Pour Your Heart Into It (29 page)

We made it, and Frappuccino was an instant hit—a runaway home run. Word of mouth about the new product spread quickly, and our regular customers introduced it to their friends. A lot of women, in particular, appreciated the fact that it is low-fat, and stopped in for a Frappuccino after a run or a workout. Frappuccino accounted for 11 percent of our summer sales that year. It pushed up our profit numbers, and our stock hit a record high.

In fiscal 1996, the first full year on the national market, we sold $52 million worth of Frappuccinos, which represented 7 percent of our total annual revenues. That’s $52 million we would not have registered had we not listened to our partners in California.

I was wrong, and I was delighted about it. Turning down Frappuccino was the best mistake I never made. In late 1996,
Business Week
named it one of the best products of the year.

And did it dilute the integrity of Starbucks? A coffee purist might think so, but, most importantly, our customers didn’t. Frappuccinos not only gave us a welcome alternative for warm-weather months but also provided a way to introduce non–coffee drinkers to Starbucks coffee. Besides, the more I drank Frappuccinos, the more I liked them.

Perhaps the most remarkable thing about this story is that we didn’t do any heavy-duty financial analysis on Frappuccino beforehand. We didn’t hire a blue-chip Establishment consultant who could provide 10,000 pages of support material. We didn’t even conduct what major companies would consider a thorough test. No corporate bureaucracy stood in the way of Frappuccino. It was a totally entrepreneurial project, and it flourished with a Starbucks that was no longer a small company. Even when I doubted it, it went ahead.

If we had been a typical leaden corporation, Frappuccino would never have emerged as it did. Its story epitomizes the enterprising spirit we still have at Starbucks, an innovative edge that keeps our customers coming back and our competitors grousing. It’s experimental. It’s adventurous. It fires people up and engages their imagination.

In October 1995, Dina, Anne, and Greg received the Starbucks President’s Award. Dan was named nonretail Manager of the Year. They would laugh if someone asked if Starbucks is corporate and bureaucratic.

H
OW
D
OES A
C
OFFEE
C
OMPANY

G
ET
INTO THE
M
USIC
B
USINESS?

During 1994, another idea percolated up from the store level. It pushed Starbucks into a new direction that I never could have imagined: the music business.

The idea began brewing in University Village, one of the original Starbucks locations, an urban shopping center with an eclectic clientele that included college students, professors, and wealthy homeowners. Timothy Jones, the store’s manager, had worked for twenty years in the record industry and loved music as much as he loved coffee.

At that time, we had long been working with AEI Music Network, which provided a “tape of the month” for us, primarily jazz and classical instrumentals. Starting in 1988, Timothy asked if he could be the one to select the tape from AEI’s monthly programs. We were happy to oblige. He began reviewing the monthly selections and experimenting with various types of music in his own store, gauging customers’ reactions during different times of day. Gradually, he added jazz vocals, such as Ella Fitzgerald and Billie Holiday, and varied the classical offerings. Because of his personal interest and initiative, Timothy became Starbucks’ music conscience.

Again and again, customers complimented him on the music that was playing, and asked where they could buy it. He had to tell them it was a special compilation for Starbucks, not for sale.

In late 1994 Timothy approached us with an unusual idea. “Why not compile our own CD or tape?” he asked. “Customers would snap it up.”

At about that time, AEI had made a few tapes for us called “Blue Note Years,” using jazz cuts from the 1950s and 1960s, most of them recorded by the acclaimed Blue Note label. They included such great instrumentalists as John Coltrane, Art Blakey, Bud Powell, and Thelonius Monk. Customers loved them.

One day, by coincidence, Jennifer Tisdel, our director of retail marketing, was having Sunday brunch with a friend visiting from Los Angeles, Dave Goldberg. Dave worked in new business development for Capitol Records, which owns Blue Note, and he told her about an idea he had for marketing Capitol’s music through a retail company.

“Well, how about Starbucks?” she suggested. “We play a lot of jazz in our stores.”

The idea clicked. Dave had heard the Blue Note tunes played in our stores, and they saw many possibilities for synergy. Both Blue Note and Starbucks had a “coolness factor” in their image and we could benefit from association with each other. Capitol had been looking for ways to get a wider audience for its music, especially jazz, and would benefit from having it played in our stores more regularly.

Jennifer put him in touch with Timothy Jones at University Village. Together, they explored an idea: What if Starbucks compiled great recordings from Blue Note in a CD and sold it exclusively in our stores?

They revised the idea and brought it to Howard Behar. He found it intriguing enough to turn it over to Harry Roberts, one of the most creative executives we’ve had at Starbucks. As vice president for merchandising, Harry was always looking for fresh and imaginative new products to sell. The idea set Harry on fire, too, and he became the executive who championed our entry into the music business.

We had to do some research first. Timothy looked through two years’ worth of customer comment cards, from all the Starbucks locations, and found hundreds that asked us to sell the music we played in our stores. It was an overwhelming demand we had neither anticipated nor noticed. Many of our customers are middle-aged with young kids and don’t have time to hang out in record shops and flip through albums or listen to new tunes. But if they hear something good playing at Starbucks, they want to buy it on the spot.

In December of 1994, we had a trial run. Kenny G had recorded an album of holiday music,
Miracles
, which we decided would be a good test case in our stores. Would people buy music with their coffee? In fact, as soon as they went on sale, Kenny’s CDs flew off the counters. Jazz and java, it seemed, were a natural fit.

