Onward (29 page)

By 1:45 p.m.,
Starbucksgossip.com
was buzzing with rumors and anonymous opinions.

At 2:30 p.m., Cliff hosted an internal conference call with regional directors and district managers while our chief financial officer led the analyst conference call.

Then, at 3 p.m., I began an open forum on the ninth floor. I took the podium in the tense hall knowing that one of our biggest challenges was not tactical, but emotional.

Outside the company, investor sentiment was unfolding and the public dialogue was taking shape. Tomorrow's coverage would be widespread as negative momentum fueled itself.

Starbucks’ closures could be cast as progress toward the company's commitment to transformation, but it was likely that some would frame them as a nail in our coffin.

Six days after the announcement, on July 7, 2008, our stock fell to a 52-week low of $14.95 a share. Wall Street wanted to see much more from Starbucks than just store closings.

“Short-term investors may rally behind the restructuring theme ‘feel’ of this announcement,” read a research note from Goldman Sachs. “However, longer-term investors may need to see further clarity on current business trends.”

“The first step is admitting you have a problem,” wrote Morgan Stanley's John Glass. “The rationalization is welcomed, but does not negate near-term fundamental challenges. While we believe the brand is and will remain relevant to the U.S. consumer, there is no quick fix to turn around this company.”

The coverage by almost every major newspaper, business website, and national broadcast news outlet confirmed our predictions about the media's focus and tone.

“Starbucks Goes from Venti to Grande,” wrote
Time.com
in one of the more neutral headlines.

“Is the Global Domination of Starbucks Finally on the Wane?” asked an opinion piece that first appeared in the United Kingdom and was reprinted in the
Seattle Post-Intelligencer
.

At
Forbes.com
: “Starbucks’ Dark Side.”

In
Fortune
: “Starbucks Has a Bitter Plan.”

A Motley Fool syndicated newspaper column claimed that a “tag-team of doughnut shops, fast-food joints, and quick-service diners” was crowding us out of the market, while the
San Francisco Chronicle
argued that our 600 store closures was proof that the US economy was in a recession. “Americans have decided to give up their $4 lattes,” it read. “In 2008, a better definition of ‘recession’ may not exist.”

Then this from the
Christian Science Monitor
: “Why Starbucks Lost Its Mojo.” The piece hypothesized that Starbucks got into trouble because we created a sense of “cool” for customers by “giving middle-class Americans exactly what they thought they wanted,” a way to generate envy or status. Narrow viewpoints like the
Monitor'
s aggravated me because they overlooked or perhaps begrudged Starbucks’ mission and very real social contribution: human connection. Yes, this raises cynics’ eyebrows, and yes, for some customers Starbucks is an aspirational brand or even a token of pride, but the latter is an unintended effect of what we originally set out to do.

Starbucks never set out to be cool. We set out to be relevant!

And few things were more necessary, were more relevant, than human connection, especially as the world was going through such upheaval and uncertainty.

Starbucks never encouraged our baristas to be cool, but rather to be friendly and knowledgeable about our coffee and to engage with, laugh with, and reach out to their customers. The company does not make investments in health coverage and ethically source our coffee because these things are “cool.” They are the right ways to conduct business.

The company's hard times could not be reduced to one cause or the death of some pop-culture trend. As I was learning every day, the story of our trials and tribulations was just not that simple.

On July 9, 2008,
The
Wall Street Journal
picked up on a national phenomenon that we were dealing with back in Seattle: “Not knowing
whether their local Starbucks will stay open is making customers and employees jumpy,” began the article.

In Starbucks stores around the country, not only were our baristas worried about their own store's fate, but our regular customers also feared their daily routine was about to be disrupted, and they came at baristas with a barrage of questions our people could not answer: “Will you close?” “When?” “What will
you
do?” “Where will
I
go?” A blog speculating which stores might get the ax sprang up, and as anxiety grew, Starbucks was widely criticized for not publicizing the complete list of closures.

Clearly we'd underestimated the anxiety that would result from not identifying which stores were scheduled to close. Out of respect we had wanted to inform our partners in person before their stores’ fate went public, as well as prevent an employee exodus or lax customer service in the months before a store actually ceased operating. Originally we had planned to reveal the first 50 closures by mid-July and the balance over many months. But once we recognized the degree of public angst, we very quickly changed course and released the full store list on July 17.

