On 26th February 2008 Howard Schultz closed every Starbucks in the USA. It was a dramatic and unprecedented move by the once and present chief of Starbucks. Schultz had built the company, turned it into one of the world’s best-known brands, run it for many years, moved away from day-to-day running of the business as chairman, then became so concerned that he felt compelled to return as CEO in January 2008.
He came back because he believed that Starbucks had ‘lost its soul’. He was determined that it would recover its soul, by returning to the principles, values and spirit that had created the Starbucks brand. The one-day store closure was to retrain the baristas, to reassert the Starbucks romance with coffee. This came with a huge risk and cost – actual and potential – but it paid off. Stock that had been trading at $7 subsequently rose to $55 after Schultz’s return to brand principles.
Howard Schultz tells the story of the turnaround in his book Onward, a stirring tale of leadership in the face of adversity. Starbucks has now bounced back in the eyes of Schultz, customers and business analysts. The recovery has all been about restoring the value and distinctiveness of the Starbucks brand.
This makes the book I’m now introducing as relevant as ever. It’s the story of the Starbucks brand and it was originally written and published in 2005 when Starbucks was at its most Camelot-like height of wellbeing. It describes the story of the company’s foundation and growth, the pivotal role of Howard Schultz, and in particular the development of the brand that is the driving force for Starbucks’ success. It’s what Howard Schultz means by ‘soul’. When you read this story you will be reading the Starbucks brand story, but you will also be reading a book about branding. Because, as I write in this book, Starbucks is in many ways the quintessential modern brand. I’m happy to stick by these words:
“Starbucks is actually one of the purest examples of a brand that we have. It starts with a commodity product – coffee beans – and invests them with extraordinary added value by creating an experience that transcends the simple act of drinking an unnecessary beverage.”
Seven years on from the time I wrote that originally, Starbucks has grown again. The numbers – of countries, outlets, sales – change constantly so you can never fix the story of Starbucks by using these business measures. What matters more, and what is enduring, are the brand’s principles, values and philosophy. This means that I’m able to say that the story in its essentials is as up to date now as it was on first publication. Perhaps the story has even been proved true by the test of time. All the lessons and conclusions that I drew about branding are as relevant now as they were when first written.
It should be recorded, though, that there have been some major changes since 2005. Let me update you on those changes under four headings.
Howard Schultz’s return sent a powerful signal to many audiences, not least the internal one. His swift decision to close the US stores for a retraining day was dramatic, risky but right. It stemmed from a feeling that the company had taken its eye off the ball. In effect, Schultz was saying (to adapt Bill Clinton’s election-winning mantra): “It’s the coffee, stupid.”
Starbucks is first and foremost about coffee. It needs to cherish and build its reputation for coffee expertise, and Howard Schultz felt that the reputation had slipped. The change in the coffee market, driven to a large extent by Starbucks over the last three decades, meant that the taste for better coffee was now an irreversible trend throughout the world. Forays into music, once seen as an interesting and possibly vital part of the future, were now considered a distraction because they softened the focus on coffee.
At the same time, as part of this reassertion of fundamental values, Schultz was restating his belief in Starbucks’ people and its core values that are centred on people. He was not afraid to take principled stands – for example, in favour of employee healthcare and gay marriage – that would make him and Starbucks deeply unpopular in many constituencies. As a symbol, Schultz took to brandishing the key to the original Pike Place store in meetings, emphasizing his personal, emotional commitment to original Starbucks principles. As part of this process, a team redrafted the mission statement (very much in tune with the 1990 version) to begin with the following words: “To inspire and nurture the human spirit one person, one cup, and one neighbourhood at a time.”
In the early years of the millennium Starbucks seemed hell-bent on growth. It expanded into new regions and countries at a rapid rate, opening new stores at dizzying speed. In doing so, a large element of homogeneity entered the brand and its store design. It seemed that one size/one design would fit all, and there was a sense of Seattle imposing its view on the rest of the world. And the rest of the world, with a wider range of competitors now on offer, was signalling that it no longer wanted to accept this.
As a result, Howard Schultz initiated a number of important design changes to the stores, the products and the graphics. Experimental ‘new look’ stores opened to test the market. Customers responded well. Now, more than previously, new stores are individually designed to reflect the places where they are situated. Centralized design has been abandoned.
In the same spirit, there is now much greater latitude for different countries to respond to their own cultures and tastes in eating and drinking. In France, for example, you can order a mild or a strong espresso. This greater flexibility reinforces Starbucks’ commitment to its core product, coffee.
A brand’s logo is too often seen as the be-all and end-all of a brand. Many brand redesigns have been pilloried as the result of a logo redesign. Starbucks managed to get its redesign right – it was seen as a natural move for an international brand to update and simplify its logo. This made sense especially since the visual element of the brand had become so universally recognised. By focusing strongly on the graphic element of the siren, presenting it more boldly, Starbucks achieved a new logo that was more striking and adaptable than the previous one – and that would work in countries where languages other than English were spoken.
A Starbucks executive said to me recently: “We’ve moved away from store count. The era of rapid expansion is over – we want to be in places where we’re welcome.” Behind the comment is a certain amount of irritation at unjustified criticism but also a reinforcement of Starbucks’ belief that it can be a force for good in the world. Starbucks has always tried to be fair and generous with partners, suppliers, farmers and developing countries but has received little credit for it. This does not stop it continuing good practices, building them because they are inherently worthwhile not because they have publicity value.
A number of initiatives have restated Starbucks’ more altruistic beliefs. After the New Orleans devastation, Starbucks partners voluntarily contributed their own efforts to help get the city back on its feet again. A European Youth Foundation has been launched, and every year European baristas go to African coffee plantations to understand and contribute to the efforts of those communities. US partners go to plantations in Costa Rica, Asian partners to Indonesia. Farming support centres help African farmers with agronomy training, aiming to achieve higher yields of better coffee. This will help the farmers while also bringing benefits to the company of supply security.
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 20th 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.
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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
