Creativity and foresight should never be undervalued when it comes to entrepreneurialism or when considering what to invest your money in. Many of the most valuable and innovative companies found a niche in an already existing market and were able to improve upon a fundamental need or idea.
Take coffee and cryptocurrency for example.
Coffee was already popular before Starbucks became a global phenomenon. And yet, Starbucks has managed to create a unique experience for consuming coffee products that have made creator Howard Shultz and Starbucks shareholders alike, incredibly wealthy. And it is sticking to the basics that have led to Starbucks’ vision for its coffee remaining an incredible success.
Satoshi Nakamoto, creator of Bitcoin can be said to have done something similar. Nakamoto did not try to reinvent the wheel when he created a digital currency using blockchain. Instead, he perfected an idea that was already in around and filled a gap in the market -there was a need for a better way to use digital cash.
And like Shultz’s Starbucks vision, Starbucks took coffee shops to a whole new level.
Coffee and cryptocurrency are a natural pairing because they take care of two of the things we need the most; cheap legal stimulants and the money to buy them.
While there is some truth in that statement, cryptocurrency, like Starbucks, has found a niche in the market place. Starbucks delivers quality coffee with trademarked perfection anywhere in the world. On the other hand, cryptocurrencies make spending and sending money fast, affordable, and uncomplicated.
That is why both Starbucks and cryptocurrencies are valuable investments; they make our lives easier by perfecting access to basic wants and needs.
The Highs and Lows of Franchises
One of the reasons that Starbucks has experienced such incredible success, is that they were able to avoid relying on the Starbucks franchises. Starbucks’ main competitors are McDonalds and Dunkin’ Donuts, with 14600 Starbucks locations in the United States, it just beats McDonald’s.
However, unlike Starbucks, its competitors gained success through franchising. There is a good reason for a company like Starbucks to work as a franchise. By selling your company as a franchise, corporations are able to grow quickly without requiring a large capital. That’s because instead of investing their own cash and leveraging themselves, franchisees get others to invest in them.
Many are happy and wise to pay large sums of money to become part of a successful chain. For example, iconic Canadian-started coffee shop Tim Hortons (it is no longer a Canadian majority holding) costs around $700,000 to start up a franchise.
But buying into a franchise is often a sure thing. As a franchise owner, you are handed all of the ingredients for a successful business.
So why might franchising be a problem? The short answer is that with franchising the owner loses a lot of control over the brand and the culture of a company. At least this was why Schultz avoided selling Starbucks franchises.
Culture and Consumption
Shultz believed that avoiding creating Starbucks franchises would be the key to maintaining a continuity that customers would appreciate. And he was right! There is a good reason why whether you buy a Starbucks in Labrador, New Foundland or Seatle your experience is the same -many customers love continuity!
Think about it; with Starbucks, you know what you will get every time. This may not be everyone’s cup of tea -or more correctly coffee- but this is just what we love about Starbucks. Your grande, decaf, half-sweet mocha tastes the same from sea to shining sea!
But it’s more than just offering customers the comfort of consistency, Schultz believed in building a culture and he was able to do so by avoiding making Starbucks into a franchise. By keeping Starbucks under one roof, the company was able to ensure that were they in control of the quality of their product as well as training employees.
Living the Culture
The investment in their employees is perhaps one of their most valuable assets. Because Starbucks is not a franchise, they are able to control the quality of its employees through very specific employee training. Central to maintaining a corporate culture is having employees who believe in their vision.
Not only are they all experts on their product, but they are also trained to have meaningful conversations with customers. And, all employees whether full or part-time have stock options and health benefits.
By investing so much into their employees, in terms of training and stock options, Starbucks as a relatively low employee turn-over rate. Again this keeps costs down by wasting money on training and makes it possible to keep a clear vision for everyone in the company to conform to. It is in large part because of the quality of their staff that Starbucks has become so successful -they are just selling coffee after all.
Outside of the United States and within other established companies, it is possible to own a Starbucks franchise. They are essentially small Starbuckses that operate within another business. Examples of these mini-franchises are seen in certain hotels and department stores.
Also, it is possible to own Starbucks franchises in Europe. The initial cost to buy into a franchise is around 700,000 British Pounds.
Still, by avoiding exclusively franchising Starbucks, the company has been able to maintain control over the details of the company, which Schultz believes makes for stronger consumer and employee loyalty. The key to success is maintaining the culture of Starbucks.
Market Highs and Lows
But there is more coffee than drinking it!
When you’re enjoying your first cup of coffee of the day, you may be thinking about where it was grown or roasted, and how it came to have such a fine flavor. But you may not be thinking about what a fine investment it is.
Coffee is the most actively traded commodity of its kind. That is, coffee is the most widely traded “breakfast commodity,” which means it is traded more than sugar, cocoa or orange juice.
