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Originally published June 17, 2011 at 10:00 AM | Page modified May 25, 2012 at 2:24 PM

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Starbucks: More robust after restructuring

Howard Schultz returns as CEO of Starbucks and completes turnaround.

Seattle Times business reporter

Founded: 1971

Headquarters: Seattle

Major operations: 16,863 cafes in the U.S. and abroad, plus sales of coffee, bottled Frappuccino and other products in grocery stores.

CEO: Howard Schultz

Employees: 137,000

Major products/ services: Coffee and tea, pastries and sandwiches.

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Earlier this year, Howard Schultz released a book about how he turned Starbucks around.

Some people never knew it was in trouble.

Although the world's largest coffee-shop chain closed hundreds of stores over the past few years, its cafe count never dipped below 16,000.

Starbucks' sales were hurt but stayed above $9 billion a year.

From the vantage of the average customer, Starbucks was wildly successful at marketing upscale coffee to the masses.

Still, Schultz was concerned enough to resume the title of CEO in early 2008 and make major changes.

He cut some 35,000 jobs and began to overhaul the look and feel of Starbucks' stores, including selling wine and beer at two test cafes in Seattle.

He debuted Starbucks' first-ever dividend for shareholders and unveiled an instant-coffee product, plunging into uncharted territory for a company that long catered to coffee snobs.

The result: Starbucks was the best-performing company in The Seattle Times' ranking for 2010.

Its profit for the fiscal year ended Oct. 3 was $946 million, up 142 percent from the year before, partly because of massive restructuring charges in 2009.

Starbucks has changed from the inside, even though it might look the same to its regulars.

Rather than add U.S. stores like every corner needs one, it is ramping up international growth.

It plans to open in India soon and double its number of stores in China and South Korea over the next five years. It currently has just over 1,000 stores in those countries combined.

"We're understored in markets like Brazil and Russia, and even in a country like Mexico, which five years ago we thought had growth opportunities for 250 stores; we're going to get to 500 before we know it," Schultz said during a recent quarterly earnings call with analysts.

Another area for growth is Seattle's Best Coffee, a chain Starbucks bought in 2003 and mostly allowed to languish.

Schultz put top executive Michelle Gass in charge of bringing Seattle's Best out from under Starbucks' shadow, and in one year, the chain went from selling coffee at 550 stores — 480 of them in Borders bookstores — to 50,000 locations, including Burger King and Subway fast-food joints.

Starbucks does not say how much money Seattle's Best makes, but it is well under $1 billion a year in sales.

A third area for growth is grocery sales.

Starbucks recently fired Kraft Foods as the distributor of its coffee in grocery stores and is overseeing marketing and distribution of those products itself.

Finally, Starbucks has said it wants to grow through acquisitions.

Speculation on which companies it might buy has ranged from small distributors no one knows to iconic chains like Peet's Coffee & Tea — which 40 years ago inspired Starbucks' founders to start roasting in Seattle.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

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