Schultz at Starbucks: Coffee, Activism and Controversy
After more than three decades managing Starbucks’s growth from a tiny local chain into a global coffee giant, and wading into touchy political topics along the way, Howard Schultz is leaving the company.Posted — Updated
After more than three decades managing Starbucks’s growth from a tiny local chain into a global coffee giant, and wading into touchy political topics along the way, Howard Schultz is leaving the company.
Schultz, the executive chairman, is relinquishing all of his duties at the Seattle-based chain. The move is likely to fuel speculation that Schultz is preparing to run for office, though he said he’s thinking about a range of options, including public service.
Schultz, 64, joined Starbucks as its marketing director in 1982, was inspired to turn it into a community hub after a trip to Italy in 1983, and purchased the chain in 1987. Starbucks now has more than 28,000 stores globally.
In 2000, he resigned as chief executive and became the company’s chairman. He later returned as chief executive and has helped run the business for more than a decade since.
Anemic sales at Starbucks had led to the company’s stock losing half its value in a single year, so Schultz fired James L. Donald, the chief executive, and installed himself in the top seat. He pledged to bring “laserlike focus” to reining in the chain’s unwieldy collection of locations and products and reviving the company’s original appeal. Within a month, Schultz said that Starbucks would discontinue breakfast sandwiches, whose scent, he said, “interferes with the coffee aroma in our stores.” He also slashed head count, cut a swath through top management and closed underperforming U.S. stores.
Starbucks introduced Via Ready Brew, an instant coffee option, which was more affordable than many of the chain’s more complicated concoctions. Many saw the product as an attempt to attract consumers battered by the recession. The chief executive had pushed for a nationwide Via debut in January 2009. But cooler heads prevailed, and skeptical consumers were introduced gradually to the product, with a test run in Seattle and Chicago followed by a nationwide rollout. In 2010, Via pulled in more than $200 million in revenue.
As Schultz closed hundreds of U.S. stores, he pushed for aggressive overseas expansion into India, Brazil and elsewhere. Under his watch, Starbucks’s corporate structure was reworked to include three divisions focusing on Asia, the Americas and a broad region that included Europe, the Middle East and Africa. In 2017, Schultz said that China would eventually be a larger market for the company than the United States.
The company began looking beyond Frappuccinos, buying the parent company of bakery brand La Boulange. In November, Starbucks agreed to purchase Teavana, a purveyor of high-end teas. By late 2013, the company had spent $750 million on the two companies as well as on the juice brand Evolution Fresh. “We have a lot going on,” Schultz said.
Months after a gunman killed 26 people, most of them young children, at Sandy Hook Elementary School in Newtown, Connecticut, Starbucks asked customers not to take firearms into and around cafes. Schultz acknowledged “the emotionally charged nature” of the gun rights issue but said that he was trying to consider customers who “have been jarred and fairly uncomfortable to see guns in our stores.” In an open letter, he wrote that gun rights activists were using the stores “as a political stage” for events that “disingenuously portray Starbucks as a champion of open carry,” which in turn provoked protests from gun control supporters. Under Schultz, the company has also circulated a petition about a 2013 government shutdown and applauded a 2015 Supreme Court ruling about same-sex marriage.
Hoping to generate conversations after a rash of shooting deaths of black men by the police and racial tension around the country, Schultz came up with a plan to have baristas write “Race Together” on cups. The initiative instead incited derision and outright hostility toward employees and executives. Schultz ended the initiative within days, saying that he had not expected “universal praise.”
Schultz led a group of nearly 20 U.S. companies, including Microsoft and Walmart, in supporting an effort to find full-time jobs, apprenticeships, internships and other work for jobless youth. The 100,000 Opportunities Initiative was driven by an unemployment rate for young workers that, at 18.1 percent, was more than three times as high as the rate for the overall workforce. A year earlier, Starbucks began a plan to cover much of the tuition for baristas earning an online college degree from Arizona State University.
In his second attempt at relinquishing power, Schultz said he would resign as chief executive in April 2017, passing the job to his close friend and chief operating officer, Kevin Johnson. Schultz, who had increased the chain’s market value more than sixfold during his stint as chief executive, stayed on as executive chairman, in part to lead Starbucks’ social justice initiatives. “I got succession wrong the first time,” he said, adding that he was “not going to be hovering and shadowing” Johnson.
Starbucks swung into damage control after two African-American men were arrested in a store in Philadelphia in April while waiting for a business meeting to start. The company apologized, revised its guest policy to allow visitors to sit without making a purchase and designed companywide anti-bias training. In May, several weeks after the arrests, Starbucks shut down 8,000 U.S. stores and paid 175,000 employees to take the 4-hour training on nearly 23,000 new iPads. Schultz made the publicity rounds, walking reporters through a preview of the program and talking up the company’s compassion on several television shows.
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