Coffee empire built on shared values

Howard Schultz, head of US java giant Starbucks, talks about his optimism over China and how the firm has harnessed its workers' talent

Seventeen years ago, when Starbucks Corp opened its first store in Beijing, the idea was pooh-poohed by many who said coffee did not stand a chance in a tea-drinking nation like China.

"That has all changed. We now have 2,000 stores in 90 Chinese cities and the country is probably the largest international market for us, even larger than the United States," says Howard Schultz, chairman, president and chief executive officer of the US-based global coffee chain Starbucks Corp.

Despite economic challenges, China has a brilliant future, Schultz says. "I am not saying this just because the middle class population in the country is doubling from 300 million to 600 million. It also has a lot to do with the nature of Chinese people and their penchant for hard work. I have seen for myself what can happen when a young Chinese person puts on a green apron," he says.

Schultz recently spoke to China Daily about Starbucks' corporate culture, its local business strategies and the secret to its success. The following are edited excerpts.

Starbucks' sales in China and the Asia Pacific market increased 9 percent in 2015 compared with the previous year. What has propelled the growth and how do you plan to sustain the momentum this year?

Our success has not just been in Shanghai or Beijing, but also in the second and third-tier cities. Starbucks has stores in more than 90 cities in China now.

I think we are now a brand that is trusted by Chinese customers. The quality of the experience and the strengths of our partners bring Starbucks to life.

I think people are looking for a place that is rejuvenating and we have been able to give them that through our stores in the country.

Our success has also been shaped by good coffee and beautifully designed stores. But the real reason for success is that our partners have often exceeded the expectations of customers with their warmth and caring attitude.

We plan to open 500 new stores in China this year and I think our growth prospects look robust for the time being.

Starbucks employees are often given health benefits and other incentives. Is this your way to build a business that is profitable and one that shares its success with the community?

Early on, Starbucks was the first employer to give stock options and additional healthcare to employees. Today, we offer additional benefits like housing subsidies and one-year leave without pay.

We had a great year in China in terms of performance, and the philosophy of the company has always been to share the success.

I think we also want to demonstrate to the parents today that we understand the responsibility of taking care of their children.

As a public company, we have responsibility to create shareholder value and make profits. But we also have to bring our people along with us on the journey.

Most of the companies put the shareholders on top and the employees at the bottom. But we have turned it upside down.

We said we cannot create long-term value for the shareholders unless we create long-term value for the employees. Though that philosophy started in the US, it now percolates to other markets like China also.

It is an emotional journey to see the Starbucks partners. They are so authentic and so genuine. You cannot manufacture that.

What's your plan in the smaller cities of China?

Some of our new stores will be in the third and fourth-tier cities. We have to earn the respect of those customers in small cities, but the reputation of Starbucks will stand us in good stead as we expand.

Do you plan to bring new businesses such as Teavana to China?

We plan to introduce Teavana beverages in Starbucks stores in China this year and later on have exclusive Teavana stores. But for now, there will be Teavana beverages just in Starbucks stores. Globally, tea outnumbers coffee in terms of customers and much of that growth is coming from young customers. Teavana tea is more suited for this segment and the flavors and innovation we create are targeted at the younger generation.

Starbucks opened its flagship store in Tmall.com in December. What will be the next steps in your expansion strategies?

I think it's fair to say that our digital and e-commerce as well as mobile plans will continue to foster new innovation this year. We hope to bring Mobile Order & Pay into China, but I cannot tell you exactly when. We run Mobile Order & Pay just in the US and it is relatively new. It has been received very well. You will see that coming to China soon.

How do you foster happiness among your local employees?

The culture and the value of the company run very deep. You treat people with great respect and you honor them, whether they are American or Chinese, or Asian or Middle Eastern. In China we have 30,000 people working for Starbucks, and they feel that they are being treated with great respect. That is what we want to show to our customers.

What is your ideal company?

I grew up in the Canarsie Bayview Houses of the New York City Housing Authority, which provides public houses for low-income residents. I had lots of dreams and aspirations, but I was also perturbed by the endless pain and suffering around me.

The biggest concern for me was that my father, who was uneducated, had a series of very bad jobs. As a result, he was not respected or valued at his work place.

As he got older, I noticed that he became bitter. I never imagined or could believe that one day I would be in a position to start my own company or grow a global company. All along, as we were thinking about the future, what I had in my mind was trying to build the company that my father never got a chance to work for.

In 1987, we had 11 stores and 100 employees. We did not have partners in America then. But we had the dream and expectations of building a different kind of company, a company that makes profits and shares it with employees.

I had no money to build that company. I had to go outside to find money from other investors. When I told them about my theory of building a different kind of company and about sharing success, most investors said no. They said you cannot build a company that gives so many things back to its employees. You have to give that to the shareholder, they said.

I believe that is the wrong thing to do. We had to take the road less traveled.

I believe in the humanity of people. I believe as managers and leaders, the only way you can build a great company is if you can balance the expectations of customers with the expectations of the employees. That was in 1987.

There are 23,000 Starbucks stores in 70 countries. In one recent week, 85 million people went to our stores and over 300,000 people around the world are proud of wearing the green apron. It is hard to believe how it happened. But it happened because we share our success.

Bio

Howard Schultz

Age: 62

Education: Bachelor's degree from Northern Michigan University, United States

Career:

1982: Director of operations and marketing at Starbucks

1987: CEO of Starbucks

2000: Chairman of Starbucks

2008 onwards: President and CEO of Starbucks

Honors:

Fortune's 2011 Businessperson of the Year

Distinguished Leadership Award from Northwestern University's Kellogg

School of Management

Botwinick Prize in Business Ethics from Columbia Business School

First-ever John Wooden Global Leadership Award from UCLA Anderson School of Management.

Named in Time magazine's "Time 200," a list of the most influential people in the world.

wangwen@chinadaily.com.cn

( China Daily Africa Weekly 02/05/2016 page31)