The Starbucks Story (18 page)

Howard Schultz bought Starbucks because he loved the product but saw that it could become better as a social experience. For a brand to have growing power, it needs to be a social animal; it must have the ability to bring people together. The brand acts like a good party host, thinking of the needs and preferences of the guests and providing a suitable setting and atmosphere, yet allowing individuals to adapt the space to their own use.

So Starbucks, despite saying things like “Aim for the unexpected, the offbeat, the clever,” will never take idiosyncrasy too far. There has to remain a solidity that comes from a large dose of the expected, the familiar and the unchallenging. Though it may not want to admit it, that is part of its success. We go into Starbucks because we know. We might try other brands because we don’t know and they will allow us to risk a little, discover something, perhaps feel a little uneasy in doing so. In Starbucks, we discover only what it has provided the space for us to discover about ourselves; it does that by facilitation, not stimulation.

The reason for not admitting this is the fear of corporate uniformity. Starbucks wants to feel more offbeat than it really is. Yet in providing the literal and metaphorical comfy chair, it ensures that we keep coming back because we enjoy the experience of not being changed, of being at peace with ourselves. The brand is relaxed about being itself and about you being yourself. It does not send out imperatives to “Be like us or else.” It is an affirming brand rather than one that challenges you to become something else. It supports you, not transforms you, giving you confidence in your individuality, whether as customer or partner.

Starbucks naturally puts a lot of effort into trying to make this experience as congenial as possible. This means going beyond what many other brands regard as the tools of brand management: the guidelines governing the elements of the identity (logotype, colors, typefaces, and so on). The management of the Starbucks brand is built on the principle that
everything matters
. This stems from a system of beliefs and values that is intended to guide every action that anyone representing the company takes. If there is ever any doubt about a decision to be made, you resolve it by thinking about what the brand guides you towards.

Many in these sceptical, if not cynical, times may find it questionable to base their judgment on a set of beliefs that they did not come to themselves through a process of their own discovery. The strength of the Starbucks brand has been that it has persuaded a large number of people – particularly its own staff and its loyal customers – that its beliefs and values could actually be their own. But this is what happens in any business with a strong awareness of its brand: employees have a formal contract and an informal contract. The informal contract revolves around upholding the brand’s values in return for a greater degree of personal expression and involvement at work. For a brand to be effective, it needs to make emotional connections to employees and, through them, to customers – and to respect the physical and emotional needs of both groups. This raises both the expectations and the stakes, leaving brands vulnerable to relatively small slips. Trust built up over years can be lost in a moment. Starbucks has been able to ride out a lot of negative publicity because its foundations have been strong. But it has also been lucky because it has not told its positive story particularly well, not out of arrogance, but from a sense of bewildered hurt.

One lesson about brands is inescapable: there is no short cut to success. How many businesses launched in the dot-com boom survived to establish themselves as brands? Very few. How many believed they could offer themselves as brands overnight? Very many. Branding is not like instant coffee; you cannot take a spoonful to get a quick result. It takes time to build a brand because you have to give it strong foundations. The foundations start with a powerful, enduring idea that is embodied in the positive values of the brand. The idea gains resonance, depth and meaning through all the individual and collective actions taken over time. Wrong decisions and false steps can set a brand back, perhaps fatally.

Each individual has a role to play in helping to build the strength of the brand, because everyone affects the way it is perceived. Building a brand is not easy, but if you manage to do it, you create something that is incredibly valuable because people want to be associated with it – perhaps even to be defined by it. That brings a commercial value greater than any amount of marketing or advertising campaigns can create. Unknown 15 years ago, Starbucks is now ranked at number 70 in Interbrand’s table of the world’s most valuable brands. That is why Howard Schultz says: “The equity of the Starbucks brand is a priceless asset. Every decision we make has to contribute to its sustainability and differentiation.”

Above all, it is the barista who represents the Starbucks brand. The baristas, particularly in Seattle outside rush hours, are models of non-cloying friendliness. In the store on 1st and Marion when I visit in November 2003, the certificate on the wall says Yumi is partner of the quarter. You can tell why. Within a minute of walking in I receive a glowing smile and an espresso, and we exchange views on the Seattle Art Museum and London.

Particularly in America, but also throughout the world, there is a crisis of trust in the corporate world. The reasons are perfectly understandable. Corporate America has behaved badly, with scandals at Enron, Worldcom and the mutual funds adding to a widespread concern about the power of big business to act against the interests of the individual and the whole planet. The questions customers now ask of companies go way beyond their “value proposition”: the right product at the right price. This most basic transaction between brand and customer is soon disposed of. Customers want to know what a brand is going to give the world in return for the cash they hand over for a product. People’s faith in governments and institutions is dwindling, so consumers tend more and more to put their faith in brands. But faith – quite rightly – is not easily given, and people feel they have a right to some kind of say in the running of the brand.

This afflicts American brands particularly because much of the world is deeply suspicious of Brand USA in its current expression. American foreign policy fuels anti-Americanism, and naturally American brands suffer. Brand USA is powerful but vulnerable in many parts of the world, including those it might consider its best friends. But the more we get to know the brand through individual representatives and sub-brands, the less vulnerable it becomes. The brand reasserts its human values to win hearts and minds, rather than relying on its sheer might.

Visiting Seattle makes this a little clearer. The American brand has culturally resonant sub-brands, and Starbucks is a product of one of them. The Seattle sub-brand has been one of the great, but relatively unnoticed, phenomena of the last thirty years. In 1971, Jimi Hendrix, one of Seattle’s most famous sons and exiles, had just died, and Seattle’s biggest employer, Boeing, had cut half its staff. Since then, the region has given rise to Starbucks, Amazon and Nike. They represent a different America from Texas, New York or California; not necessarily a kinder, gentler America, but a more globally aware, customer-focused America, a less abrasive but even more optimistic one.

