Starbucks Corporation (NASDAQ: SBUX) is now a household name, synonymous with the word 'coffee'. Thirty years ago, however, this was not the case. Starbucks went public in 1992 with its initial public offering (IPO) at $17 per share. As of October 2019, that initial IPO price, adjusted for stock splits and special dividends, was just 34 cents per share! Since its IPO, Starbucks stock has split 2:1 a total of six times. The company began paying a dividend in 2010 and has increased it annually since 2011.

But that is misleading. Early investors have certainly been rewarded handsomely for sticking with Starbucks. If you had invested $1,000 on June 26,1992, the day Starbucks went public at $17 per share, your investment would be worth around $329,455 as of October 25, 2019. This represents a compound annual growth rate (CAGR) of 23.6% (excluding dividends).

Key Takeaways

  • Starbucks has grown to be a globally dominant player in the coffee-shop space since its modest IPO back in 1992.
  • At the time, shares of Starbucks were listed initially at just $0.34 per share, adjusted for splits and special dividends.
  • As of October 25, 2019, SBUX has a compound annual growth rate of 23.6%.

The Starbucks Story

You could not buy a cup of coffee at the first Starbucks store that opened in 1971. Starbucks originally only sold coffee beans and equipment. CEO Howard Schultz began working for Starbucks in 1982 and came to the realization it should be selling freshly brewed coffee instead of just machines and beans. The owners of Starbucks at the time tried the idea in downtown Seattle serving the very first Starbucks caffè latte.

Due to a different vision for success Schultz left the company in 1985 and began his own chain, Il Giornale. In 1987, Schultz returned to purchase Starbucks with the help of investors. His goal was to bring the Italian coffee shop back to America. Schultz envisioned a place for conversation and a sense of community.

Growth of the Brand

In 1987, when Schultz merged the Il Giornale and Starbucks locations, the company owned 17 stores. When it went public in 1992, Starbucks had 165 total locations. In 1996, with 1,015 total stores, Starbucks opened its first international location in Japan. As of 2015, Starbucks operates over 22,500 stores, under several brands, around the globe. Store growth on an annualized basis since its IPO has been close to 24%.

Starbucks has transformed its offerings since the first caffè latte. In 1996, the company began bottling and selling its Frappuccino. It has acquired brands such as Seattle’s Best Coffee, Teavana, La Boulange, Evolution Fresh and Tazo Tea. Starbucks customers can choose from bakery items, sandwiches, teas, juices, coffees and coffee accessories in the store. Through grocers, consumers not willing to pay the cafe price can purchase products, such as ground coffee, to enjoy at home. Within a short period of time, Starbucks has entered and captured a significant share of the at-home coffee market.

The Future

Starbucks continues to open thousands of new stores each year, mainly outside of the North American market. The company has a five-year plan with several goals to continue driving growth. Starbucks wants to be the employer of choice and invest in those employees who continue to deliver superior customer service. Starbucks has always been on the forefront of valuing employees, especially its part-time staff. The company has stated it will grow to 30,000 locations globally and work on creating new reasons for customers to visit its stores throughout the day. From breakfast to lunch, and also snack and evening offerings, the goal is to entice customers to come back a second time in one day or make additional trips per week. Starbucks wants to become a major player in the global tea market. Following the acquisition of Teavana, the company will incorporate this brand into its stores and grocery supply chain.

The expansion of digital engagement allows Starbucks to drive participation in programs such as mobile ordering and My Starbucks Rewards. The company has begun testing delivery using the mobile app platform and is partnering with the delivery startup Postmates. With the mobile app, customers can order ahead, save their favorite drink, add funds to a Starbucks card, send gift cards and track their rewards. It is now easier than ever to get your hands on Starbucks' products.