Starbucks Problem

Having installed its coffee stores across much of North America, Starbucks Corp. is aggressively expanding overseas -- and like other global retailing icons, it is finding that international fame can carry a price. Starbucks has been boycotted by anti-war protesters in Lebanon and criticized by New Zealand advocates seeking higher coffee compensations to farmers. And, faced with the possibility of terrorist attacks, the company has pulled out of Israel. Such dissent overseas recalls some of the problems faced by the McDonald's Corp., which has been targeted by everyone from anti-war demonstrators to vegetarians. What some see as growth, others see as corporate colonialism. What some see as international expansion of Starbucks, others see as the outright hijacking of foreign cultures. "It's very American . . . and is seen as this very aggressive attempt to grow that business," said Greg Carpenter, a professor of marketing strategy at Northwestern University's Kellogg Graduate School of Management. Nonetheless, Starbucks is ambitious and is looking to international markets for growth. The company has more than 6,400 stores throughout the world -- 1,400 in 30 countries outside of North America. Although Starbucks does not break down its sales from its international operations, revenues for "all other business units" -- which includes overseas sales -- were $482.7 million for fiscal 2002, up 31 percent from $369.1 million in 2001. Starbucks' popularity has persisted even in an economic downturn and during the war -- an impressive feat as other retailers are struggling, said Greg Schroeder, a research analyst with Fulcrum Global Partners LLC. It gives the company confidence in its vision of a future with 25,000 stores, at least 10,000 of them in North America. Overseas, it projects 1,500 stores in Latin America, 6,000 in the Asia-Pacific region and a combined 7,500 in Europe, the Middle East and Africa. The company plans to open at least 1,200 stores in the United States and abroad in its 2003 fiscal year alone. Starbucks' international strategy -- in which it forms joint ventures or licenses other companies to own and operate Starbucks stores -- differs from its domestic approach, where the stores are largely company-owned. The idea is that an experienced local partner can help identify locations, sift through tax issues and give Starbucks stores more community appeal, Peter Maslen, president of Starbucks Coffee International, said. But operating in volatile political or economic situations could introduce a lot of risk for the company, experts said. "It is typically the market leader that attracts the attention of