The local coffee shops serving coffee grown from different counties uses a transportation system for their global supply chain. Coffee is a profitable business while more coffee shops open up every year with 55,246 shopsprojected in the United States which is a growth of 1,260 more shops than 2015. The year 2015 had 1,303 more shops than the previous year (2014). The industry is still growing with more transportation needed to accomplish their global supply chain necessities. The coffee beans are grown in various countries. Many countries like Ethiopia and Kenya will grow the coffee beans from plants. These farmers will then pick the cherries from the tree and eventually peal the cherry off the seed or eventual coffee bean. These seeds are then dried out usually by the sun. These beans then go through a process called “milling the beans” where the beans are endocarped which removes the parchment layer from wet processed coffee. After the milled coffee beans, which are now called green beans after the milling process, are then shipped out using loading ships.
Sometimes these beans are shipped to brewers, other times they are shipped to be tested where people use a procedure called cupping to taste the coffee using a sample amount from the bags. The cupper will smell the aroma and sip the coffee after it passed the visual test. After this cupping procedure the beans are then shipped using all various shipping methods to roasters where the beans turn dark brown and have an aromatic smell. Caffeol is fragrant oil locked inside each bean and is released when the bean turns brown at around 400 degree inside the bean. The roasting is done at 550 degrees. The roasting process is usually done in the importing country due to the time table of roasted beans. Freshly roasted beans must reach the consumer as quickly as possible to stay fresh. Fresh beans release air when they are packaged, so the packaging needs a valve to release the air. When the beans are stale, they will not release any more air. This is one reason you do not want to buy coffee beans that have had the air sucked out of the packaging, it is basically showing they are stale beans. Only buy the coffee bean packaging that has air in the bag.
Starbucks is a company with world renown and was first established in 1971. In the last ten years Starbucks has tripled in annual revenue and earned $16.5 billion dollars in 2014 with a total of 21,366 stores. Starbucks is the second most valuable fast food brand in the world, second to McDonalds. What differentiates the company from its competitors is focus of speed and quality. Starbucks tries to get the customer their order in 3 minutes and 3-5 minutes when it’s busy. The equipment selected in each Starbucks store is at one of the highest quality pieces of equipment in the industry. Starbucks claims to have 87,000 different drink combinations and the barista can make each and every one of them. These specific steps translate to their brand and product value. Each store has high quality equipment and each store has a barista that can pour a perfect cappuccino and latte with the right amount of foam on top. The baristas are taken care of since Starbucks offers health insurance to their employees who work 20 hours a week or more costing $250 million dollars in 2009. This makes the baristas happy and enjoyable to speak to in the stores.
The product in each global store relates to the target market because each cup of coffee ordered can be very unique to the customer. The 87,000 different drink combinations helps Starbucks fit in each market. Some stores in various countries change the look of their logo a bit to fit the culture and beliefs of the country. Most logos show wavy hair while in Saudi Arabia, the lady on the logo is covered up. Some countries (not the USA) show the full picture of the lady who is holding her legs (fins) in the air like a naked mermaid with two fins which seems to be a turn off in America. The Starbucks logo changes depending on where they are in the world. Starbucks is continually growing each year and looking to expand their global presence.
Starbucks is a global coffee company; their corporation is based in Seattle Washington. The coffee Starbucks uses is definitely a variable cost along with the milk and syrup used in the cup prepared. The paper cup and heat sleeve are all variable costs for Starbucks. The prices of coffee beans vary depending on the time of year and quality of beans purchased. Milk can vary accordingly and variable costs depend on the amount milk syrups used in each cup of coffee.
The fixed costs of Starbucks will depend on the store location and the rent provided. Rent and equipment leases are a fixed cost. The rent may be different from one store to another, but once the rent and leases are establish the amount owed each month will be the same. The fixed cost fit help management analyze the overall costs.
Starbucks has several mixed costs in the corporation. Some costs can be salaries and wages which fluxgates depending on bonuses. However the wages and salaries are typically fixed, they fall in the mixed category when there are possible changes like the bonuses. Food sold at Starbucks can fall under mixed costs as well. The costs of goods change depending on demand and time of year.
The barista making and serving the coffee at Starbucks can represent step costs. If one barista serves 40 cups of coffee in one day the costs of the employee stays the same, but if more than 40 cups of coffee are needed to be made, then Starbucks will need to pay for another barista and showing more cost for the store. On a graph the step costs will look like steps on a stair case. More costs to produce more products.
Starbucks would be more likely to benefit from using a customer cost hierarchy for determining cost drivers. In customer hierarchy, each unit sold could be different depending on the coffee drink being made. However, for example if milk costs .0234 per ounce and a drink needs nine ounces, the cost for the milk would be $0.21. The coffee used at around $7.50 for a pound of beans worth thirty two double shots, the coffee costs for a single drink would cost $0.23. Let’s say the coffee ordered is caramel flavored and needs one and a half of syrup at $0.277 cents for the drink. The total food cost for the drink would be $0.72, but the drink must be poured into a cup with a lid and a sleeve to protect from being burnt at a cost up to an additional $0.20 cents bring the total costs of goods per cup of coffee at $0.92 cents. Each day an order level of each customer would be one coffee per day and a Starbucks store seeing 200 customers on average a day and costing the store $183.52 in goods. An average cup of coffee costs $3.50 which brings in $700 a day minus the costs of goods brings the total to $516.48. Say the barista is paid $15 an hour and serves 25 cups of coffee per hour. That would be an additional $0.60 cents per cup of coffee for a total of $1.52 per cup and $1.98 of profit.