbucks
gets to use upfront as revenue
before a single product is even purchased.
- Eventually it is a liability
if someone chooses to use it,
and you will find that
in lots of gift card programs,
they're plenty of people who never use it.
- [Narrator] So how important
is Starbucks' mobile app
and gift cards to its bottom line?
And what role does technology play
in its continued evolution?
This is the economics of Starbucks.
In 1971, the first Starbucks,
a small unassuming cafe
opened in Seattle's downtown.
Fast forward 50 years, and that
store is still in operation,
but Starbucks is a global coffee giant.
- Only McDonald's is bigger than Starbucks
when it comes to market caps.
So they are really a powerhouse
when it comes to really the
whole restaurant industry.
- [Narrator] In its
early years of operation
Starbucks expanded slowly
and only within Seattle.
It wasn't until 1987
when the original owners
sold the company to its
then marketing director,
Howard Schultz,
that the Starbucks that
we know today took root.
Schultz began expanding
Starbucks outside of the city
and introduced Americans to
what was then a little known
Italian drink, the espresso.
- They were really founded
on this coffee house culture
that they make each beverage
by hand according to order.
As Starbucks has grown,
that has gotten more complicated.
- [Narrator] Today, Starbucks
says they make more than
a 170,000 different varieties of drinks.
- These beverages can be very complex.
They can take a while.
They can take many different ingredients.
And so it's good for Starbucks.
And that these tend to be
higher price beverages,
but for workers, the baristas,
they can be very complicated.
- [Narrator] The company's
early investment in espresso
has transformed to many
different signature drinks
from the creation of the frappucino
to the launch with a pumpkin spice latte.
- Pumpkin spice latte, high five it.
- They really didn't know
that it would take off like it did,
but clearly it is formed
quite a phenomenon
all around the world really.
- We introduced pumpkin to
spice, us here, Starbucks.
- One additional thing
in Starbucks evolution is
cold beverages have
become much more important
to the company, whether
it's just an iced coffee
or a nitro iced coffee,
or all these cold foam and cold brewed.
Increasingly this is so
important to their revenue,
the company has gone through
periods where frappuccino sales
have softened, but they've
come up with more cold drinks
to keep people interested
and keep people ordering.
- [Narrator] In part due to
the company's Seattle founding
technology has played a large
role in the change dominance.
- A key moment of that was
the founding of its mobile app
in 2009, which was very early
for one of these kinds of apps.
And they really saw this
as a digital flywheel.
- At the end of 2021, mobile
orders accounted for nearly
a quarter of all Starbucks
transactions in the US.
Many of those purchased
through a virtual Starbucks gift card,
which was previously the only way
a customer could order on their phone.
Today, a little under one half
or 44% of all transactions
at Starbucks are done
with a Starbucks card.
In fact, so many Starbucks
customers use a Starbucks card
or the Starbucks mobile
app to purchase items
that Starbucks says it holds
about $2.4 billion in cash
that was uploaded by
customers to be used later.
That number exceeds the
deposits at many American banks.
- Starbucks also gets a
lot of data from that.
They own a lot of that data
in a way that many companies
don't because they have
created this whole ecosystem
where people are using the Starbucks app,
they're mobile ordering,
and they're hooked into that
Starbucks unique proprietary system.
- [Narrator] As mobile payments rise,
Starbucks' business
priorities have shifted.
Prior to the pandemic,
approximately 80% of US Starbucks
transactions were on the go,
either as drive-through or mobile order.
- Starbucks started in cities,
but really has spread
all around the country,
including the suburbs.
And a lot of that is through drive-thrus.
- [Narrator] These
alternate pickup options
are becoming increasingly important
to the company's bottom line.
- [Woman] Especially during the pandemic.
I mean, these stores have
been a lifeline to Starbucks
because they kept running and
people could easily queue up
and go and not have to
enter an actual cafe.
- [Narrator] Starbucks has long said that
"It remains committed to a set of values
established early in the
company's existence."
- Starbucks is very
committed to trying to create
a connection between its
baristas and its customers,
even in its drive-thru.
They talk about this on earnings calls
that there are these
customer connection scores.
They want to make sure that
everyone is feeling good
about their Starbucks experience,
which is getting increasingly challenging
when you're ordering through
a drive-thru or a mobile app.
You're trying to get in and out.
- [Narrator] Starbucks says,
"Those values also appear
in the manner in which
their stores are designed."
- The items you will find in the store,
they really choreograph that
down to where the basket
of water is placed into a store.
They want this all to feel very similar.
- [Narrator] Starbucks has long
touted its internal culture,
which it says is built
on a strong relationship
between management and employees.
- The workers at it's stores
are not called workers
or baristas they are called partners.
And this is very central
to the company's ideology.
Part of that is that all these partners
do get shares in the company,
it's called Beanstalk.
- [Narrator] That relationship
may look different
going forward for some
Starbucks locations.
After two of three Buffalo stores voted
in favor of unionization.
- [Narrator] Since then,
Starbucks has thrown
a huge amount of energy and
resources into this issue.
And executives have traveled
to Buffalo extensively
to meet with workers, to try
to understand their concerns
(indistinct) to the company.
They want to maintain
this direct relationship
with their workers, they
call unions an intermediary.
They do not want that
relationship to be severed.
But according to these workers,
they who support the union,
they want a more direct
relationship with the company.
- [Narrator] In a statement
to the "Wall Street Journal"
Starbucks said, "Starbucks's
success past, present,
and future is built on
how we partner together,
always with our mission
and values at our core.
From the beginning, we've
been clear in our belief
that we are better together as partners
without a union between us at Starbucks.
And that conviction has not changed."
- They are the world's
biggest coffee chain.
They are very dominant when
it comes to coffee sales,
and they are really synonymous
with the coffee house culture
in a lot of ways, but they
do face increasing pressures.
(upbeat music)
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