As our fiscal year neared its close, I wasn't feeling a sense of success so much as a sense of relief that the pressure was no longer as intense as it had been during the past year and a half. As much as I thrive on being an underdog, I did welcome a shift from survival to growth mode. Focusing on proactive growth was a right we had earned by virtue of transforming the US business, a privilege I would never again take for granted.
“Starbucks deserves an ‘A’ for turning itself around during the recession. But it will take work to stay at the top of the class,” read an August column in The Wall Street Journal, its title warning, “Starbucks Faces Growth Challenge.” That was correct. Returning Starbucks to disciplined, profitable growth was my next priority, and my immediate and first focus was on Starbucks Coffee International, the unit that included all of our stores and consumer packaged goods businesses outside the United States.
International was by far the company's most exciting and largest prospect. That was why, in early September 2009, I flew to China. I was anxious to ignite our future.
Joyful shock. That was the look on Helen Fei's face.
I was in Shenzhen, China, attending an open forum with about 200 of our Chinese partners. I'd only just arrived in the country and had spent the morning visiting Starbucks stores on what was a brutally hot, humid September day. Today's was the first of several open forums I would attend in three cities during the trip. I was still catching up to the time zone difference—Shenzhen is 15 hours ahead of Seattle—but the energy in the room enlivened me.
In the back, half a dozen baristas in green aprons stood holding trays of small paper coffee cups while other partners from Starbucks’ 34 stores throughout Shenzhen—China's third-largest city, which, amazingly, was a small fishing village only 30 years ago—filled the rows of chairs.
When I stood up to talk to the group, I knew the first thing I had to say:
It's important for me to be very transparent, and I feel like I need to apologize to all of you because I have not been to China in over a year and a half. During that time, we have been incredibly focused on fixing the US business. And that has taken all of our time and our energy—and one of the things that has suffered is the close attention we in Seattle have paid to the exciting growth and development in China. We're very sensitive to that and apologize for it.
But those days are over, the US business is now in very good shape, and we're going to return our focus, attention, and discipline to make sure we do everything we can to accelerate the growth and development of Starbucks China.
After I spoke and answered questions, I took my seat in the front row. There was local business to attend to, and I listened as a translator told me that a partner in the room was about to receive the coveted recognition of being designated store manager of the quarter.
“Helen Fei!” someone announced.
I turned and looked around the room to see a woman in a black short-sleeved polo, her dark hair pulled back from her face, stand up, cup her hands over her mouth, and somewhat shyly walk to the front of the room to receive a framed certificate. It was clear from her expression that she was surprised, and clear from the sound of the applause that she was widely liked and respected. I clapped as she walked to the front of the room.
Later, I learned that Helen was 30, married, and has a son. In 2003 she had moved from her small village to work as a barista for Starbucks in Shenzhen. After two years, she had had to move back home for family reasons, but she stayed in touch with her colleagues at Starbucks and rejoined the company when she was able to return to the city.
Then, in another unexpected announcement, Helen was told in front of the group that in addition to being named manager of the quarter, she was also being promoted from her current position of store manager to district manager. As the tears in her eyes welled up, I sensed that working at Starbucks was more than just a job to Helen.
“Congratulations,” I said a few moments later.
“Xie xie,” she replied, thanking me in Chinese and smiling as we posed together for a photo. I stepped back as others patted her on the back. So many of Helen's generational peers had, like her—and for that matter like me—left their families and come to a big city to make their own way. In some cases, to make their mark. I was proud that Starbucks is an employer China's young people strive to work for. There was so much energy and excitement here, not just in this room, but in almost every Chinese city I visited—a palpable sense of possibility, most notably among young people. The entrepreneurial spirit is alive and well in Greater China, and every time I return I am amazed by just how much change the cities have undergone since my prior visit.
China is, of course, the world's fastest-growing major economy, and with a gold-rush mentality, companies from all over the globe have been flocking here to reach the country's 1.3 billion consumers. We opened our first store in China in Beijing in 1999, and year after year our stores have continued to post positive comps, and profits have improved. Now, in our 10th year, our almost 700-store presence in Greater China is still relatively small compared to what the market can sustain. The booming country offers huge possibility for Starbucks’ retail and consumer packaged goods businesses, and it was now a top priority for the company.
In the near future, China would be Starbucks’ largest market outside of the United States.
The Chinese had embraced Starbucks for the same primary reason that customers in the other 52 countries we operate in had. Quite simply, there has always been a universal appeal in our ability to elevate the coffee experience by creating a connection. In China, people were not only enjoying Starbucks coffee, but also using our stores as an extension of their homes or workplaces—perhaps even more so than in the West. With China's homes being particularly small and apartments remarkably tight, Starbucks’ clean, spacious, safe, comfortable environments are a welcome destination, especially during afternoons and evenings, when our stores tend to be most crowded. And whenever we open a new store, it is not unusual to see a line out the door and down the block.
The third place experience that we had nurtured in the United States is as relevant in Oman, Jordan, as it is in Dublin, Ireland. Or São Paulo, Brazil. Even Paris. In that sense, Starbucks is no longer a Western brand. We've created something that has universal acceptance and fulfills a universal need.