And the United States is the largest consumer of the commodity, consuming nearly 500,000,000 cups a day! The rest of North America and Europe follow closely behind the United States, as they are also large consumers of coffee.
Essentially Americans consume more coffee because there are more of them, and in Asia, tea is more popular than coffee.
As for the wealth of producers, Brazil accounts for nearly 60% of coffee production worldwide. In second and third place, respectively, are Vietnam and Colombia. Ethiopia is also a major producer, but it does not produce as much as the other countries do.
Investing In Staples and Holding On Throughout the Volatility
When you are thinking about what to invest in next, you might want to think about acquiring holdings in coffee ETFs and cryptocurrencies.
Both coffee and cryptocurrencies are staples, and that means a few things:
- Inevitably each staple has its brightest stars, for example, Starbucks and Bitcoin
- Staples make great investments/shares to hold because through thick or thin, people will always want them
- And volatility is an inevitability!
While there is insufficient data to fully explain Bitcoin’s fluctuations, there is a good explanation for the volatility of the value of coffee.
Coffee prices are highly affected by weather and season. And given that Brazil is the number 1 coffee supplier, its value is also affected by the value of the Brazilian currency, the real.
Investopedia reports that:
“[In a] one-month period in 2014 saw coffee futures prices rise, and then fall, approximately 20%.”
Basically, it is not uncommon to see the value of coffee double, and then to fall by half, all within a year.
The value is also strongly impacted by the relative strength of the consumer market and the availability of discretionary income. That means that coffee consumption is subject to the overall health of the economy and disposable income.
Still, countries have been known to keep emergency stores of coffee in the event of a crisis; so the value of coffee is not just in its market value. People just love coffee.
To follow the price of a coffee you can track the iPath Dow Jones-UBS Coffee Subindex Total Return ETN (JO) and the iPath Pure Beta Coffee ETN (CAFE). These are the two exchange-traded funds, or ETFs, available to U.S. investors as well as other investors that directly track the performance of the coffee market.
There is no doubt about it, part of the value of cryptocurrency is the culture itself. Satoshi was inspired by the American mortgage crisis of 2008. The pseudonymous creator(s) of digital cash saw a need in a market that already exists.
Many consider Bitcoin digital gold because it is a non-fiat currency. That means that its value is not backed by another commodity, it is valuable because it is useful and rare. Satoshi wanted to reinvigorate a direct, peer-to-peer exchange economy. And to fill that need Bitcoin was created.
But more than that, in a global economy we need faster, cheaper, safer ways to transfer money. Digital cash and blockchain were not new ideas, they had been around for some time, but no one had managed to put them into practice until Bitcoin.
Like Starbucks, cryptocurrencies did not need to come up with a wholly original idea. Instead, they perfected upon things that we already used.
Starbucks and Blockchain
Starbucks is also no stranger to the value of blockchain, the underlying foundation of Bitcoin and other cryptocurrencies. Recently, Starbucks has embraced Microsoft’s Azure Blockchain Service. Microsoft has developed its own blockchain tools. The goal of Azure is to make blockchain adoption simpler and easier by offering developers better tools for building on the blockchain.
Starbucks’ use of the blockchain is an excellent example of what blockchain applications can offer supply chain confirmation. Recently Starbucks has used the immutable record of a blockchain to track every movement of their beans. The record of each step offers valuable insight for Starbucks’ partners and customers. This is the same sort of information that many other businesses of all kinds could also benefit from.
With this level of detail to supply-chain concerns, Starbucks continues to prove itself as a detailed oriented company and this demonstrates why it can be well worth running the entire show
Innovate and Inspire: Coffee and Crypto
So what do Starbucks and cryptocurrency have in common?
- They are both valuable and volatile assets.
- They have tapped into a niche in already existing markets; cryptocurrency is improving FinTech, while Starbucks sets the standard for our coffee consumption.
- They each have their own cultures which increase their market value. By understanding the needs of their markets, both crypto and Starbucks know what their customers want. And both are ready to find creative ways to keep people happy by improving digital spending and your not-so-regular cup of Jo.
- Continuity is key! You cannot have a culture without there being continuity. For Starbucks, Schultz achieved his desire to maintain a unified vision for the company and employees. One of the reasons for the success of cryptocurrencies is usability. Using digital cash needs to be fast and secure. This is achieved through the improvement of blockchain and strong-cryptography.
So what should you invest in? Coffee or crypto? If both is an option, you might want to do just that!
And while Starbucks seems like a more obvious choice than branking into cryptocurrency, perhaps it is time to think about expanding your investment horizons.
But how do you know which cryptocurrencies to invest in? Start by doing your homework, and think about the Starbucks model.
Starbucks is successful because it is a serious, thorough and creative business. It is also a company that offers fiscal and business transparency. Because Starbucks is not primarily made of franchises, they are able to keep clear financial records and are control important decisions in the company.
These are exactly the kinds of cryptocurrencies that you want to invest in; transparent, savvy and creative.