If there’s one mistake Howard Schultz is determined not to repeat, at least not any time soon, it’s this: retirement.
Starbucks’s seemingly tireless chief executive stepped away in 2000 (he took the chairman position), only to watch his company’s financial results begin to evaporate, as rapid expansion, a misguided foray into food – not to mention the economic downturn – took their toll.
Eight years later, Mr. Schultz roared back to lead the day-to-day operations of the company he built, shutting hundreds of U.S. stores, ditching the stinky cheese breakfast sandwiches and bringing back the scent of java to the cafés, helped by an internal “aroma task force.”
Starbucks is enjoying record operating results again, despite a $2.8-billion (U.S.) penalty imposed on it this week after it lost a grocery distribution battle with Kraft.
Now 60, at a time when other CEOs might think about handing over the reins, Mr. Schultz says he’s more in need of a caffeine fix than ever. There are no talks of succession and neither of his two children are involved in the business.
“I didn’t get that right the first time around and that was my own fault,” Mr. Schultz says, sipping – what else? – a (black) Starbucks anniversary blend that includes his favourite Sumatra dark brew. “I have no immediate plans to leave any time soon. And I don’t have any political ambitions, if that’s your next question.”
While other business leaders shy away from speaking on the issues of the day, he’s outspoken on matters from gun violence (he recently asked customers not to bring guns into Starbucks cafés) to last month’s U.S. government shutdown (he led a petition against it).
Mr. Schultz is firmly planted at the top, steering the ship in rough waters. Rivals ranging from the Oakville, Ont.-based Tim Hortons Inc. to U.S. fast-food titan McDonald’s Corp. – and its spreading McCafé – are struggling to make sales gains with cautious consumers, who still seem willing to dole out $4.15 for a "venti" latte.
“I think it’s harder today than at any other time in my 35-year career to maintain this kind of success at this level,” he says.
In a fast-moving digital age, any perceived misstep is quickly tweeted, posted and shared around the world, meaning retailers have to be nimble.
As we speak, at a Starbucks near Toronto’s posh Yorkville neighbourhood, Mr. Schultz is surrounded like a rock star by a clutch of his “partners,” the corporate nomenclature for employees, all clamouring to shake his hand.
He’s in town to rally the troops and congratulate them for a record year in Canada, with more than $1-billion in sales and more than 1,300 cafés.
This is an important market for Starbucks – it was in Vancouver, just across the border from the chain’s Seattle headquarters, in 1987, that the company made its first attempt at international expansion.
“If Vancouver did not succeed as Starbucks from ‘87 on, our entire international business, which is now thousands of stores and a significant amount of growth and profit, may not have existed,” he says.
Early lessons learned in Canada informed Starbucks’s global expansion strategy – from navigating cross-border duties and cost disparity to cultural sensitivities.
Like putting lids on customers’ coffee cups.
Mr. Schultz says Canadians, more than Americans, tend to take the lid off to add cream or milk and sugar, he says. Perhaps it’s the Tim Hortons habit of drinking milder coffee, prompting Canadians to dilute Starbucks’ bolder taste.
The company has recently come under attack for charging considerably higher prices in its cafés in China than elsewhere, but Mr. Schultz makes no apologies. Costs are just higher in China, he says.
In Canada, prices differ by regions although they’re comparable between big cities such as Toronto and New York, he says. A “grande” brewed coffee, at $2.35, such as the one Mr. Schultz is sipping, is five cents more than in New York. A latte costs the same in both cities for every size except a “tall,” which at $3.60, is 20 cents more in Toronto.
It’s clear that coffee, and café culture, is a passion for Mr. Schultz.
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