The main challenge we face abroad is, of course, a different one than we had faced in the States and Canada. As Starbucks now knew all too well, growth for growth's sake is a losing proposition. We had to expand with diligence and attention to detail. And in other countries, the details are about being locally relevant and respectfully reflecting the cultures our stores are operating in. Making Starbucks locally relevant without diluting the brand is an ongoing issue that we have to address to a degree that we did not have to in the past. While there are many aspects of the transformation that would be applied to our businesses and stores around the world, creating products that honor regional tastes and traditions is not something that can best be accomplished in Seattle and simply exported. Locally relevant products, to resonate, have to be invented and executed by local talent and leaders.
“Welcome to Starbucks’ INNOVATION Store.”
The bright, hand-chalked sign welcomed several of us into a mock store at Starbucks’ business offices, which serve as the support center for all of our stores in China. It was lunchtime, and our small group was seated at a long rectangular table dressed with a white tablecloth. I was not sure what to expect, but I was hungry and, looking at the small porcelain plates and silverware in front of us, I had a hunch that scones, blueberry muffins, and breakfast sandwiches were not on the menu. I leaned forward on the table, head resting against my hand, just smiling as I listened to our local partners explain what we were about to taste. I almost felt relaxed. After the past 18 months of rapid-fire problem solving, it was a pleasure to sit, listen, and wait to be pleasantly surprised by our partners’ self-directed innovation.
Our China
team had spent the past few months experimenting with new recipes, infusing local flavors into foods and beverages that, one day, Starbucks might serve in its Greater China stores. During the next hour, a parade of new drinks and dishes were placed in front of me, one after the other, many with ingredients Starbucks had never used.
Peanut Mocha Frappuccino.
Iced Oriental Beauty with Aloe.
Then, a thick green drink called Black Sesame Green Tea Frappuccino. I took a sip. Delicious. It was a local twist on one of Starbucks’ best-selling beverages, Green Tea Frappuccino, that had been created in Japan.
“Green tea is an essential ingredient in Chinese culture,” the woman immediately to my right explained to me. “And black sesame is another ingredient that the Chinese use in cooking.” I nodded. Annie Young-Scrivner was the newest addition to the Starbucks leadership team. I had just hired her to be global chief marketing officer, and it was her first week on the job. She was a dynamic presence.
Annie came to Starbucks from PepsiCo, where she had most recently been chief marketing officer and vice president of sales for Quaker Foods and Snacks. A smart, charismatic leader, Annie is someone who I believe will bring to the team the global, multibrand experience the board had been urging me to acquire, as well as deep international perspective, most notably in China. Annie was born in China, and her parents moved to the United States when she was in grade school. She is fluent in Chinese and, over the course of her career, had lived in Shanghai, where she served as region president of PepsiCo Foods for Greater China, and worked in 27 other countries. The thickness of Annie's passport rivals any I have seen. She understands the Asian market as well as the culture to a degree few people in Seattle currently do. Annie elaborated. “In China, black sesame is looked at as a product that has efficacy. It helps your skin, and the women think that it keeps their hair from turning white as they age. The sesame itself is used in a lot of breads, pastries, and as a cooking ingredient for flavor.”
Next, lunch's main course. As each small plate was placed before me, it was obvious that our partners were truly thinking outside of the box. Sesame noodle salad. Spicy Thai beef wrap. Soup. Lasagna! Everything tasted fresh and flavorful, and while I knew our Asian stores probably would not serve noodles—research already told us that our customers in China did not want Starbucks to serve food they could easily get on any street corner—I was impressed by the creativity I was experiencing.
As was Michelle, who sat to my left. She had joined me on the trip, although not purely in a Starbucks capacity. In the past few weeks, I had made the decision to go ahead and unleash one of the company's other brands: Seattle's Best Coffee, or SBC. The 550-store retail and packaged coffee business had been a stepchild quietly operating in Starbucks’ shadow. I chose Michelle as its president and gave her unspecific marching orders: Unlock SBC. Here in China, she was researching SBC business prospects.
Finally, dessert. A single scoop of ice cream affogato with a thick black sesame sauce. At the center of the table sat fruit kebabs and plates of small chocolates and pastries, even mini-sandwiches. Most notably, these dishes were meant to be shared in small group gatherings, social occasions that Starbucks’ food offerings currently did not cater to. But sharing is an intriguing idea, especially for crowded Asian cities such as Shanghai, where personal space is rare and people chose to entertain and gather in public spaces, like Starbucks.
Such sensitivity to regional lifestyles and palates is a critical piece in how Starbucks shows up around the world. Yet I knew that we had to resist the obvious. When we opened in Switzerland in 2001, we had been pressured to put the regionally favored beverage known as kaffe crème on our menu, but on opening day we sold dozens of Frappuccinos and barely any kaffe crèmes. Our international customers, we were coming to understand, wanted to taste Starbucks, not the store next door. But they were delighted when we put a Starbucks twist on their traditions. In Taiwan, when our partners created a product called coffee jelly, a gelatin made with coffee, the popular cool beverage migrated around Asia and became one of the region's best-selling seasonal products.
