Starbucks CEO has ambitions beyond coffee
BY TAKESHI HATAKAWA STAFF WRITER
Starbucks Chairman and CEO Howard Schultz in an outlet in Seoul, South Korea, during a 13-country promotion tour for his book "Onward: How Starbucks fought for its life without losing its soul." (Toshiyuki Matsumoto)
Howard Schultz is the Steve Jobs of coffee. Like the former chief executive of Apple Corp., he transformed a small company into an institution that changed the rules and assumptions of its industry. Like Jobs, he left the company, only to return to save it from stagnation and then build it once again into a dominant market force.
He is credited with masterminding the meteoric rise of Starbucks Corp., a company credited with changing U.S and global coffee culture. It operates 17,000 stores in 55 countries, and serves 60 million people every week.
Walk a few city blocks in the morning in the United States, and you will almost certainly see someone carrying a Starbucks cup with the firm's famous green siren logo.
But Schultz is not satisfied. This spring, Starbucks changed made a subtle change to that logo, bringing the iconic green siren out of her circle and dropping the words "Starbucks Coffee."
Schultz wants his company leave its image as a simple coffee vendor behind it and fuel growth by expanding into other markets, and anyone familiar with the company's history would not bet against him.
As Starbucks' CEO in the 1990s, Schultz transformed Starbucks from a small coffee seller on the West Coast the United States into a global brand. He left the top job in 2000 for a seat on the board responsible for overseas operations, but returned as CEO in 2008 after the company ran into a rough patch. He has engineered a dramatic turnaround. After posting a one-quarter loss, Starbucks notched up a banner year in fiscal 2010.
Central to his style of business is a focus on the critical role ordinary employees' play in delivering an attractive experience to customers. He calls his staff "partners" and the company's headquarters is called the Starbucks Support Center. Rather than being the heart of the business, it is seen as an information and support provider for those working in the stores.
Starbucks was the first privately owned U.S. company to extend full health benefits and offer a stock option program to all of its employees, including part-timers.
Some of that emphasis on normal workers may come from Schultz's own personal history. The eldest son of an ex-U.S. Army trooper in Brooklyn, New York, he grew up with a brother and sister in a state-run housing project for low-income earners. Schultz's father had to move from one job to job, working without health care or work-related accident compensation, but Schultz excelled at football and other sports at high school and became the first person in his family to go to college after earning a university athletic scholarship.
"Watching my family and others struggle just to get by imprinted upon me a desire to build the kind of company that my father never had a chance to work for. One that provided for its people in a way that my father deserved," Schultz said.
In 1982, he joined Starbucks and took a trip to Italy the following year, where he was struck by the place Italy's espresso bars occupied at the heart of their communities. It gave him a new vision for the coffee industry.
At the time, Starbucks' main business was selling coffee beans. Schultz tried to persuade the company's founders to bring cafe' culture to America but was rebuffed, and he left to open his own chain of espresso bars. In 1987, he returned with enough money to buy the Starbucks chain and, as it CEO, turned it into the huge chain we know today.
During the 1990's, Starbucks expanded at breakneck speed, opening hundreds of stores each year. In 1996, it opened its first overseas shop in Tokyo and then pursued an ambitious global growth strategy.
Since buying Starbucks, Schultz has been devoted to ensuring that its stores become an integral part of customers' lives -- a "third place" in their daily routines. The idea is to create a comfortable and relaxing refuge from work lives similar to the espresso bars of Italy.
Despite his emphasis on the role of employees, he has sometimes been ruthless when the welfare of his company has been at stake. In 2008 and 2009, he closed 900 unprofitable stores, laying off 18,000 workers.
At the same time, he pushed through a series of reforms to revive the foundering coffee empire. He opened a website inviting customer complaints and ideas to improve stores and products. The company received more than 110,000 proposals and put over 600 of them into practice, including free wireless Internet access and a Facebook-based service allowing customers to give gifts to their friends.
Another of the reforms was a return to its roots, focusing once more on merchandise sold at each shop, including instant coffee which has proven to be a hit. But, if the subtle changes to the firm's logo this spring are anything to go by, more expansion rather than a retreat to old ground is on the horizon for a company Schultz says is in better shape than ever.
"The company has never been healthier than it is today, right now," Schultz said.