Starbucks recorded global record operating profit of £644.1m last year, but the picture in the UK is more difficult to grasp.
In the UK, Starbucks sales were down last year – apparently for the first time ever – as it closed unprofitable outlets. Starbucks Coffee Company (UK) filed accounts at Companies House for the year to 30 September 2013 showing revenue down to £399m, from £413m the previous year.
At the same time, Starbucks claims it did not suffer lost sales as a result of the tax avoidance row in 2012 – difficult to reconcile this with the visibly emptier outlets that could be seen for weeks if not months at the time. However, it is also true that customer numbers also visibly recovered remarkably quickly.
A Starbucks spokesman is quoted as saying: “The UK is our fastest-growing market in Europe. Gross profit is up 13 per cent and operating margin is up more than 22 per cent. The loss before tax fell by more than 30 per cent. We are on schedule to open 100 new stores this year and expect the business to continue to grow.”
With the UK showing pre-tax losses of £20.4 million, it’s clear either that Starbucks is operating far less efficiently in the UK than its competitors, or that it is continuing to make royalty or other charges that turn profit into loss. Either way, it continues to risk renewed public furores, despite making voluntary tax payments.
Worldwide success
The controversy over UK results overshadows the fact that Starbucks has built a truly effective, successful and formidable global organisation that is expanding rapidly.
It continues to invest heavily in both its supply chain and its staff at all levels, as well as in its tea brand Teavana, but its payment and loyalty programmes may be the most critical – and successful – elements of all.
The Starbucks Card programme
The Starbucks Card now delivers one third of transactions in the USA and Canada, and no fewer than 10 million Starbucks customers actively use the mobile app, twice as many as just one year previously.
The rewards programme is driving increased incremental revenue through personalised offers and communications, and Starbucks is looking at ways to exploit social and mobile platforms – with mobile ordering to be introduced in 2014.
Already proving their worth as a leading innovator, it will be worth watching Starbucks’ digital developments closely in the coming years.