Recruitment Associates Starbucks Coffee Case Q: How many cups of coffee does Starbucks sell globally every day?

? There are 2 approaches to this question 1. Estimate based on supply (i.e. supply per outlet) 2. Estimate based on demand (i.e. consumer aspect) With all approaches, the number generated is not that important as long as it passes a reality-check (i.e. is not 1000 or 1B), estimates are reasonable and justified to some extent and the calculations are accurate. Approach 1 This should be done on the basis of a single outlet and then grossed up based on reasonable estimates of the number of stores Estimate the number of cups sold in one outlet Want to see some evidence of segmentation Starbucks doesnt just sell coffee, and it sells lots of different types of coffee Need to have a sensible estimate of opening hours Need to calculate the maximum possible sales given the average amount of time taken to produce and sell one cup, and the number of employees Need to think about the demand at various times of the day i.e. pre-work, lunch etc Need to think about the time allocated to selling coffee vs. the other products Estimate the number of outlets globally [Starbucks has ~3,500 stores globally and 171 stores in London]: This needs to be estimated from a reasonable starting point based on something that they know (e.g. London, Oxford, etc.) They need to think about whether Starbucks is in all countries of the world or not. There needs to be a sensible work up to the global number Approach 2

This should be done on the basis of consumer demand, and then a market share estimate. Once again it needs a segmentation of the market of coffee drinkers Estimate the proportion of the population in a reference location who drink coffee based on a reference point. Can think about population demographics age, wealth, city vs country etc., and how many cups are drunk in a day high drinkers vs. low drinkers. Many ways to segment this market! Estimate the proportion of coffee drinkers who buy a cup of coffee (i.e. make at home vs. make in the office vs. buy) Estimate what proportion of the potential market buy from Starbucks, i.e. what is its market share. Need to include direct competitors that are obvious as well as individual cafes and also restaurants. Then this needs to be grossed up to a global level based on their reference point Key Points They Need To Hit Hardest part of this is thinking about the global issue. Need to consider that Starbucks is a luxury product therefore income is a factor. Need to consider cultural issues e.g France and Italy are a nation of caf-goers, and the Japanese love all things convenient and American, etc. Key points business people, age, income, culture, Americanism, city vs country. Follow-on questions Q: If you were not in this room, how would you go about determining this number? Phone Starbucks Internet P&L Develop this aspect How would they use the P&L to calculate this number? Q: How many cups of coffee does a retail outlet need to sell in order to breakeven? They need to understand the concept of breakeven First course of action should be to determine the cost structure Key items Rent Wages Raw material Provide them with the figures

Need them to consider that they sell other products not just coffee and they need to think about the value breakdown and not the volume breakdown Get them to sanity check all outcomes Q: What are the pressures acting on a retail outlet Competitors Suppliers Seasonality New product launches