So even though every food and beverage we sampled in Shanghai that afternoon would not make it into Starbucks’ stores in China, I left our offices encouraged by the possibility that every country where Starbucks operates might exhibit the same entrepreneurial drive. Somewhere on the day's menu was another coffee jelly. Perhaps another Frappuccino. Or VIA.
For me, it had also been great fun to stop for a few moments to taste and ponder what could be.
At its core, I believe leadership is about instilling confidence in others, and being in China at this juncture as Starbucks turned a corner was an opportunity for me to allay fears about the company's stability and then get our people excited about what is possible. About dreaming big. And then bigger.
I also wanted to instill a comprehensive understanding of the lessons learned from Starbucks’ trials. In the earlier years of the company, it was my job to imprint Starbucks’ mission to ensure the brand's consistency across cultures, but now my role is to imprint our most recent wisdom, and in some respects to translate the leadership's new operational mind-set. I am very conscious of not making the same mistakes in China or anywhere else in the world that we made in the United States, and we will proactively share our new tactics and techniques.
As time and resources allowed, we would roll out our new point-of-sale system and the Mastrena to our stores in other countries. Clover, too. Our experts from Seattle would share our new store designs, Lean techniques, and social networking knowledge with managers and our joint-venture partners. We would instill a new level of cost discipline and use our more efficient supply chain to improve distribution around the globe. And we would continue to ensure that each barista knew how to pour the perfect shot of espresso: like honey pouring from a spoon.
I've said often that every enterprise and organization has a memory. And those memories create a path for people to follow. As I see it, the transformation was a brief but specific period in Starbucks’ history, and our memory of its collective lessons will inform our future. They are already informing my leadership:
Grow with discipline. Balance intuition with rigor. Innovate around the core. Don't embrace the status quo. Find new ways to see. Never expect a silver bullet. Get your hands dirty. Listen with empathy and overcommunicate with transparency. Tell your story, refusing to let others define you. Use authentic experiences to inspire. Stick to your values, they are your foundation. Hold people accountable but give them the tools to succeed. Make the tough choices; it's how you execute that counts. Be decisive in times of crisis. Be nimble. Find truth in trials and lessons in mistakes. Be responsible for what you see, hear, and do. Believe.
In the lakeside city of Hangzhou, I stood up once again to speak to our baristas and store and district managers. Almost a year ago, Starbucks’ stock had tumbled to $7.17, its lowest close since 2001. Yet this week, in America, our share price hit an 80-week high, more than $20 a share. While I rarely talked about our stock price, I did mention this to our partners who had gathered on the second floor of one of Hangzhou's 13 Starbucks.
I stand before you today to say that the momentum in the US business continues and I feel we will end fiscal 2009 strongly, going into fiscal 2010 with as much confidence about the future as we've ever had.
But the courage, the creativity, and entrepreneurship that we need in China must come from you. We have to establish a very healthy balance between the Starbucks history and heritage and your own Chinese culture. I encourage you all to challenge the status quo, to start thinking about what we can do to become more relevant. Let's really demonstrate the hunger, the excitement, the entrepreneurship that made this company great. However, we can't turn Starbucks into a company that we don't respect and don't recognize. We must do it in a balanced way.
Starbucks’ transformation was being achieved not simply because we were effectively responding to external economic, technologi
cal, and social challenges, or correcting the problems we had brought upon ourselves. Rather, it was being achieved because of how our partners tried to solve these problems.
If Starbucks is to be a company my father would have felt proud to work for, a company that my wife and children and our partners’ families will hold in high regard, we have to maintain balance on many fronts. Balance between the emotional and the disciplined. Between instinct and information. Between global and local. The personal and the professional, and, of course, between profit and humanity. Doing so will not be easy as we expand our brand and businesses around the world. But the sheer power that Starbucks Coffee has to positively affect the lives of tens of millions of people—partners and their families, customers, farmers, shareholders—is as invigorating for me as opening my very first store.
Before leaving Shanghai, we visited a beautifully designed store in the center of People's Park, a tree-filled oasis surrounded by traffic and office buildings. As we left and made our way across the park on yet another hot, humid afternoon, the store's manager, Li Yan, ran to catch up with us, holding something in her hand. She reached us and handed me a flat wrapped gift. I opened it right there to find, encased in a box, laminated documents in Chinese. At first I did not know what they were, but Li spoke and someone translated. “These are four copies of China's very influential newspaper, People's Daily.” Then Li pointed to the date of one of the newspapers. I squinted a bit to see what she was referring to. July 19, 1953. My birthday. She had presented me with an original copy of a newspaper from the day I was born. The three other newspapers were from special dates in Starbucks’ history: the day the company went public (June 26, 1992), the opening of our first store in Taiwan (March 28, 1998), and when we opened our first store in Shanghai (May 4, 2000). As we each held a side of the box and looked at the newspapers, Li explained that it was a present to me on behalf of her partners. I was beyond touched. Truly taken aback by the thought and effort behind such a personalized gift. “Xie xie,” I said. She thanked me as well and returned to her store.
Onward: How Starbucks Fought for Its Life Without Losing Its Soul Page 35
