Advertising

Sunday, November 4, 2001 - Page updated at 12:00 AM

E-mail article     Print

Starbucks turned a shot into a grande

Seattle Times business reporter

Her mythical likeness looms invitingly over thousands of coffeehouses worldwide. But lately, the Starbucks siren has been keeping an anxious watch over her realm.

She has seen protests by organic-food consumers, vandalism to her stores in Chicago and Sacramento, and a boycott by activists in Seattle's Central Area. Windows bearing her image were shattered in downtown Seattle in the World Trade Organization riots of 1999.

Since her debut 30 years ago at the first Starbucks in the Pike Place Market, the siren has become a symbol of global capitalism, beckoning some 15 million customers a week to more than 4,800 stores around the world. She is the face of a company that topped $2 billion in sales last year and whose product recently was named the world's fastest-growing brand.

But ubiquity carries a price. The company has emerged as a target for a growing number of critics with varying objectives but a shared view of Starbucks as an icon of corporate power.

For better or worse, it has joined the legion of America's most visible companies, drawing comparisons to McDonald's and Levi's. As the company continues to expand at a dizzying pace — with three new stores a day — it continues to open the door to opportunity and scrutiny.

Modest ambitions

Starbucks began with modest ambitions. In April 1971, three friends opened a gourmet coffee-bean store at Pike Place to introduce people to "the difference between good coffee and run-of-the-mill coffee," said Zev Siegl, who founded the company with Jerry Baldwin and Gordon Bowker.

"Our aspiration was to create a regional company that Seattle would be proud of," said Siegl, who sold his stake in 1980, when Starbucks had four stores. "We did not aspire beyond that."

Those small-scale plans changed forever when Howard Schultz walked into the store in 1981. Schultz, then a New York-based vice president for a Swedish housewares manufacturer, was bowled over by his first sip of the dark-roasted coffee and urged Baldwin to hire him.

Schultz got his wish in 1982, signing on as director of marketing and retail stores. Five years later, Schultz led a group of investors to buy the company and began expanding it aggressively.

The company swiftly established itself as the first national marketer of specialty coffee, growing from 17 stores at the end of 1987 to 165 in 1992, the year its stock was sold publicly. By 1996, it had 1,000 stores, including its first international outlets in Japan and Singapore.

'Changing the game'

Today, Starbucks spans four continents and is nearing 5,000 stores. Its brand was called the world's fastest-growing last year, ranking 88th in a study by Interbrand, a New York-based brand-valuation firm, which assessed the Starbucks brand at $1.8 billion.

What makes Starbucks so intriguing from a marketing standpoint is "they've done it organically and at the consumer level without advertising much," said Jeff Parkhurst, Interbrand's director of American brand valuation.

"They did a great job of changing the game on the role of the brand," he said. "With Starbucks, there's more of a social experience tied to the brand. They even changed the names: Instead of medium and large, there's tall and grande."

The company has focused on creating an inviting atmosphere for customers, designing stores as a gathering place. As the idea caught on, Starbucks came to represent a lifestyle as much as a product.

Robert Thompson, professor of media and popular culture at Syracuse University, said Starbucks "is now part of mainstream American culture, as much as something like 'Is that your final answer?' or 'You're voted off the island.' "

Such visibility can cut both ways. As Thompson put it, "any stand-up comic worth their salt ... has a couple good Starbucks jokes." Even Dr. Evil had green-aproned baristas in his Space Needle headquarters in the second Austin Powers movie.

But anti-Starbucks sentiment has spread far beyond good-natured ribbing. The company was a prominent target during the WTO protests in 1999, when stores in downtown Seattle were vandalized and looted.

Over the past year, activists have pressed the company to do more to support the fair-trade coffee movement, which aims to ensure that indigenous farmers in foreign countries are paid fair prices for their beans. Vandals in Sacramento struck Starbucks several times over the summer, while others in Chicago glued the locks at 14 stores. And the Organic Consumers Association, based in Little Marais, Minn., is staging a leaflet and protest campaign demanding that the company eliminate products containing bovine growth hormone and buy more fair-trade coffee.

Ronnie Cummins, the consumer group's director, said campaign organizers considered targeting conglomerates such as Kraft, Nestlé or Procter & Gamble, which sell canned coffee that represents the majority of U.S. coffee sales. But the group ultimately decided on Starbucks because the company has its own stores and a socially minded customer base.

"Starbucks is highly visible — they're everywhere," Cummins said. "Everywhere there are socially conscious consumers, there are also Starbucks outlets. It's hard to get at Kraft because they're just one of thousands of products in grocery stores."

Nothing to do with coffee

Sometimes, the protests have nothing to do with coffee. In Seattle earlier this year, the company was pulled into a debate over racial profiling when community activists urged a boycott of a Central Area store in connection with the death of Aaron Roberts, a black man shot by a white police officer. While the company had no connection to the shooting, the activists said they wanted Starbucks to urge police reforms.

