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Karstadt in Joint Venture with Starbucks

October 5, 2001

Germany is to get its first Starbucks coffee house in the spring of 2002, after the US chain set up a joint venture with local retail giant Karstadt.

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BERLIN. German retailer Karstadt AG on Thursday signed a joint venture accord with Starbucks, the US operator of a chain of coffee houses. Karstadt is to own an 82% stake in the venture; Starbucks 18%. But Karstadt chief Wolfgang Urban said the US company has an option to raise its stake in the joint venture to 50%.

Over the longer term, the two companies aim to open 1,500 Starbucks coffee houses in Germany in shopping centers and supermarkets. Initially, there will be 12–15 outlets, the first of which will be opened in the spring of 2002. The number will rise to 180–200 by 2005, with 100 new outlets to be added annually after that.

Each outlet is expected to generate annual sales of 1.2–1.3 million euro. "Starbucks is the brand; we are the marketing agent," said Urban. At a conservative estimate, the operators of coffee shops in Germany are seeing a 7% return on sales right now. The main players are currently chains such as Balzac Coffee and Woytens, but Starbucks is aiming for market leadership.

Starbucks' modus operandi is to operate 100% subsidiaries in North America, but to form partnerships abroad. In the US, it operates a stock-option scheme for all workers. Urban said the plan is to transfer this scheme to the German venture in the longer term.