The Starbucks Story
Read The Starbucks Story Online
Authors: John Simmons
To my founding colleagues in 26:
Margaret, Martin, Tim, Tom, Jim, Ben, and Simon
www.26.org.uk
Copyright © 2005 John Simmons
First published in Great Britain in 2005 by Cyan Books
This edition published 2012 by Marshall Cavendish Business
An imprint of Marshall Cavendish International
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The right of John Simmons to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved
No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. Requests for permission should be addressed to the publisher. The author and publisher have used their best efforts in preparing this book and disclaim liability arising directly and indirectly from the use and application of this book. All reasonable efforts have been made to obtain necessary copyright permissions. Any omissions or errors are unintentional and will, if brought to the attention of the publisher, be corrected in future printings.
Cover design by Benson Tan
eISBN: 978-981-4408-76-9
The photographs, illustrations and artworks
on pages 10, 33, 36, 44, 63, 71, 113, 116–7,
126–9, 136, 137, 163, 170, 171, 176, 178
and 179 are © 2005 Starbucks Corporation.
All rights reserved. Used with permission.
Starbucks, the Starbucks logo, the Starbucks Card and
Starbucks Card Duetto are trademarks or registered
trademarks of Starbucks US Brands, LLC in the US and
of Starbucks Corporation outside the US. Hear Music
is a trademark or registered trademark of Starbucks
Corporation. Used with permission.
Chapter 1 Starting with a bean
Chapter 2 Setting out on the voyage
Chapter 3 Expanding the horizons
Chapter 4 Friends and neighbors
Chapter 5 Head for a different place
Chapter 6 Here, there, and everywhere
Chapter 7 Doing well by doing good
Chapter 8 The next port of call
Six important things for other brands to learn from the Starbucks story
Martin Liu asked me to edit a series to be called Great brand stories that he intended to publish. Having known Martin from his time at Texere, when he had published my book
We, me, them & it
, I was delighted to accept. We then planned the series and agreed that I would write this book on Starbucks. Thank you, Martin: it would not have happened without you.
People at Starbucks have helped me by making themselves available for interview. I thank them for their openness. The further I have gone with this book, the more I have found to admire in Starbucks. Above all, it has great people. I thank especially Howard Schultz, Orin Smith, Soon Beng Yeap, Cathy Heseltine, Wanda Herndon, Cecile Hudon, Thomas Yang, Tom Walters, Kathie Lindemann, Rebecca Burke, Sandra Taylor, Sue Mecklenburg, Dave Pace, Jim Donald, Dub Hay, and Marc Stolzman. Extra-special thanks to Carole Pucik, my guide to Starbucks in Seattle, and an endlessly patient recipient of requests and questions. The opinions expressed here are mine and not Starbucks’; any errors are mine alone. My thanks and admiration go to the Starbucks Foundation and the National Literacy Trust, which will receive part of the proceeds of this book.
Three books have been especially helpful in my research. Howard Schultz’s Pour your heart into it (with Dori Jones Yang, Hyperion, New York, 1997) for his personal account of Starbucks’ development; Scott Bedbury’s A new brand world (with Stephen Fenichell, Viking, New York, 2002) for his insights into Starbucks from his time there; and Mark Pendergrast’s Uncommon grounds (Texere, London, 2001) for its story of coffee over the centuries.
Pom Somkabcharti has seen this book through production with great care and diligence. Rob Andrews at R&D&Co has designed it with real flair and talent.
Finally, thanks to my daughter Jessie, who took many of the photos. And my constant thanks to Linda, who not only read and commented on the text, but typed most of it, too. I could not have written it without her.
On 26
th
February 2008 Howard Schultz closed every Starbucks in the USA. It was a dramatic and unprecedented move by the once and present chief of Starbucks. Schultz had built the company, turned it into one of the world’s best-known brands, run it for many years, moved away from day-to-day running of the business as chairman, then became so concerned that he felt compelled to return as CEO in January 2008.
He came back because he believed that Starbucks had ‘lost its soul’. He was determined that it would recover its soul, by returning to the principles, values and spirit that had created the Starbucks brand. The one-day store closure was to retrain the baristas, to reassert the Starbucks romance with coffee. This came with a huge risk and cost – actual and potential – but it paid off. Stock that had been trading at $7 subsequently rose to $55 after Schultz’s return to brand principles.
Howard Schultz tells the story of the turnaround in his book
Onward
, a stirring tale of leadership in the face of adversity. Starbucks has now bounced back in the eyes of Schultz, customers and business analysts. The recovery has all been about restoring the value and distinctiveness of the Starbucks brand.