"As partners in the community, they have a corporate responsibility to demand police accountability," activist Dustin Washington said in June.

President and Chief Executive Orin Smith finds that rationale troubling. While Starbucks strives to be a good corporate citizen, Smith said, "there's no way we can do it all the way a lot of organizations would like us to."

The company hasresponded to some of the activists' demands. Last month, it donated $1 million to coffee farmers in the developing world and promised to buy 1 million pounds of fair-trade coffee in the next 12 to 18 months. The company now offers organic milk for an extra 40 cents a cup.

Starbucks has contributed millions over the years to literacy programs, Conservation International and CARE, the worldwide disaster-relief organization. Last year, the company gave $7 million to charity, with employees adding $5 million.

For more than a decade, the company has granted stock options and health benefits to all employees who work at least 20 hours a week, making Starbucks one of the few companies to offer such incentives to part-timers.

Looking at that record, Smith said, "it's a pretty unfair and short-sighted point of view for those organizations to go after the ones that are trying, versus the ones that say, 'I don't give a damn.' "

Cummins concedes that Starbucks is more socially conscious than many companies, though he says it overpublicizes its charitable acts. He places it "somewhere in between a real socially responsible company and a bottom-line, business-as-usual type of company."

Learning the hard way

Starbucks is hardly the first company to experience the pitfalls of visibility. In the late 1990s, activists went after Nike to highlight substandard labor conditions in overseas factories operated by subcontractors — even though competitors such as Reebok and Adidas made shoes in the same factories.

Maria Eitel, Nike's vice president for corporate responsibility, said the Beaverton, Ore.-based company "learned the hard way" what it was like to be targeted by activists. She said Nike has found that the best way to handle criticism is to deal with it directly.

"A few years ago, I think people saw this as an adversarial 'critics attack, company responds' issue," Eitel said. "To me, that's over. If you're in that position, you've already lost."

Last month, Nike released its first corporate-responsibility report, outlining its environmental and labor practices. And Eitel said she's in regular contact with activists, "from the most extreme to the most moderate."

"I think when the company was first attacked, as is natural, we were defensive," Eitel said. "What we've really decided as a company is that we'd be open and direct and that we would learn."

Starbucks also has made efforts in line with that philosophy, forming a department of corporate social responsibility last year, now headed by Dennis Stefanacci. Smith says he, too, tries to learn from the company's critics.

"While I may not agree with a lot of the people who hold some of these positions ... I'm looking for the kernels of truth in whatever it is that they're promoting," Smith said.

Protests against Starbucks have been hurtful, said Schultz, now chairman and chief global strategist. But he believes they are a consequence of growth.

"I remember the early days of Starbucks," Schultz said. "We were revered as the underdog and the small company. And now we're not a small company. We're large and ubiquitous, and as a result of that, we're a target.

"I do feel very strongly, though, that many of these groups are ill-informed about Starbucks being the poster child for whatever the protest of the day is. ... If people kind of got underneath the company and looked at all we do, maybe they'd have a different view."

Protests too vague

Parkhurst, the brand analyst, said Starbucks' image and bottom line haven't suffered much because of the protests. "It just depends on how core the issues are to their business," he said. "The beef scare with McDonald's in Europe — that has had a financial impact on them because it's core to what they sell."

But the Starbucks protests have been either too vague or tied to causes that make up "a fairly small chunk of the pie," Parkhurst said.

"So far, those aren't an issue on the total franchise. A bigger issue they might face down the road is in the U.S.: When do they hit the saturation point?"

It hasn't happened yet. Despite the weak economic, sales are rising, and expansion plans are as ambitious as ever. The company plans to open 1,200 more stores by October 2002, and Schultz often says these are "the early days" of growth.

"The biggest reason that people who drink our beverage frequently don't drink it more is convenience," Smith said. "In short, we don't have enough stores. It is a convenience experience — you don't often go more than a few blocks for a cup of coffee."

As Starbucks continues to expand, it will likely draw more scrutiny and protests, said Christie Nordhielm, assistant professor of marketing at Northwestern University's Kellogg Graduate School of Management.

"They can expect for it to increase," Nordhielm said, "not because there's this rising tide of anti-globalization, but because they're digging deeper into the well."

But that won't necessarily translate into a widespread backlash, said Thompson, the pop-culture professor.

"There are some things that invite loathing, but that doesn't necessarily mean that we stop consuming them," he said. "(Coffee) is like television. We've been disparaging that vocally for many years, but every year we watch a little more of it than we did before."

Jake Batsell can be reached at 206-464-2718 or jbatsell@seattletimes.com.

advertising


Get home delivery today!

Advertising

Advertising