Anyone who’s ever been to Hollywood would probably recognize the Capitol Records building, a tall white cylinder shaped like a stack of records, with a spire on top. I remember seeing it years ago and wishing I could go inside.

On January 31, 1995, I found myself walking into that landmark building with Harry and Timothy to meet with Gary Gersh, the president and CEO of Capitol Records. Photos of famous singers and musicians lined the corridors. We passed studios where Frank Sinatra, Nat King Cole, and numerous other greats had recorded their famous hits.

We took an elevator to the top floor and were greeted by Gary, Bruce Lundvall, president of Blue Note, and a dozen other executives.

Blue Note Records loved the idea of allowing Starbucks to compile a selection of its jazz greats and offer them on an exclusive compact disk. For them a Starbucks CD was a way of reviving interest in some old Blue Note titles. The entire record industry was looking for alternative venues to showcase music, since the old sales formula, radio stations and record stores, was failing to reach a lot of listeners.

We agreed that it was in our mutual interest to work together. We decided to produce as many as five CDs in the coming year, using not just Blue Note titles but also other music from the Capitol catalogue.

Timothy left his store and began working on music full time. He got to spend hours in Blue Note’s archives and listen to its incomparable recordings of jazz greats. He discovered a seldom heard piano-only version of “I Get a Kick Out of You,” played by Nat King Cole. The album was ready in just a few weeks.

We kept the whole project as secret as possible so we could take the world by surprise. A $1 million promotion was designed to highlight the release of the album, called
Blue Note Blend.
Our coffee specialists, Mary Williams, Tim Kern, and Scott McMartin, even developed a Blue Note blend of coffee, “smooth and spirited,” our first new coffee blend in four years, to complement the soulful sounds. Our creative people designed jazzy blue packaging for it. Jennifer and Timothy arranged for local school jazz bands to play in our stores in thirty-eight different cities that month. We also developed in-store campaign materials drawing from the coffee and CD packaging, wrapping the store in blue. Some store managers, caught up in the enthusiasm, even hung blue notes made of paper from the ceiling.

The introduction of
Blue Note Blend,
on March 30, 1995, coincided with the grand opening of our largest store yet, at Astor Place in New York City’s Greenwich Village. It is a huge 4,000-square-foot site in a prime location, with high ceilings and windows on three sides. Thelonius Monk, Jr., came to the celebration, and we had a special performance by Blue Note recording artist Benny Green. Dave Olsen and I were there to soak up the mood, as were Gary Gersh and Bruce Lundvall. We were all—dare I say it?—jazzed.

Despite our enthusiasm, we still didn’t know how customers would react. Retail stores like ours normally didn’t sell CDs, and it was certainly conceivable that we might sell only 10,000 copies.

As it happened,
Blue Note Blend
sold 75,000 copies before going out of print, and we still get calls for it, from San Diego to Atlanta. Ralph Simon, then vice president of Capitol Records, told us, just a few weeks after the disc was released, that it would have hit the Top Ten on the Billboard jazz charts if its sales had been tracked like those of a traditional album.

Later that year, we produced three additional CD compilations, followed by six others in 1996, branching out from jazz to classical and blues. In April 1996, when we introduced the
Blue Note II
album, we created an event in Seattle called “Hot Java/Cool Jazz,” inviting high school jazz bands to perform downtown, with a panel of prominent local musicians to judge them. In many instances, we were able to raise funds for these schools’ music programs, as a way of giving back to the community. Our second biggest hit came in the summer of 1996, with
Blending the Blues
, a historical look at Chicago blues, including vocals by Howlin’ Wolf, Etta James, and Muddy Waters.

Did this foray into the music business make sense for a company like Starbucks? I would answer an unqualified yes. On the one hand, it gave a boost to sales, especially in April 1995, the month of the Blue Note introduction. But more important, it sent a message to our customers that we would continue to surprise and delight with unique products they never expected to find in a coffee store.

Selling music CDs wasn’t just a marketing ploy imposed from on high. The idea was generated right there in our retail stores. It was a perfect demonstration of the character of Starbucks, one that was maturing in harmony with its customers. It added to the warmth and atmosphere that people were seeking when they came to our stores. And it showed our people, again, that we were willing to take a chance on a ground-breaking idea if it appealed to our sense of esthetics.

I realize it’s easy for one person among our 25,000 partners to feel like a single digit in a rapidly growing company. But Dina and Dan, Anne and Greg, Timothy and Jennifer, at all different levels of Starbucks, proved that we’re sincere when we say we believe in encouraging initiative. Rather than stifle the entrepreneurial spirit in our people and then try to resurrect it, as so many companies are trying to do, I’m convinced we should nurture it from the beginning in each new hire. It’s demoralizing, I know from experience, to get fired up about a great new idea only to have it dismissed by higher-ups.

Quite possibly, the most promising inspiration for Starbucks’ future is unfolding now in the mind of someone who joined the company as a barista yesterday. I hope so.

CHAPTER 16
Seek To Renew Yourself Even When You’re Hitting Home Runs

To stay ahead, always have your
next idea waiting in the wings.

—R
OSABETH
M
OSS
K
ANTER

When you’re failing, it’s easy to understand the need for self-renewal. The status quo is not working, and only radical change can fix it.

But we’re seldom motivated to seek self-renewal when we’re successful. When things are going well, when the fans are cheering, why change a winning formula?

The simple answer is this: Because the world is changing. Every year, customers’ needs and tastes change. The competition heats up. Employees change. Managers change. Shareholders change. Nothing can stay the same forever, in business or in life, and counting on the status quo can only lead to grief.