This makes the book I’m now introducing as relevant as ever. It’s the story of the Starbucks brand and it was originally written and published in 2005 when Starbucks was at its most Camelot-like height of wellbeing. It describes the story of the company’s foundation and growth, the pivotal role of Howard Schultz, and in particular the development of the brand that is the driving force for Starbucks’ success. It’s what Howard Schultz means by ‘soul’. When you read this story you will be reading the Starbucks brand story, but you will also be reading a book about branding. Because, as I write in this book, Starbucks is in many ways the quintessential modern brand. I’m happy to stick by these words:
“Starbucks is actually one of the purest examples of a brand that we have. It starts with a commodity product – coffee beans – and invests them with extraordinary added value by creating an experience that transcends the simple act of drinking an unnecessary beverage.”
Seven years on from the time I wrote that originally, Starbucks has grown again. The numbers – of countries, outlets, sales – change constantly so you can never fix the story of Starbucks by using these business measures. What matters more, and what is enduring, are the brand’s principles, values and philosophy. This means that I’m able to say that the story in its essentials is as up to date now as it was on first publication. Perhaps the story has even been proved true by the test of time. All the lessons and conclusions that I drew about branding are as relevant now as they were when first written.
It should be recorded, though, that there have been some major changes since 2005. Let me update you on those changes under four headings.
Howard Schultz’s return sent a powerful signal to many audiences, not least the internal one. His swift decision to close the US stores for a retraining day was dramatic, risky but right. It stemmed from a feeling that the company had taken its eye off the ball. In effect, Schultz was saying (to adapt Bill Clinton’s election-winning mantra): “It’s the coffee, stupid.”
Starbucks is first and foremost about coffee. It needs to cherish and build its reputation for coffee expertise, and Howard Schultz felt that the reputation had slipped. The change in the coffee market, driven to a large extent by Starbucks over the last three decades, meant that the taste for better coffee was now an irreversible trend throughout the world. Forays into music, once seen as an interesting and possibly vital part of the future, were now considered a distraction because they softened the focus on coffee.
At the same time, as part of this reassertion of fundamental values, Schultz was restating his belief in Starbucks’ people and its core values that are centred on people. He was not afraid to take principled stands – for example, in favour of employee healthcare and gay marriage – that would make him and Starbucks deeply unpopular in many constituencies. As a symbol, Schultz took to brandishing the key to the original Pike Place store in meetings, emphasizing his personal, emotional commitment to original Starbucks principles. As part of this process, a team redrafted the mission statement (very much in tune with the 1990 version) to begin with the following words: “To inspire and nurture the human spirit one person, one cup, and one neighbourhood at a time.”
In the early years of the millennium Starbucks seemed hell-bent on growth. It expanded into new regions and countries at a rapid rate, opening new stores at dizzying speed. In doing so, a large element of homogeneity entered the brand and its store design. It seemed that one size/one design would fit all, and there was a sense of Seattle imposing its view on the rest of the world. And the rest of the world, with a wider range of competitors now on offer, was signalling that it no longer wanted to accept this.
As a result, Howard Schultz initiated a number of important design changes to the stores, the products and the graphics. Experimental ‘new look’ stores opened to test the market. Customers responded well. Now, more than previously, new stores are individually designed to reflect the places where they are situated. Centralized design has been abandoned.
In the same spirit, there is now much greater latitude for different countries to respond to their own cultures and tastes in eating and drinking. In France, for example, you can order a mild or a strong espresso. This greater flexibility reinforces Starbucks’ commitment to its core product, coffee.
A brand’s logo is too often seen as the be-all and end-all of a brand. Many brand redesigns have been pilloried as the result of a logo redesign. Starbucks managed to get its redesign right – it was seen as a natural move for an international brand to update and simplify its logo. This made sense especially since the visual element of the brand had become so universally recognised. By focusing strongly on the graphic element of the siren, presenting it more boldly, Starbucks achieved a new logo that was more striking and adaptable than the previous one – and that would work in countries where languages other than English were spoken.
A Starbucks executive said to me recently: “We’ve moved away from store count. The era of rapid expansion is over – we want to be in places where we’re welcome.” Behind the comment is a certain amount of irritation at unjustified criticism but also a reinforcement of Starbucks’ belief that it can be a force for good in the world. Starbucks has always tried to be fair and generous with partners, suppliers, farmers and developing countries but has received little credit for it. This does not stop it continuing good practices, building them because they are inherently worthwhile not because they have publicity value.
A number of initiatives have restated Starbucks’ more altruistic beliefs. After the New Orleans devastation, Starbucks partners voluntarily contributed their own efforts to help get the city back on its feet again. A European Youth Foundation has been launched, and every year European baristas go to African coffee plantations to understand and contribute to the efforts of those communities. US partners go to plantations in Costa Rica, Asian partners to Indonesia. Farming support centres help African farmers with agronomy training, aiming to achieve higher yields of better coffee. This will help the farmers while also bringing benefits to the company of supply security.