Starbucks guru brews up more success

MANILA, Philippines - When we last met Starbucks chairman and CEO Howard Schultz 15 years ago, his global coffee chain, in partnership with Rustan Coffee in the Philippines, had opened its first store at 6750 Ayala Avenue, and we joined him for a cup of Seattle’s most famous brew.

This year, as of press time, Starbucks has opened its 207th Philippine branch, and Schultz has announced plans to open 100 more within the next four years.

During his brief, two-day visit (he flew in via private jet) Schultz met the majority of his local “partners” (Starbucks lingo for its employees) and, according to his actual partner, Noey Lopez, managers and baristas were crying as they made their presentations to the CEO  such is the awe, reverence and loyalty Schultz inspires among his flock, who regard him as they would their own personal Steve Jobs.

He’s changed the way that, not only coffee companies, but companies in general do business, with a strong social conscience that pays it forward every day in most corners of the globe (see, there is an upside to the longstanding joke about Starbucks’ blanket-like expansion.)

Schultz also visited Starbucks’ most notable stores in the metro, including the flagship at 6750, the eco-friendly drive-thru at 32nd and 7th in BGC, and The Grove Rockwell, which recently won the Starbucks award “Best New Core Store Design in Asia.”

Schultz is as we remember him, if a little leaner and grayer at the temples. He’s friendly yet guarded, but there really is no way to adequately profile someone  much less get under his skin  in 15 minutes.  You just throw your questions out there and hope for the best.  Here is the full interview:

THE PHILIPPINE STAR: How has the Philippines  and Rustan Coffee as a partner  helped ensure Starbucks’ remarkable growth?

HOWARD SCHULTZ: We just returned from a meeting with 600 Starbucks partners (employees), we had an almost two-hour meeting, and what I experienced in that room, in that time, is something you can’t teach, and it’s not in any training manual. It is the authentic, genuine, heartfelt feeling of our Filipino partners who wear the green apron every day. And the relationship that the Lopez family and Rustan’s has built with these people who bring Starbucks to life every day is the reason why we have succeeded and built the company much bigger than we ever thought. We all know that 15 years ago, we didn’t think that the market could hold more than 50 stores. And maybe that would be too many! And here we are now  207 stores? And we announced today that we would open up at least another 100 in the next four years. So I think what our people have been able to do in this market is create an experience in our stores that clearly differentiates Starbucks from many, many other people and other companies. So it’s the quality of the coffee, it’s the design of the stores, but all of that is secondary to the relationship our people have built with our customers.

A lot of foreign brands fare poorly against local brands  Jollibee being one example, which took over Burger King here. And there are a lot of local coffee chains. How did Starbucks win over the market?

First of all, we coexist with other people who are in the business; we haven’t put anybody out of business, we’ve expanded the market. But I think the reputation of the company, the quality of the coffee, has obviously created a taste profile and experience. The design of the stores is beautiful. We visited some stores today that are every bit as good-looking and beautiful as any stores we have around the world.

I tend to think that perhaps Western companies or brands come to this part of the world and they make a mistake in that they water down the experience. And I think that Rustan’s and the Lopez family deserve credit for not doing that, and for elevating the experience and elevating the stores. The experience we have here in the Philippines is a mirror image of what we have in Seattle, Washington: no difference.

We know that Starbucks has a certain style template, but is there any Filipino imprint that your local partner can put on the design of the stores?

I think in the stores we saw today, you’re beginning to see local materials that are not only relevant, but I think it’s incumbent upon Starbucks to demonstrate relevance by being respectful of the local culture and heritage, and you’re beginning to see that. Now we’ve just built a LEED (Leadership in Energy and Environmental Design)-certified store, which I think was very important to demonstrate that. So the innovation we’re bringing to the market is in design, in products, categories, all these things in which we have to continue to not embrace the status quo but keep pushing for innovation.

Starbucks cultivates relationships with its growers  interest-free loans, schools, hospitals, monitoring receipts at the grower level to ensure proper payment, etc. Do you have similar mechanisms in the Philippines?

