comparison Green Mountain Coffee with Starbucks Coffee

1. Specialty coffee industry
-Starbucks and Green Mountain Coffee
Jay Nam: Jay.nam@sunbeltnetwork.com

2. Starbucks
Before Now

3. Green Mountain Coffee
Before Now
Newman’s Own Tully’s
Keurig brewer
K-cups for Keurig
Timothy’s

4. Coffee facts (1)
= +
3 cups of coffee a day
per year
30 fully grown coffee
trees a year

5. Plus
Farmers’ labor

6. Coffee facts (2)
Fair Trade Coffee = $1.26 /LBS
One pound of ground coffee can
yield from 32 to 45 eight ounce of
cups of coffee
X 32 cups of coffee = $1.5 X 32 = $48
X 45 cups of coffee = $1.5 X 45 = $67.5
Starbucks Verona
Ground Coffee,
1 lb. Bag = $18.99 /lbs Source: Ask.com

7. Coffee facts (3)
Commodity - Grower 2 cents per cup
Goods - Manufacturer 5-25 cents per cup
Service – Corner Diner 50 cents -$1 per cup
Experience– Premium $1 - $4 per cup
Coffee Shop
Ultimate – Café Florian
Venice, Italy $5 - $15 per cup
Source: Experience economy,1999

8. Nature of business (1)
• Coffee production: $90-billion-a-year industry
• $ 10.8 billion : Combined revenue of the two
companies in specialty coffee industry
- Starbucks : $ 10.3 billion
- Green Mountain Coffee : $ 0.5 billion
• 25 million coffee farmers in the world and an
estimated 100 million people working in the
coffee industries in total

9. Nature of business (2)
• 76% of coffee is drunk at home, and 72% of
that is bought from a supermarket – (National
Coffee Association of America)
• The growth in the specialty coffee market is
attributable to its spread to fast-food
restaurants and convenience stores as well as
to the increased demand for specialty coffee
in the workplace.
• Consumers are insisting ethical sourcing and
aware of environmental effect of coffee. More
companies are conscious of those factors –
Coffee facts

10. Integrity- (1)Starbucks
• Starbucks seems to be conscious of ethics and
social responsibilities to its stakeholders
• Starbucks was the largest corporate contributor in
North America to C.A.R.E., humanitarian aid
programs for the Third World countries it
purchased its coffee supplies
• But, the company seems to comply minimum of
its duty as a socially responsible entity, judging
from some conflicts with Fair Trade Coffee by
using very tiny portion and advertising overly

11. Integrity- (2)Green Mountain Coffee
• Green Mountain Coffee has been focusing on the
duty of integrity and honesty to stakeholders and
suppliers when few people were conscious of the
practice of ethical management and sourcing
• From the beginning the company has been trying
to go beyond the regulated minimum of ethical
and environmental responsibility
• Green Mountain Coffee has been among the top
10 companies on Business Ethics’ list for four
years running.”(Business Ethics Magazine Lists
“100 Best Corporate Citizens”, 2006)

12. Governance role - Starbucks
• Governance issue in Starbucks seem not to be so
complicated as we have seen at example of GM.
• Howard Schultz focused more on dealing with
externalities, like resistance of local competitors
and debt control for management continuity than
the board
• The boards seems to have executed an auditing
role rather than a supervising role
• Even when Howard Schultz stepped down from
CEO for 8 years, he just supported CEO and did
not take the rein of the company before return

13. Governance role - Green Mountain
• Green Mountain Coffee also seems not to have
serious governance issue as Starbucks
• Bob Stiller has been President, CEO and Chairman
from 1981 till 2007. The board seems to be
playing the auditing role after Bob Stiller’s
stepping down
• Bob Stiller also dominantly focused on
externalities regarding environmental and social
responsibilities by establishing environmental
committee and partnering with a lot of farmers in
the coffee producing countries.

14. Governance roles
Effective power
Monitoring
Auditing Supervising
Efficient rules Externalities
Focused Broad View
Counseling Steering
Ineffective
Involved

15. Leadership style - Starbucks
• Howard Schultz, being hooked at the first
experience of Starbucks coffee, established his
vision and has been trying to execute it in reality
sine 1981
• Initiated extending health care benefits to part
time employees working at least 20 hours a
week, even though there were resistance from
board members who feared rising cost
• He encouraged employees and mainly generated
urgency issue from top, but shared information in
horizontal ways.

