Getting more bang for your Starbucks

Starbucks CEO Howard Schultz's account of how he turned the company around makes for compelling reading.

By
July 21, 2011 17:40
4 minute read.
Starbucks CEO Howard Schultz

Howard Schultz 521. (photo credit: REUTERS)

 
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Honesty first: I’m biased. I love Starbucks like a coffee-hound, searching it out at airplane terminals and in foreign cities far and wide, feeling always in exile from it here in Israel.

But Starbucks CEO Howard Schultz’s latest book is not a history of the famous coffee franchise – he wrote that history in 1999’s Pour Your Heart Into It.

His latest volume follows the company during a two-year mini-crisis that lasted from 2007 to 2009. It is mostly about his decision to return as CEO of the company, and the changes he made after doing so.

Schultz’s book on his personal relationship with Starbucks joins a great pantheon of business biography. What differentiates it from its peers is its style and presentation. He and his co-author have organized the book into numerous succinct chapters that all begin with what appears to be a sort of “daily message.”

Chapter 32, for instance, is emblazoned with the huge title “Winning” and the message: “Sitting in the familiar New York City offices of Kekst and Company – where almost two years earlier, I’d talked about Starbucks’ downfall – I waited to begin what I felt would be the most important earning announcement the company had made since going public.

Starbucks’ profits were growing again.”

This presentation, for better or for worse, makes readers feel they are reading a sort of self-help book more than a hard-nosed story about Starbucks.



The author worked in one of the first Starbucks stores, but he didn’t start the company. It initially opened in 1971, and Schultz only came along in 1982. He actually left the company originally to start his own line of coffee shops.

“I didn’t truly discover coffee’s magic, however, until one year later on a business trip to Italy,” he writes, explaining that “in every bar I felt the hum of community and a sense that, over a demitasse of espresso, life slowed down.”

Schultz’s story isn’t exactly one of those “copy editor to newspaper baron” stories.

He remarks that he only “sometimes worked behind the counter with the baristas. Pouring shots. Steaming milk.

Blending beverages.” In 1987 he was able to buy out Starbucks and combine it with his existing chain of stores. He brought the idea of the European coffee shop to America; “before the late 1980s, hardly anyone in the US and dozens of other countries ordered an espresso or a non-fat latte with extra foam!” The company expanded rapidly, and by 1996 it had opened its first store abroad.

By 2010, it had around 17,000 stores worldwide. An oft-repeated joke about Starbucks is that you know there are too many when you go in the bathroom of a Starbucks and there is another Starbucks in there.

In 2007, under CEO Jim Donald (Schultz had left the position in 2000) the company began to falter. It moved beyond its coffee brand into CDs and books. “It would be a while before I recognized that Starbucks’ amplified foray into entertainment, while it had its upside, was another sign of hubris born of a sense of invincibility.”

One thing that particularly irked Schultz, as he watched the company he had built stumble, was the introduction of sandwiches in 2003: “I had resisted the idea of serving hot food from day one... it chipped away at our narrative. Where was the magic in burnt cheese?” His account of how he was brought back as CEO and the methods he used to turn the company around not only makes for compelling reading, but is crafted in a way would appeal to any student studying business. He talks about the focus groups and advisers he brought in to work with him. He discusses the branding strategy and how he purchased new products, like the Clover espresso maker. He dwells on how he handled the delicate conference calls with investors.

But the Starbucks narrative is also about not “losing its soul.” As one might expect, this is primarily about the company’s commitment to fair trade and its farmers in far-flung regions of the world.

“Beginning in the late 1990s, social responsibility also became a marketplace imperative... between 2000 and 2005, the company and our individual partners committed more than $47 million to local communities around the world,” he writes.

He describes one particularly compelling story about Rwanda, where he traveled to speak to farmers who supply the company with beans. “In my almost 30 years with Starbucks, our coffee buyers had made tremendous progress in ensuring that our farmers are treated and paid equitably,” he asserts. The devil is in the details, though: In one case, an employee even donated a Friesian cow worth $500 to a woman in Rwanda.

The story of the Starbucks turnaround is fascinating. Its stock price has grown from $10 in 2008 to almost $40 today. It has more than 130,000 employees, and Mr. Schultz is a very wealthy man. There are downsides to this volume, of course: There are few juicy details, too much self-congratulatory backslapping, a lot of platitudes, and nothing about the failure of Starbucks in Israel or the author’s Jewish background.

Mainly Onward is a quick read full of numerous short stories about products and people; an engaging book, especially for those interested in business.

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