Starbucks Canada Struggles to Keep Up with its U.S. Counterpart

Yet another coffee-related story in Thursday's The Globe and 
Mail: This time it was about higher coffee costs in Canada as opposed to the United States. It seems that President of Starbucks Canada Colin Moore is struggling with lower profit margins in almost every facet of his business. Higher costs for everything from milk (a key ingredient in lattes) higher shipping prices (which result from moving supplies across the vast Canadian terrain) to higher wages paid to employees as a result of increased minimum wages and benefits that must be paid to Canadians.

"There is quite a difference in margins in different parts of the geographies for us around the world," Mr. Moore told The Globe and Mail last Wednesday. "Specific to Canada, there are differences in the cost structure, not the least of which is the cost of dairy in Canada versus the cost of dairy in the U.S. Canadians pay one of the highest prices in the world for milk and cheese."

Mr. Moore is making every effort to increase efficiencies in his cafes by striving to increase the number of customers that move through the check-out lines and adding more products to the menu, products such as the single-brew K-Cups and the milder coffee known as the Blonde brew. 


With operations in more than 55 countries, Starbucks Canada is contending with an operating profit that is approximately 18 per cent, compared to 20 per cent or more in the United States. In an effort to improve performance, Starbucks is now reporting its financial results separately for the Americas region (the United States and Canada), the high-growth China and Asian Pacific region and the under-performing Europe, Middle East, Russia and Africa regions (EMEA). Prior to this time, Starbucks was organized into just two divisions: Starbucks U.S. and Starbucks Coffee International.

The new organizational structure "will enable us to accelerate our global growth strategy," according to chief financial officer Troy Alstead. Separating the EMEA region will allow the company to concentrate on that region, which is also hampered by higher operating costs, large distances, and a divergent cultural composition. In the EMEA, profit margins are in the single digits.

While in the United States Starbucks has a deal with U.S. giant Target Corp. to operate the store's cafes, the same arrangement will not necessarily apply in Canada. Nevertheless, Mr. Moore said he welcomes discussions with the company.

"We're trying to get our product everywhere we can for the Canadian consumers," he said.