Wednesday, 17 October 2012

Storm in a coffee cup

In a way I'm rather sorry that I don't like the coffee at Starbucks.  If I did like it, I could boycott the shops but I never go in them anyway so a boycott is a non-starter.  By now you are either yawning madly, bored out of your skull, or wondering what it is I have against the giant coffee retailer.  I shall, of course, attempt to explain.

The UK company's annual accounts for the year ended 2 October 2011 (which seems a rather odd year-end date but we'll let that pass) showed that there was a turnover for the year of very nearly £400 million.  OK, if you want to be pedantic it was £398 million but in my book that's near enough to £400 million to make no difference.  Now you might think that an international company with a turnover of that magnitude would show a profit for the year on which they would pay Corporation Tax.  You might think that, but you would be wrong.  Starbucks' main rival in the UK is Costa Coffee.  Their last annual accounts showed a turnover only slightly less than that of Starbucks at £377 million.  Costa managed to make a profit and paid tax of £15 million.  That's £15 million more tax than Starbucks paid as they showed a pre-tax loss, just as they have for the last three years, and therefore paid no UK Corporation Tax.  The loss arose largely because the UK operation pays the parent company 6% royalties - more than is paid in most franchise operations.

I accept that Starbucks employs thousands of people in the UK and therefore pays employer's National Insurance contributions as well as business rates on its premises but I do think the financial structure of the group needs changing so that the appropriate tax is paid in the country of operation.  I have no doubt that similar situations exist in other countries so this non-boycott boycott of mine is on their behalf as well as the UK's.


All this reminds me of the time some 50 years ago when I was a teenager and we used to spend evenings in coffee bars, as they were known then.  There were three in Brighton that I patronised, the Continental in Castle Square, the Penny Farthing in East Street and one in the Savoy cinema on the corner of East Street and the sea front.  The Continental was my favourite, but all of them served coffee (sometimes frothy coffee) in wide, shallow, glass cups.  There was none of this nonsense about skinny lattes (whatever they are) and I don't think anybody ever ordered a black coffee.  Coffee was coffee and came according to how the establishment served it.


I have managed to get back onto the Downs this week when walking the dog and have taken yet another picture of the view from near the Upper Lodges to Stanmer Park.  I must have photographed this view - or very nearly this view - hundreds of times but each one is slightly different depending on exactly where I was standing, the amount of zoom I used, the time of year and the play of the sun and clouds.  Here is this week's effort.


Uncle Skip, said...

6% royalties doesn't seem excessive. It's close to what most franchisees pay for the use of a brand (McDonalds, Subway, etc.) name and the support it gives.
That said, Starbucks isn't anywhere near the top of my favorites list.
OTOH they do provide entry to the workplace for a lot of young folks.

Brighton Pensioner said...

Could be you are right about the 6%, but to quote yesterday's Telegraph Business section:

Starbucks UK also pays its Seattle parent 6pc in royalty fees, which is considered very high in the industry, as Starbucks is charging its wholly-owned UK division more than what most companies charge franchises.

(BTW, you should never believe what you read in the newspaper!)

Suldog said...

Your countryside is so magnificently lovely! Whatever blood I have in me, from my ancestors over there, yearns for it every time I see a photo such as this one.