Business Unusual

Serving coffee beans to human beings

Starbucks has been run by Howard Schultz for most of the last 40 years. He is stepping down as Executive Chairperson in June 2018. There is much speculation that he may consider running for US President in 2020.

His story is not just about how to build a global brand, but how it could be done while remaining socially responsible to staff, suppliers, his customers and their communities.

Is he some saint or visionary? Not really, but he did take a feeling from a trip to Italy in the 80s and combined it with his own history to create the world’s largest coffee chain.

He has used that to turn Starbucks into a company that operates in over 75 countries and has over 28 000 stores employing over 300 000 staff.

So what did he see in Italy?

He joined Starbucks as marketing director in 1982 and did a trip to Italy the next year. Italy has many coffee shops all serving individually brewed cups of coffee. They also did not only serve as a place to buy the coffee but somewhere to sit and enjoy it, meeting others or simply watching them.

Starbucks in America at the time served filter coffee as part of a meal. While the Starbucks founders had seen the benefit of finding good beans and carefully roasting them, they were not looking to expand the sale of the coffee beyond the main store, just the beans.

The strength of the belief saw Schultz leave and start his own, only to be approached a few years later by the Starbucks founders who wished to sell the retail business to focus on the coffee bean brand.

From 1988 Schultz was CEO. He set about transforming the business and the way America drank coffee. He set about opening thousands of stores in the following 12 years, opting to own rather than franchise most. Looking after one store is difficult; looking after all of them while looking for new locations and managing the supply chain and the staff at the same time seems impossible. But, perhaps, his social approach helped.

Starbucks does not refer to employees as staff, but rather partners. It is not just a marketing or HR gimmick because Starbucks offers share schemes to employees. They also provide healthcare to parents and bursaries for those that are studying.

There is a big emphasis on training to make customers feel welcome although that was tested recently with the arrest of two black men in a store that were waiting for someone. Shultz created a diversity training workshop, shut 8000 stores on 29 May 2018 and took four hours to work through a 60-page guidebook. The training is available online and should serve as a good start for South African companies to emulate.

Besides staff he wanted to ensure farmers were getting fair value for their crops. Large corporations don't have the best reputation for ethical sourcing. However, Starbucks claims to not only have 100% ethically sourced beans, they are working to make coffee the first 100% sustainable agricultural product.

Their expansion to the rest of the world was no less aggressive, with China being a rapidly expanding market with new stores opening almost daily. The world's largest Starbucks is in Shanghai with 400 staff serving on two floors covering over 2000 square metres.

A significant partner in China is Alibaba who manage the cashless payment system and ordering via a mobile app.

Alibaba’s founder Jack Ma and Shultz have long been friends and it appears they share similar values. Ma ranks customers first, followed by staff and then shareholders, as does Shultz, although most multinational are arguably more invested in keeping shareholders happy above everyone else.

For all the growth and expansion of Starbucks, including to South Africa with at least 10 stores, and more planned, the country that started it all for Shultz, Italy, is a planned expansion. In part that may be because there are already hundreds of thousands of coffee shops.

Entrepreneurs are rightfully seen as heroes by many, yet social entrepreneurs are an even rarer breed. Howard Schultz has demonstrated that you can be a huge business, with an impressive returns to shareholders, while also looking after staff and grounding your business to serve the community in which it operates.

This should be a case study for all South African entrepreneurs to not only strive for your company’s success, but those that serve in it and the broader community too.


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