In the meeting I just came from today, one of the Starbucks partners told the story of what we are doing, visiting the growers, working with them and giving back to the families that are growing coffee. I think that is very emblematic of what we have tried to do around the world. And I think we recognize more than ever that our success is linked to the enduring nature and sustainability of farmers, growers and exporters. But the issues and the challenges they have are quite significant and we have to do as much as we possibly can. You mentioned things like interest-free loans, which we’ve been doing for almost 20 years; we’ve immunized children, we’ve built schools, we’ve built water projects; and now we have agronomy offices, five of them around the world, where we’re actually helping to train farmers on best practices to improve yield and sustainability for them. We view that as a deep responsibility of the company, which I think is part of the foundation of the business plan, which is balance between profitability and a social conscience.

Do you see that as one of the reasons for your success  strong CSR (corporate social responsibility) and giving back to the community?

Well, I think the trust people have in the Starbucks brand, people know that we are a values-based company. Now, we’re not perfect, we do make mistakes, but the lens in which we’re trying to build the company is through having a conscience. I think that’s how you attract and retain great people. I think customers recognize that in us, and I think that has been part and parcel of our success, yes.

There was a point in the mid 2000s when Starbucks announced it would slow down growth in some markets  but not Asia. How fast is the growth going to continue in Asia?

I think this is going to be the fastest-growing region for Starbucks in the world for quite some time, and we are enjoying great success here. So we are investing ahead of the growth curve, and we will build thousands of stores in this part of the world over the next five to 10 years.

Do the booming economies in Asia excite you, as a businessman?

Yes! We’re all mindful of the economic growth here, the middle class and the aspirational way that people look at a brand like Starbucks. But that’s not going to give us success; that’s a tailwind to help us, but we have to show up and execute every day.

Considering that a lot of Asian countries have their own strong coffee and tea cultures, does it present any special challenges when you enter those markets?

The interesting thing is we’ve learned over the years that the customer wants the true Starbucks experience. They don’t want us to do too much to alter or refine it for the region. When it comes to food and design of the stores, that’s where we can demonstrate local relevance. 

Did you come away from your meeting with President Obama feeling better about America’s future, about Starbucks’ future? Did it renew your faith in government and maybe even the Democratic party?

I think the conversations that I’ve had with the president have remained a private matter. I appreciate the question, but…

You came back to Starbucks after retiring and, like Steve Jobs, “saved” the company. What did you change to make things right?

I think we reminded people and rekindled in them the culture and values and traditions of the company. That sounds like a lot of words; what does that mean? When we got into trouble, we were measuring and rewarding the wrong things, and when we transformed the company, we came back to the humanity of Starbucks, exceeding the expectations of our customers and focusing, literally  it sounds trite  on one customer at a time. And we were just looking and measuring the company through the wrong lens.

CEOs such as yourself are in a very unique position right now in America’s history to steer the US economy, to some extent. What changes would you like to see in its navigation?

The US economy is down to nine million jobs. We were at 50 million after World War II. No matter what economist you talk to, their theory is that America must restore its manufacturing base. So I would focus on how do we do that and commit  to a policy of financial incentives and investment credits and doing things to restore that. Second thing is, we have to have a balance between entitlements and revenue  then you get into the political issues of polarization, of party over the country. And that, right now, has us in such a political gridlock that it’s preventing the people of America from being represented in the way they should be. We have to overcome the Democrats and Republicans seeing the world through the lens of their own party versus through the lens of what’s best for the people.

Is it out of the question that you would consider running for political office?

Yeah, no political ambitions. But thank you!

You left the company for a number of years because you said you were “a bit bored.” How do you keep yourself from getting bored now?

How can I get bored doing this? I think this is an incredibly exciting time for Starbucks, a very challenging time. So it’s a moment where I’m energized and excited about the future, and the next few years should be really extraordinary in terms of what the company is capable of doing.

Has your vision for the company changed at all?

I think it has. I think we have a chance to be a historic company, and as respected and admired as any company in our generation, but in order to do that, it can’t just be about profit, it’s got to be about balance.

Did you laugh at that headline in The Onion, “New Starbucks opens in restroom of existing Starbucks”?

I did laugh at that. But I think Jay Leno said it first.