Coffee Schmoffee — Can Starbucks’ CEO Fix America?
WHY YOU SHOULD CARE
Because, if done right, private corporations really could help save the world.
In January 2019, former Starbucks CEO Howard Schultz revealed he might run for president as an independent in 2020. Always keeping you ahead of the curve, OZY caught up with him as he was first dipping his toe in politics in spring 2016.
I was ready to describe Howard Schultz as a humorless do-gooder corporate executive running one of the most successful businesses on earth: Starbucks. But then he surprised me. At Starbucks’ annual rally-the-faithful event in March (aka its shareholders meeting), the tall, trim, gray-suited chief sauntered to the edge of the stage and lifted a white Starbucks coffee cup. When he pulled from inside the company’s unadorned red Christmas cup — sans snowflakes or reindeer, and with excellent comic timing — the audience roared with laughter. Meanwhile, a video replayed the vitriolic attacks on the company in November for “removing Christmas” from its holiday vessel. “It’s just a cup,” Schultz says, laughing.
Laugh he should. Sales hit another record last year.
Schultz definitely has a knack for stirring up controversy, like his “race together” campaign a year ago that aimed at getting Starbucks baristas and customers to talk about race relations, but the public blowback was instant and huge. And yet, sales just kept climbing. “The customers didn’t care,” says Will Slabaugh, an analyst at financial services company Stephens.
So maybe it’s no surprise that Schultz has started wading into the swamp of American politics, in his own extraordinary (for a corporate CEO anyway) Howard Schultz kind of way. “Broken promises, void of truth in leadership have led to a fracturing of trust and confidence not only in our elected officials but in our institutions,” he waxes, noting the American dream has become depleted by “cynicism, despair, division, exclusion, fear and, yes, indifference.” He called for that dream to be replenished by showing care for fellow citizens. How, exactly? Hard to say. Still, shareholders gave Schultz a standing ovation after his impassioned rift for national reconciliation, and the moral voice of corporate America had thundered.
His list of fix-its have included campaigns to hire veterans and unemployed youth, as well as buying fair-trade coffee and getting employees registered to vote.
I met Schultz, 62, at the Starbucks Reserve Roastery & Tasting Room in Seattle, where the conveyor belt behind him carried a hypnotic procession of upright black bags containing “reserve coffee,” just the latest of Starbucks’ seemingly unending stream of iterations on the coffee bean since its founding 45 years ago. The year-old roastery is fast becoming one of Seattle’s leading tourist attractions, a coffee fantasyland inside an old Volvo dealership with java brewed every way imaginable, intentionally and faithfully reminiscent of Willy Wonka’s chocolate factory — complete with a maze of copper tubing, big machines and full-throated beat music, in sharp contrast to the soft jazz tones I usually hear in Starbucks stores. The company just announced plans to open another roastery in New York in 2018.
The Seattle roastery is only one of Schultz’s recent favorite projects, just up the street from where Schultz, a Brooklyn native from the housing projects, discovered good coffee in the original Starbucks and tied it to a vision based on his experience of Italian espresso bars. Voilà! Twenty-five years later — yes, with plenty of hiccups along the way — Starbucks now boasts 24,000 stores in 70 countries and 300,000 employees, with record sales of $19.2 billion and $3.6 billion in profits last year.
I tried to bait Schultz, when I talked to him, into blaming somebody — Republican or Democrat — for the raucous tone of political discourse. But “the well-known liberal,” as one shareholder put it at the meeting, refused to bite: “The dysfunction and polarization in Washington has not been skewed to one party versus the other,” he says.
From his own perch, he seems serious about fixing the world while pampering employees and delivering for investors. That latter task, he says, “is the price of admission.” But he also argues that they feed each other — that content and proud employees, with heath care, stock options and tuition support make for happy customers who buy more coffee. “The irony of it all is that it has added to the financial performance of the company,” he says. His list of fix-its have included campaigns to hire veterans and unemployed youth, as well as buying fair-trade coffee and getting employees registered to vote. It’s a long list, and some experts figure all of Schultz’s do-gooder instincts have indeed been good for the company. But even Slabaugh wonders if Schultz’s latest foray into U.S. national politics doesn’t take him to fringe territory.
Despite his intentions, Schultz’s step has a little less bounce these days (literally), after he pulled his Achilles tendon last Fourth of July, throwing him off his running routine. He sleeps little, less than five hours (“a blessing and a curse,” he says), and starts the day early, making his first coffee — often Aged Sumatra in a French press — for himself and his wife, Sheri. He’s now a grandpa. On his early-morning drive to the office, it’s a doppio espresso macchiato at a Starbucks store. He made himself a doppio on the side of the Roastery before our meeting (ignoring all those baristas!). After lunch, another French press. And that’s it. He says he’s trying to cut back on travel — 11 countries in two months — “but it’s not working out that way.” After all, China is going gangbusters and, he says, could one day rival or exceed the U.S. market.
Starbucks wasn’t always going gangbusters, and Schultz is living proof of the power of second acts. Think Steve Jobs or Michael Dell. He’s a hyperenergetic, hands-on leader who stepped back from the CEO role in 2000, only to return in 2008 after the company’s performance faltered. As Schultz tells it, a single-minded focus on growth proved self-defeating, as it ignored what he sees as Starbucks’ key to success. “Our strategy has to be linked to inspiring our people,” he explains, pointing out that the company’s $20 billion in sales comes from an average purchase of just $5, and that employee attitude and customer experience drive that sales volume.
Still, having failed to retire once, even without any plans to try it again soon, he recognizes, laughing, that “I’m not going to live forever.” He’s says he’s surrounded himself with a leadership team capable of taking over. “I’ve learned the hard way that succession is a discipline unto itself,” he says. Even so, Starbucks without Schultz as brewmaster-in-chief is hard to imagine.