Onward (62 page)

So it is with this strategic vision that we embark on the next chapter of Starbucks’ story. We could not, however, turn the page without having first transformed and stabilized the retail business and the brand in the United States. That is the foundation from which our growth will always spring.

Just as no single product, person, or initiative is determining Starbucks’ future, no one thing is responsible for having transformed the company to be in a position to grow as never before. Since my return as ceo, many sustaining initiatives have taken root and blossomed, each helping us to meet the goals of the Transformation Agenda that we articulated back in early 2008.

To conclude
Onward
, I want to revisit these goals as well as provide a snapshot of the progress we continue to make on the initiatives that supported them. Doing so, I believe, brings this part of our company's story full circle, illustrating how the plans we created and executed not only brought about the transformation of our business, but also continue to solidify our ability to pursue the type of sustainable, profitable growth we envision.

Revisiting these initiatives is also a fitting tribute to our partners’ hard work and diverse talents; without them, Starbucks would not be here today.

From day one, I knew we could not transform the company if we did not excel and lead in our core business, and so a goal that began with Espresso Excellence Training evolved into innovative products and practices that continue to improve the quality and delivery of our brewed and espresso beverages. Today, customers tell us that our brewed coffee and espresso-based drinks taste more consistent and significantly better than they did two years ago. The proof of Starbucks’ coffee authority will always be in the cup.

Pike Place Roast
Since launching Starbucks’ signature approachable blend in April 2008, we've served one billion cups of Pike Place Roast to customers. Today, the breakthrough brew is our top-selling whole-bean coffee.

We also no longer send any preground coffee beans to our stores, instead grinding all beans, including bold and decaf, just prior to brewing a batch. That means our coffee tastes fresher and, much to the joy of the merchant in me, the rich aroma of freshly ground coffee once again permeates our stores throughout the day.

The Mastrena
With this elegant espresso machine now in almost 70 percent of all of our US company-owned stores and its rollout continuing throughout the world, our baristas have more control over each shot and the steaming of milk, and once again they can more fully connect with customers by making eye contact and conversation with them as they wait on the other side of the espresso bar.

Clover
The transcendent little coffee machine born in Seattle's Ballard neighborhood produces one of the top five best-selling beverages at the more than 100 stores that serve it in cities in the United States and Canada. Clover is finding its way into more locations, giving customers an opportunity to enjoy the nuances of our traditional blends and the flavors of our exotic, smaller-batch Starbucks Reserve coffees.

People continue to come to Starbucks for coffee
and
human connection, and we have put our customers back at the center of the Starbucks Experience by addressing their needs, providing value in a manner congruent with the brand, and developing programs that recognize and reward our most loyal customers.

Starbucks’ Loyalty Program
Our customers have thanked us for thanking them. In December 2009 we rolled the Rewards and Gold Cards into a single new program called My Starbucks Rewards. Customers cite the program as a reason they are visiting our stores more frequently. To date, more than $1.5 billion has been loaded onto Starbucks Cards. It is hard to overstate the value of our loyalty program, to our customers and to the company . . . and much more is planned for its future.

MyStarbucksIdea.com
Since launching in March 2008, the site's 250,000 registered members have submitted 100,000 ideas. We've launched 100, including enabling a customer to remotely buy someone a drink, selling reusable cup sleeves for our hot beverages, and bringing back salted caramel hot chocolate. As long as customers talk, we'll continue to listen and respond.

Social Media
With more than 27 million fans around the world, Starbucks is currently a top brand on Facebook. One million people follow Starbucks on Twitter, and each month our website receives 12 million visitors. Popular applications that people download to their mobile devices allow them to locate the nearest Starbucks store, get nutritional information, even pay for your purchases. More than just a marketing tool, our digital presence further engages our customers, which is an essential element in our growth model going forward.

Digital Ventures
In the fall of 2010, in partnership with Yahoo!, we launched the Starbucks Digital Network, finally tapping into the value of our vast Wi-Fi network by bringing community information and free premium content to our customers
on laptops and mobile devices in our US company-owned stores. Even at its nascent stage, the Starbucks Digital Network has amassed an impressive collection of carefully selected providers that includes:
The Wall Street Journal, The New York Times,
and
USA Today
; free music downloads from Apple's iTunes; educational games from Nickelodeon; exclusive book excerpts from major publishers; career and job information from LinkedIn; Zagat restaurant reviews for local eateries; and health and wellness tips. The Starbucks Digital Network is designed to be a meaningful differentiator that will dramatically enhance the Starbucks Experience for our customers.

Lean Techniques
In our stores, Lean techniques have put us on a path to achieving operational excellence, finding new ways to deliver world-class customer service and perfect beverages while keeping costs in line and our partners engaged. As we continue to formally implement and share better routines with our baristas, they continue to problem solve and swap their own ideas. Today, our stores report that lines move faster, operations run smoother, and partners have more time to connect with customers. And, in 2009, our partners named Lean their most valued program of the year.

