The Starbucks Story (2 page)

Starbucks’ long-standing support for Fair Trade coffee has been strengthened over the years. Again this is a mixture of altruism and commercial sense. With the Fair Trade Foundation a ‘no-strings’ loan scheme has been established. The relationships with farmers are based on mutual advantage and respect rather than the donation of aid. The coffee communities become stronger and more sustainable as a result. Starbucks does these things because it’s convinced they are the right things to do. The company’s proud of them but says little about them to the outside world.

There has always been a quest for innovation in Starbucks. I have told the stories previously of, for example, the development of stores inspired by Italian espresso bars, the growth of a music business, the creation of Frappuccino. Not every initiative will succeed but with the return of Howard Schultz in a hands-on role there has been a willingness to take risks, to be open to creative thinking and to make a commitment to innovation. This has coincided with the increased importance of new media that offer different channels to reach customers. One example of this combination of receptiveness to innovation linked to new technology was ‘My Starbucks idea’. Customers were invited, in an early form of crowd sourcing, to contribute their own wishes and thoughts to the development of innovation.

In 2008, with the US Presidential elections nearing, Starbucks appointed a new advertising agency in the USA. Within days BBDO suggested a 60-second ad to encourage higher levels of voting by offering free coffee to every voter. It was a moving ad that aired just once on
Saturday Night Live
then spread virally by YouTube, Facebook and Twitter. These new media were embraced enthusiastically by Starbucks customers.

All this laid the ground too for a surprising piece of product innovation. Starbucks had always separated itself from the big coffee brands that had grown in the 20
^th
century through the production and marketing of instant coffee. You could always be clear that Starbucks coffee was not
instant
. Instant represented bland taste, a poor coffee experience for anyone who cared for coffee. Convenient, though. What if Starbucks could develop an instant coffee that was convenient and tasted good? Via, launched in 2009, was the result. It has since grown into a multi-million stream for the business, but it was adopted only because it was a sufficiently big step forward in innovation and quality.

The quest for innovation continues, alongside the drive towards greater localization and increasing dialogue with customers. Starbucks has become very smart with technology. Having pioneered its own card, it has now put the Starbucks card on the iPhone. Proximity marketing, using mobile technology, is becoming more prominent, directing customers to offers and local stores. This movement has also changed the way that Starbucks communicates internally. As 70% of its staff are younger than 25, it seemed an inevitable welcome step to move communications to newer forms of media – so the internal newsletter can now be read on a smartphone using QR codes.

* *

So, a lot has happened in a few years. It’s never possible to keep track of every development in a company as big and widespread as Starbucks. However, the more things have changed, the more the brand has remained the same. The brand, with its values and principles, remains a fixed point in the Starbucks landscape. The business still takes its compass bearings from it, and sets its direction for any new journey by thinking about the brand. It remains a great brand story. You can read how the brand developed, from its earliest days, in the pages that follow.

John Simmons

June 2012

In 1995, I went on a coast-to-coast trip across the US. When we got to San Francisco, the sun was shining and the people were relaxed. We wandered into a Starbucks, the first I’d been in.

We sat enjoying our coffee and the buzz of conversation around us. There’s a willingness to share your life with the world that seems particularly characteristic of California. The overheard conversation ran like this:

“I like this place. I come here when I’m stressed out.”

“The people seem OK. Not the usual geeks.”

“Hey, man, my sister’s a barista.”

Welcome to Starbucks.

I was watching
Six feet under
, the HBO series about a weird family of undertakers that has become a personal favorite. Two of the main characters went off to the wilderness with a pair of friends, wanting to get closer to nature. The dialogue went like this:

“Wouldn’t it be cool to totally live off the land, to really be part of nature instead of just using it?”

“Not really. I’m going to need my Starbucks today.”

You know a brand has really arrived when it sneaks into everyday consciousness like that.

Looking back, it took me by surprise. I think it took us all by surprise. Even though he exudes the easygoing confidence befitting the chairman of the Starbucks Corporation, it took Howard Schultz by surprise, too.

Starbucks is a phenomenon. A very successful and surprising one. Perhaps that is why it arouses antagonism and envy among many people, while inspiring affection and loyalty among many more.

I remember my first encounter with Starbucks in San Francisco in the mid-1990s. I overheard the conversation that gave rise to the title of this book, and enjoyed not just the coffee, but the experience. I talked with my wife about the lack of a Starbucks back home, and we agreed that it would be bound to succeed in the UK. Of course, a couple of years later it came, everyone saw it, and it conquered.

This was the honeymoon period for the Starbucks brand. It attracted an extraordinary amount of excitement from all directions. In the US, Wall Street and investors bought into it as queues formed outside each new store that opened. In the UK, Starbucks was not the first to enter the market with the idea of coffee plus a lifestyle experience, but those who were first borrowed most of their clothes from Starbucks. Starbucks bought the Seattle Coffee Company and established itself in the UK by rebranding those stores, ready to spread to other parts of the country and the continent. Asia had come a little earlier. After initial trepidation – would Japanese formality allow people to walk out of a shop and sip coffee on the street? – Starbucks basked in the glow of acceptance in Japan and beyond.

