Onward (59 page)

Back in December 2008, we had made the difficult decision to make our annual matching of the funds that partners contributed to their 401(k) retirement plans discretionary instead of automatic, knowing there was a very real possibility that there would be no match. Many companies had made a similar choice as a precaution to ride out the unpredictably weak economy, and while I believed it was the right thing to do fiscally, I also had every hope that, as our performance improved, Starbucks would be strong enough to eventually go ahead and make the match in 2009. Not doing so would, by my own standards, be a failure. Helping partners build their futures and care for their families is a core value of mine as an entrepreneur, an employer, and a son who watched his own family struggle. So in July 2009, when we concluded that Starbucks would indeed be able to match the contributions of eligible employees, I was elated. The news would not make headlines or mean much to shareholders, but for me, the ability to match funds was as important as anything we were able to accomplish all year.

In addition, we also announced that Starbucks would, unlike many companies that had indefinitely capped employee pay, increase
our partners’ salaries according to merit. The amount of the increase would vary depending in part on individual performance, but again I was happy that we were in a position to reward people. Still, I knew our partners deserved even more, and that we would have to deliver.

In the next few days after the earnings announcement, I read headlines that had tones I had not heard in a long time. “Starbucks Swings to Profit.” “Starbucks Climbs as Profit Beats Estimates on Cost Reductions.” “Starbucks Shares Soar Following 3Q Profit Beat.” I also received e-mails from a handful of people who knew, more than most, what the quarter's results meant to me personally.

“It was a very good day. For Starbucks. For its shareholders. And you. Keep it up,” wrote Jim Fingeroth, whose counsel had been so instrumental in setting the stage for my return as ceo. “Turnarounds are not easy, but very satisfying when they're done.”

Mellody Hobson, a perceptive board member whose support had buoyed me many times, sent a quote attributed to Harriet Beecher Stowe:

When you get into a tight place and everything goes against you, till it seems as though you could not hang on a minute longer, never give up then, for that is just the place and time that the tide will turn.

Those words took me back to December 2007, when I was helplessly watching our comps plummet day by day, and then to December 2008 and the angst-ridden dinner in New York City with Billy the night before our analyst conference, when more than at any other moment, doubt had engulfed me.

Yes, Starbucks’ tide had turned. And now I had absolutely no doubts that its performance would continue to trend upward. This quarter was not a peak, but rather the beginning of a climb to create a new kind of company.

The time was coming to turn our attention beyond the United States and beyond our stores to profitable growth via new revenue streams that would have been unthinkable without successfully transforming the foundation of our business.

No longer was Starbucks a flailing house in need of mending. We were a stabilized global organization that could refocus on growth—with all the opportunities and risks that that implied.

I've come to think that I am at my best as a leader when Starbucks is being challenged or fighting for survival. I'm comfortable with, and in a way enjoy, the rugged, steep ascent. That is my nature. And while I would not want to constantly battle against the odds, the raw feeling of accomplishing something that others did not think possible, or leading people beyond where they thought they could go, is extremely gratifying.

Still, rarely do I stop to celebrate a milestone. It is also my nature to look around the corner for what must come next.

In the fall of 2009, after we reported our third-quarter earnings, Starbucks was by no means taking a victory lap, but I was confident that our business would continue to improve. Each week, same-store sales and our revenues in the United States were on the rise, and the fourth quarter's performance shaped up to be even better than the third. It was nice to once again look forward to the earnings call.

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 10
^th
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.