Starbucks continues to accelerate our retail presence around the world while striving to connect with and support the neighborhoods and cultures that each store serves.

Starbucks Coffee International
Starbucks’ businesses outside the United States remain our biggest source for future growth—another $1 billion business in and of itself as we open more stores and refine a more disciplined, profitable business model. Eventually, half of all our stores will be located outside North America. Perhaps the most significant move I've made in securing the success of our international model happened in December 2009, when I asked eight-year Starbucks veteran John
Culver to oversee our global expansion as president of Starbucks Coffee International. John is familiar with our international markets, having lived and worked in Hong Kong for years, and he has the rare ability to connect with people across cultures. During John's first year on the job, our international business revenue and operating margins were up well ahead of our targets, a testament to his leadership skills and the deep focus he has brought to the business.

Expansion in China
In September 2010, when Starbucks opened two new stores in Changsha, a city of six million—relatively small compared to other cities in China—customers were lined up out the door and down the block. In the rain.

Without doubt, Greater China is destined to become Starbucks’ second home market as we open thousands more stores across the country. Already, the majority of our stores throughout China are delivering double-digit profit margins, a far cry from their performance just two years ago.

As part of our long-term strategy to be locally relevant on many fronts, Starbucks will soon open its first research and development center in China, and—in partnership with the Chinese government and working closely with local universities—we have already begun to grow coffee in the country's beautiful Yunnan province. And as for the Black Sesame Green Tea Frappuccino I tasted at our Shanghai innovation store, it is now being sold in Starbucks throughout China. It's a hit.

New Store Designs and Concepts
Our new designs continue to find their way to stores around the world. By working with regional materials and collaborating with local craftsmen, we are creating thoughtful spaces that allow customers in every culture to feel at home in their neighborhood Starbucks stores and to experience a sense of discovery when they visit our locations around the world.

Mercantile Stores
Our two stores in Seattle continue to experiment with new products like beer and wine as well as new coffee preparation techniques, such as individually brewed
coffee by the pour-over method, which has become one way of serving single-cup decaf coffee in Starbucks stores, helping to eliminate the waste from unsold decaf. As a result of the lessons learned with these stores, we opened a very special store on East Olive Way in Seattle that incorporates some of the mercantile stores’ best design elements and product offerings—including wine and beer after 4 p.m.—with our sustainable construction practices. As must-see destination spots for Starbucks’ partners and customers who visit Seattle from around the world, these three unique shops showcase our willingness to take forward-thinking risks in the same way that the Pike Place store symbolizes our respect for our roots.

Starbucks expanded our partnerships with Fairtrade and Conservation International and is reducing our stores’ environmental impact. We also do a much more effective job of sharing with others our extensive efforts on this front.

Sourcing
In 2009, 81 percent of our coffee purchased was C.A.F.E. Practices–verified, up from 77 percent in 2008. And with the purchase of almost 40 million pounds of Fairtrade coffee that same year, Starbucks became the largest buyer of Fairtrade coffee in the world in 2009. In Rwanda, the Starbucks farmer support center is now complete and actively assisting coffee farmers throughout East Africa. Five months after my visit to Rwanda, Starbucks partners raised $55,700 to send cows to coffee-growing communities. In the summer of 2010, 30 heifers arrived in Kigali and were placed with families, including Mukamwiza Immaculate's, who were trained in how to best care for their new animals. Since August, three calves have been born into the group.

Serving Our Communities
Starbucks partners and customers contributed almost 186,000 hours of service in neighborhoods around the world in 2009; our goal is to one day contribute one million hours each year. In New Orleans, a city
that is always on our minds, we honored our pledge to give $5 million over five years, and we continue to stay engaged with the city's revitalization effort. In 2010, we awarded $100,000 to three nonprofits based on customers’ suggestions about where Starbucks should donate funds.

Environmental Impact
Efforts continue to make our company-owned stores more environmentally friendly. As space, municipal regulations, and local recycling services allow, our stores can recycle paper, cardboard, cups, compost, glass, and/or plastics, as well as offer customers free coffee grounds for gardening. Since 2009, Starbucks has convened two “cup summits” with local governments, cup manufacturers, and recyclers, as well as competing retailers, to help us identify what's required to make our cups recyclable. Because of these collaborative efforts, on November 30, 2010, Starbucks and its suppliers announced that we had found a way to recycle used paper cups. This brings us one step closer to our goal to have 100 percent of Starbucks’ cups be reusable or recyclable by 2015.

We also continue to work toward a goal of having all new Starbucks company-owned stores LEED certified in 2011, and to date more than 200 of our stores have either achieved or are currently registered for LEED green building certification. We are currently retrofitting all of our stores with high-efficiency lighting and are on track to reduce water consumption by 25 percent in 2015. And as of 2010, Starbucks has purchased renewable energy certificates equivalent to 50 percent of the electricity consumed in our stores. These and other sustainability efforts will also positively affect thousands of Starbucks’ joint-venture and licensed stores around the world as they follow suit.