Although many could instinctively understand the reasons for Starbucks’ success, the sheer scale of it took people by surprise. Sitting in that San Francisco Starbucks, I could predict “this will work in England,” but even so, the speed with which Starbucks spread was amazing. As I write this now, sitting in a Starbucks in the little English town of Cheltenham, I am aware that there are currently 400 Starbucks stores in the UK. That has happened in less than ten years. No other retail brand has achieved such ubiquity so fast.

Ubiquity. It’s a word that is rarely used except, it seems, in the context of Starbucks. A quaintly Latinate word that is spoken almost to put distance between the speaker and the subject. The honeymoon period came to an end around the time of the anti-globalization protests. It was more a change in the climate than any slowing of Starbucks’ development. Naomi Klein’s book
No logo
was influential in identifying a number of big American-based brands as villains: Coca-Cola, McDonald’s, Nike, Starbucks. The lumping together was a bit indiscriminate, but there was enough semblance of hard evidence to reinforce people’s latent prejudices. In a contest between David and Goliath, we all cheer for David. In a remarkably short time, Starbucks found itself, much to its own amazement and irritation, bracketed with Goliath when it had always seen itself as David. The general perception was that Starbucks had gotten too big for our good. To grow that big that fast it must have played unfairly.

We live in societies where we reward and resent success in almost equal measure. We build things up so that they will fall the more spectacularly. Our societies are deeply, and increasingly, competitive. Brands are now an integral part of this. They are one of the ways in which we establish tribal loyalties. Being a sports fan with a lifelong adherence to a football team is one particularly deep-rooted form of competitive brand loyalty. In
Fever pitch
, Nick Hornby wrote about how as a child moving into adolescence, allegiance first to soccer itself, then to a chosen team, made playground friendships easier to forge. Starbucks provides that kind of playground.

Brands are a shorthand we use to make connections with others and to help define our own identities. The people we choose as friends share similar ideas and attitudes. When we gather, it’s noticeable how we share similar tastes in clothes, entertainment and possessions. It’s true of every generation, not just brand-conscious teenagers. Those most disinclined to agree with this kind of uniformity often have the strongest sense of shared beliefs. So Starbucks gets attacked for destroying cultural diversity on high streets by people who have an extremely narrow range of “acceptable” aesthetics and taste.

The anti-globalization protestors who were at their most vehement at the start of the new century found a readily available symbol of their discontent. Gathering in Seattle, they found a fast-growing global brand on every neighborhood street. Ubiquity, ubiquity; they really do seem to be everywhere.

The case against Starbucks was that behind its smiling, laidback New Age exterior was a capitalist predator bent on exploiting those less powerful than itself. The greatest crime was to force a small independent family business out of existence. This probably happened in some places, but certainly not all. The retail technique known as “clustering” – opening up several shops of the same brand in close proximity – meant that Starbucks appeared to saturate certain areas with its presence. These areas were generally where large numbers of office workers were concentrated, the areas where there was greatest potential demand for coffee shops. It seemed surprising that they could all survive, but generally they did. Not only did they survive, but new competitors opened up next door, and many of the independent family businesses hung on, too.

What happened was that Starbucks – and it was Starbucks rather than any other brand – grew the overall market for coffee drinking. It seems we now have a taste for coffee that few of us recognized twenty years ago. Far from killing off the competition, Starbucks gave us a wider choice of where to drink a cup of coffee than ever before. As well as choice of outlets, we now have a higher quality of coffee than we used to. For all the cynical sniffing by some, Starbucks is a brand that is committed to offering good coffee. You don’t need to be very old to remember the abysmal standard of what passed for coffee in the years before Starbucks entered the scene. The products of Nescafé, Maxwell House, Folger, and even Camp did little to educate their customers in the ways of sophisticated coffee drinking.

This then is a story that has unfolded quickly – at least in terms of conventional business development. How did it happen? What have been the ingredients of Starbucks’ success? Who have been the people behind it all? What has been the appeal to the growing number of customers?

There is no doubt that Starbucks is a thoroughly modern company. It has grown by instinctively understanding and using the principles of branding. Although it has not neglected the conventional “must dos” of traditional businesses – get the product right, construct an efficient distribution network, earn a profit by keeping costs tight – it has never wavered in the belief that its brand is its most important asset.

The brand itself is built around coffee but, in its essence, it is not really about a product. Far more important to its growth than the particular way of roasting arabica beans is the concept of “the third place.” We will explore this further as we go, because it is central to an understanding of Starbucks. But to experience it for yourself, take this book to your nearest Starbucks, sit with the coffee of your choice, start reading and, every so often, look up and observe your fellow coffee drinkers. You will see people on their way to work and on their way home from work, students doing homework, business people having informal meetings, friends gathering for a conversation, shoppers taking a break.