16. Leadership style – Green Mountain
Coffee
• From 1981,when Bob Stiller met Green Mountain
Coffee at ski resort and bought it, he spent about
30 years growing the coffeehouse into an
international coffee supplier
• He managed company with a role of chairman
because the business has been more recession-
proof with low urgency than Starbucks
• He is more conscious of social responsibility and
environmental agenda than Howard Schultz does

17. Leadership style
Employee closed
Top-down
Chairman Commander
Low Urgency High urgency
Deliberate Fast
Coach Catalyst
Employee open
Bottom-up

18. Organization mode - Starbucks
Divisional power through empowerment
1. US - 14,225 Stores
Company-operated stores(5,393), licensed
stores(8,832), food service accounts
2. International
Retail store licensing operation in more than 40
countries, food service account in Canada, UK
and Japan
3. Global Consumer Product Group(CPG)
Packaged coffee and tea, branded products in
3300 grocery & warehouse, 5500 international
accounts

19. Organization mode - Green Mountain
Coffee
Divisional power through empowerment
1. Green Mountain Coffee division
Whole bean and ground coffee, hot cocoa,
teas and coffees in K-cups, Keurig brewers
and other accessories, Newman’s Own
Organic products mainly in domestic
wholesales and retail market.
2. Keurig division
Premium single-cup brewing systems for
customers at home or away-from-home

20. Organizational Modes
Low Complexity
Controlled
Centralized roles Divisional power
Resource Scarcity Availability
Collaborative Entrepreneurial
Interconnected teams Network of entrepreneurs
High Complexity
Flexible

21. Business model - Starbucks
• In 2009 initiated a cost reduction program to
improve its operational efficiencies
• In 2010 completed the closure of nearly 1000
company-operated stores
• Enter the ready-to-drink coffee product in
Europe in January 2010
• Introduction of VIA coffee essence in Japan,
which successfully launched in the US
• Plan to sell wine and beer in retail stores

22. Business model - Green Mountain
Coffee
• Completed acquisition of Keurig in 2006
• In 2009, completed acquisition of Tully’s
coffee which had over 5,000 distributors
• Serial acquisitions expanded the Green
Mountain Coffee’s brand portfolio
• Agreement with McDonald’s USA to source,
roast and package Newman’s Own Organic
Blend coffee
• In 2009, Keurig entered into a licensing and
distribution agreement with Conair

23. Business Models
Keurig Wine & beer
Platform Efficiency
Multi brand Frappuccino
Process Efficiency Solutions Product Caramel
Innovation Macchiato
Differentiating Innovation
Volume Efficiency
Pioneering Innovation
Roasting Ready to
Capacity drink goods Organic Unique
coffee ambience

24. Conclusion (1)
• The two companies have started small and
developed into public companies by inspired
founders from the beginning.
• Starbucks seems to be more affected by changing
needs of customers and be exposed to market
volatility than Green Mountain Coffee which sells
coffee to wholesalers and offices.
• Green Mountain Coffee seems to be more faithful
to the spirit of foundation, emphasizing on social
responsibility and environmental consideration,
which Bob Stiller had conceived at the beginning.

25. Conclusion (2)
• There is a common dilemma to the company
experienced high growth rate. “In general, every
company that begins small and authentic
eventually finds it hard to retain that image as it
expands.” (Thompson, A. A. & Strickland, A. J.,
1999)
• As of 2010, Green Mountain Coffee seems to
have a more solid ground for right trajectory and
sustainable growth than Starbucks that exposed
to pressure of short–term profits for shareholders
and volatile economy than ever before.

26. Citation
• 1. Business Ethics Magazine Lists “100 Best Corporate Citizens” For 2006. (2006, June). Business Credit,
108, 53
• 2. “Green Mountain Coffee Roasters, Inc.” (2010). International Directory of Company Histories, Retrieved
from http://galenet.galegroup.com/servlet/BCRC
• 3. Kaczanowska, A. (2010, November). Coffee production in the US – 31192a. Retrieved from
• http://www.ibisworld.com/industryus/default.aspx?indid=272
• 4. Neville, M. G. (2008, Winter). Positive deviance on the ethical continuum: Green Mountain Coffee as a
case study in conscientious capitalism. Business & Society Review, 44, 555-576. doi:10.1111/j.1467-
8594.2008.00332.x
• 5. Rachael, L. (2001, June 21). Starbucks not playing fair. The Christchurch Press, pp. 9
• 6. Pine, B. J. & Gilmore, J. H. (1999). The experience economy: Work is theatre and every business a stage.
Boston: Harvard Business School Press.
• 7. Seieeni, R. (2008). The gort cloud: the invisible force powering today’s most visible green brands. White
River Junction, Vt: Chelsea Green Pub.
•
• 8. “Starbucks Corporation.” (2010). International Directory of Company Histories. Retrieved from
http://galenet.galegroup.com/servlet/BCRC
• 9. Starbucks Corporation company profile. (2010, Apr. 30). Retrieved from
http://www.nwmissouri.edu/Library/IPChecking.asp?http://search.ebscohost.com/login.aspx?direct=true
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