Then, in an ironic twist, something unusual occurred. After referring to Starbucks as a pricey extravagance, public discussion shifted as our customers and communities around the country pleaded “Save Our Starbucks.” Their calls came in many forms. E-mails. Letters. Even petitions piled on Cliff's desk. On one independent website—
Saveourstarbucks.com
—the posts rang with emotion.

“Starbucks is more that just a coffeehouse,” wrote a woman vying to save a store in Chino Hills, California.

You go to Starbucks to meet friends; bring the kids for some cold drinks on a hot, sunny day; study; work on the computer; read, or just enjoy some quiet time in a comfortable armchair. This Starbucks has really become a part of our little community and we want to do what we can to help.

From a gentleman in Niles, Ohio:
Please don't close our North Common Starbucks. My wife and I go there every day for our drinks. We know the staff and they know us. They have become our friends.

From an Indiana resident:
PLEASE PLEASE PLEASE DO NOT close the Starbucks here in Portage, Indiana, on Rt. 6!!!! This
is the BEST Starbucks we have EVER been to. Not only is it clean and the staff, ALL the staff, is always friendly but they seem to take pride in the store. . . . We ALWAYS go to this location. . . . We love everyone who works there. They really go the extra mile to make everyone happy. . . . PLEASE reconsider!!!!!!!

A few lines from a woman in Minnesota summed up so much of what we were hearing: “I can't believe that ‘my’ Starbucks is closing. You never know how important a place is until you are about to lose it.”

My personal mail was filled with more of the same, and I noticed a theme:

Dear Mr. Schultz,

For the past two years I have been coming to the Starbucks on Phillips Avenue in Jacksonville, Fl. The staff here has been wonderful. This particular team has been genuinely warm and personable day in and day out. So from my viewpoint, I would certainly consider this store to be a winner for you.

There were more like this. Most notably, the spontaneous flow spoke to our role in communities and the high quality of our store managers and baristas who provided the Starbucks Experience every day. From where I sat, I saw our customers’ sentiments as proof that our store partners were succeeding and that I was not the sole or even the most important ambassador of the brand.

Back in Seattle, Cliff, Arthur, and Mike were spending an inordinate amount of time reading more heartfelt e-mails, some including passionate promises that their favorite store would bring in more business. Our people held conference calls with mayors, at least one governor, and city officials from around the country and also talked one-on-one with partners at “safe” stores who were standing up for fellow partners at closing stores.

One day Mike, who had been through mass store shutdowns at other retailers over the course of his career, turned to Cliff. “You know, this kind of outpouring would not happen at other companies.”

It was challenging for everyone to keep emotion out of the work that needed to be done, and for every single store we received a letter about—every single one—Mike's team conducted another financial review. But rarely, if ever, did the numbers justify reversing a decision.
It wasn't easy for them to stick to their guns, but Mike and his team kept the bigger goal in mind: Rightsizing Starbucks’ retail portfolio as quickly as possible would, in the long term, secure the health of the company's future and of the 6,500 US stores that would remain open.

For months Mike and his six-person team of real estate experts, with backup from lawyers and outside consultants, camped out in a conference room, perpetually on the phone with any one of hundreds of landlords, unwinding our legal obligations and leases. It was difficult, detailed work.

For more than 20 years, Starbucks had been a desirable tenant, and a traffic-generating magnet for other tenants. Because of the financial strength of our company, developers often felt more secure signing a lease with Starbucks than with other retailers. Now our landlords, many of whom Starbucks’ partners had established relationships with, were seeing another side of the company, and their reactions ranged from calm cooperation to intractable rage. Each developer or management company faced its own economic challenges. Huge public real estate developers, real estate investment trusts, had to answer to their own shareholders. For the independent landowner, a single vacancy at a strip mall might mean not being able to pay the bills or delaying retirement. We tried our best to strike fair deals and spent millions of dollars to make the best of a bad situation for all. Trying to put ourselves in the shoes of the landlord and act accordingly expedited the process.