Starbucks gets a shot from the improving UK economy

Group says that first quarter sales growth is best for two years

Two years ago Starbucks had lost its way, but after the return of the group's founder, Howard Schultz, to the chief executive's chair, and a round of heavy cost-cutting measures and store closures, the ubiquitous coffee chain is back on its feet.

A blend of an overly ambitious expansion plan, too much attention paid to merchandise and the "brutal" economic crisis had put the company in trouble. But eight quarters of disappointing results later, Starbucks yesterday reported its first rise in global like-for-like sales for two years.

In the UK, Starbucks said a strong Christmas on the high street helped like-for-like sales jump by 3.9 per cent in the three months to the end of December. In the final six weeks of the period, sales were up by 6 per cent.

Mr Schultz yesterday hailed an improving economic situation and a "leaner and stronger" Starbucks. Speaking to journalists, and without touching any of his own coffee, preferring instead to stick to mineral water, he said: "We have now come through what was a cataclysmic and brutal economic crisis to deliver a record quarter. From our point of view, continued innovation, the successful enhancement of the consumer experience and a transformed, more-efficient cost structure have brought Starbucks to a significant milestone – a return to profitable growth."

The recovery of the UK economy was stronger than he had imagined, Mr Schultz admitted. Last February he drew the ire of the Business Secretary Lord Mandelson after telling US television that he was worried about consumer confidence in Britain. "The concern for us is western Europe and specifically the UK. The UK is in a spiral," he said, prompting Lord Mandelson to ask: "Why should I have that guy running down the country? Who the fuck is he?"

The fact that he seemingly overestimated the problems in the UK economy does not worry Mr Schultz – he now reckons that 2010 will be stronger than last year, saying that consumers are more optimistic than they have been for some time. In Britain, that is true despite VAT returning to 17.5 per cent, the spectre of rising taxes and the likely end of the Bank of England's £200bn stimulus package.

But it is not just better economic fortunes in Britain and elsewhere that has helped the company.

Starbucks has closed branches in areas Mr Schultz describes as not being in a "demographic sweet spot," by which he means poorer locations. In the UK, the company has also started sourcing all its espresso coffee, which it uses in its lattes and cappuccinos, from Fairtrade. It is also launching new store formats, which it says is in response to customer feedback.

Starbucks' UK managing director Darcy Willson-Rymer adds that 30 new shops will open this year, including more in other stores. This is despite the group being forced to close a number of outlets when the book chain Borders collapsed at the end of last year.

The clothing chain New Look has agreed to take on five of Borders' old shops and Starbucks cafés will continue to refresh its customers, Mr Willson-Rymer confirmed yesterday.

Mr Shultz argues that that there is still plenty left to do. Easyjet recently began selling Starbucks' coffee to its passengers, a move that he describes as an opportunity to tap new channels of distribution. Similarly the introduction of range of instant coffee sachets and a cheaper coffee designed to lure customers back are also on their way to a café near you this year.

All froth: Starbucks backtracks on quality claim

Starbucks was yesterday forced to withdraw a claim that it has been barred from describing a new product as "instant coffee" on the insistence of the Food Standards Agency (FSA), because, the company said, it was of superior quality to alternatives in the market.

In fact, it was revealed that no discussion took place at all between the company and the FSA regarding the launch of Starbucks' Via coffee sachets, which are expected to go on sale in the UK later this year after impressive sales in the US. During a press conference, at which the chairman and chief executive, Howard Schultz, was present, Starbucks had openly claimed that it had been expressly told not to describe its new product as instant coffee because the quality of the coffee was better than other products, including brands such as Kenco and Nescafé. The claim was repeated by the company later in the day.

The FSA said that the company was free to call the product instant coffee if it wished to. "We have not spoken to Starbucks at all about this product," it said.

A press officer for Starbucks later admitted that the claim was false. "There is actually no issue with the FSA regarding Via, or its quality," he said. "Lawyers for Starbucks had advised that because Via contains both real and instant coffee, describing the product as instant coffee could be considered to be misleading."


Starbucks' UK first quarter sales growth.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power