Name: Howard Schultz
Age: 57 years
Profile: Chairman and CEO of Starbucks
Early Years: Born in a poor Jewish family in 1953, in Brooklyn, New York. One of the jobs he did when he was young was stretching fox skins. “It just teaches you at a young age what it takes to make money.”
The Big Break: Joined Starbucks in 1982 as director, marketing. Bought the company in 1987.
Aim: To establish and grow the Starbucks brand in developing markets without sacrificing quality.
This is your first visit to India. Have you got a sense of the café culture here?
We’ve had many people visit India for the last two years on and off to assess the opportunity in the market. We’ve collectively concluded that we have to be here and that there is a large opportunity. It won’t be easy. This is a difficult challenge and no one should underestimate the degree of difficulty. But having said that, we’ve had difficult challenges before in other markets, not least of which has been China, where we’ve been very successful.
We are excited and at the same time humbled by the challenges to navigate some of the systemic situations that exist here. In terms of the café culture, without saying anything disparaging, we think there is a fair gap between quality, execution and between what is in the market and what Starbucks does every day. But no one should assume that our success elsewhere in the world will give us success here. We have to earn it.
The Indian market presents serious challenges because affordability is a big virtue. How critical is it for Starbucks to hit the right price points?
I can’t speak for what other people have done. If you look at our history in international markets since 1996, our pursuit of quality and excellence and the experience we have created around the world… there is a common thread of people realising that this is a company pursuing quality at every level and not lowering its standards for any market around the world. I think what we’ve learned is whether it is an emerging market or not, the consumer aspirationally wants quality and they want the true experience. I think it would be very disappointing for us to come all the way from Seattle to India and water down the experience because we don’t have the courage to create something that is consistent with our heritage. It is encouraging to see that the Indian consumer is frequenting many coffee stores but I don’t think their brands have been developed. It is almost as if people are just intercepting traffic. Just like we have done in China, we will create local relevancy, especially on the food side.
What’s the gap between coffee chains in India and what Starbucks offers?
I don’t want to sound disparaging but I have been in this business for the last 30 years and I don’t see anything in the marketplace that rivals anything we do. Also, a lot of these stores are franchised and so they’re independent operators. I question the way these stores are
Why did you come back in January 2008 as CEO?
There were two things going on. One, the financial crisis was very tough in the US. Two, when I returned, we had our own internal challenges. Those challenges in many ways were self induced. The company had made a series of decisions that in many ways were not the right ones. And even though I was not the CEO — I was the chairman of the company — I was busy doing other things and not paying enough attention. I was still culpable. I did come back to transform the company. In the last quarter we had record revenues, record profits. It was our best quarter and best year in the history of Starbucks. The momentum and foundation has been rebuilt in terms of innovation and store design. In addition to that we’ve had innovations that have hit the bullseye. One was the reinvention of the instant coffee category with Via. It did $181 million in its first 12 months and we’re just getting started. We’ve aggressively grown our international business and have record profits internationally, led by China.
We spent so much time rebuilding the domestic business and then John Cluver [president, Starbucks Coffee International] and his team were able to leverage lots of the progress we made in the US on to the international business, which began to give us great traction. There were four things we focussed on — building capability in the market, investments in people, engaging our customers around locally relevant products and operation and execution. We’re one year into the transformation of the international business.
How has the organisation dealt with the fact that the centre of gravity has begun to shift to the developing world?
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(This story appears in the 11 February, 2011 issue of Forbes India. To visit our Archives, click here.)
How Star Buck will benefit itself by associating with India. SWOT analysis need to be seen with magnifying glasses and how assistance be provided to SB.on Mar 6, 2011
It will be interesting to see what SB's strategy in India will be. Coffee is anyways a low margin biz and theres not much they can do with the product pricing. So whats the plan? Also, other than the Tatas will they be looking at new partners?on Feb 21, 2011
Here in the Middle East, Starbucks has the most inconsistent experience one can have for a chain which claims it is "all about the experience". Dirty sofas and chairs, irregular merchandise and inattentive staff are problems plaguing Starbucks here in GCC countries. I'll be surprised if a year from now, the 'experience' in India is any different.on Jan 31, 2011