Starbucks is a brand that attempts to do practical good while providing a coffee experience that lightens people’s everyday lives. That is an unusual combination, but Starbucks has established a unique place for itself. Its focus on the quality of its coffee remains intense, and gives it the right, the freedom and the power to create communities around its stores. I can think of no other commercial brand that has such ability to be a good neighbor and to make other people good neighbors. The benevolent aspect of the brand is unusual: an antidote to the prevailing public cynicism on the one hand and corporate misbehavior on the other hand. If it can maintain its ability to encourage good works while providing a good cup of coffee, it could become one of the most powerful and hopeful beacons in the world.

1. Start with your own people: they are the real link to consumers. Exceed the expectations of your people and you will automatically exceed those of your customers.

2. Have strong values that you stick to and know yourself by. Then take decisions according to these values.

3. Ensure there is no gap between your brand values and your actions. Change your actions to fit your values, not the other way round.

4. Keep things fresh by reinventing, but never tamper with the core of what you do.

5. Reach out to communities, making emotional connections between the people who work for you and the places where they work.

6. Remember that every detail matters.

I met Howard Schultz this time in London. It was mid-October 2004 and he had just spoken at the Royal Albert Hall before a crowd of 2,000 of the UK’s most distinguished thinkers, artists, and scientists: the great and the good. The occasion was a Day of Inspiration to mark the 250th anniversary of the RSA (the Royal Society for the Encouragement of Arts, Manufactures and Commerce).

The RSA had been founded in 1754 in a coffee house in London, and Starbucks had helped it celebrate the anniversary by hosting a series of debates, the Coffeehouse Challenge, in its coffee shops across the country. In these debates, local groups developed ambitious schemes to tackle such issues as relieving student debt, introducing national environmental awards and creating a carbon-neutral west of England. Howard Schultz presented six winners with prizes at this grandest of British public venues.

Afterward, we talked and arranged to talk some more by telephone from Seattle. It seemed to me an extraordinary path for Starbucks and Schultz to have taken. Yet, as with much of the Starbucks journey, it appears to have happened with a spirit of naïve optimism rather than commercial calculation. The company follows its best instincts, trusting that everything will turn out well.

I had wanted an opportunity to update myself on Starbucks’ progress since this book was first published six months earlier. It had been a significant year. The international business had become profitable for the first time, exactly as Starbucks had predicted to market analysts. The stock had risen to record levels. By the end of 2004, there would be 8,500 stores, and China had emerged as an exciting opportunity whose potential was growing before Starbucks’ eyes. “China has really embraced the Starbucks brand and experience,” Howard Schultz declared with some pride and awe.

The Starbucks story has settled down to a steady but dynamic curve of progress. After a period of hectic international development from the mid-1990s, during which the company established operations in 33 countries, 2004 was more a year of international consolidation than of new discovery. Starbucks had made the bold move of opening in Paris (and five stores in France by the end of the year), and continued to open an average of three shops a day worldwide, but kept to markets it already knew well. There were few adventurous strategic developments on the geographical front, though later years held out the promise of romance with the investigation of such markets as Italy, Brazil, India, and Russia.

The spirit of adventure was kept alive but channeled into other areas of development. The drive to help coffee-growing communities became stronger. After the collapse of commodity coffee prices in 2001, Starbucks had reasserted its efforts to pay farmers fair prices. It had increased its commitment to buy Fair Trade coffee, but had decided to pay premium prices for the arabica coffee that it chooses for quality reasons. In 2004, Starbucks was paying twice the open-market rate for its coffee, much of it through direct long-term contracts with farmers.

Of course, this is not all altruism, because Starbucks is keen to secure sources for its essential supplies. Yet the farming communities in the developing world undoubtedly gain better deals from Starbucks than they do from bigger multinational competitors like Nestlé, Kraft and Sara Lee. “It is a welcome relief to see Starbucks taking a lead among the major coffee companies in addressing the crisis in the coffee market.” This official statement by leading charity Oxfam sets the background for a major initiative that Starbucks announced in the fall of 2004.

Under a memorandum of understanding, Starbucks UK and Oxfam GB have joined forces to find ways of tackling the coffee crisis in Ethiopia. As a result Starbucks will contribute $180,000 to projects in the East Hararge region, where Oxfam has been working since the major famine of 1984. The money will go towards improving irrigation, providing seeds and tools, and running women’s literacy programs. Starbucks experts will also provide advice on improving coffee yields and quality, and on strengthening the growers’ marketing cooperative. The agreement enables Oxfam to maintain a constructive and critical relationship with Starbucks. As Phil Bloomer, head of Oxfam’s Make Trade Fair campaign, said, the relationship will depend on dialogue: “We hope they’ll challenge us, and we know we’ll continue to challenge them.”

Howard Schultz talks about Starbucks as an anomaly, a big company that has a conscience. He is keen to explain the difference it makes: “We’re building a different kind of company, one that balances shareholder value with ethical trading.” The significance of the Oxfam relationship for him is that it represents another example of “you can tell us by the company we keep.” While there are still detractors, you find few of them among people and organizations that deal with Starbucks and know it well.

A challenge of a completely different kind is Starbucks’ continuing venture into the music business. Earlier in 2004, the Hear Music Café opened in Santa Monica, California. This is a mixture of Starbucks as a coffee retailer and a new channel for selling non-mainstream music. Customers can sit with a coffee at individual stations and listen to an eclectic mix of music. They can then create their own personal collection of music that has nothing to do with the latest offerings from the pop charts. People simply listen, discover new favorites, burn their own CD and buy it to take away with them. Hear Music coffee houses have opened in Seattle and Texas, and you can hear the excitement in Howard Schultz’s voice when he talks about them.