- The Times -
The Seattle-based giant has cut back on its global expansion plans. The slowdown will hit its expansion in Britain. Howard Schultz, the chief executive, who founded the chain from the first shop on a street corner in Seattle, said that the company would be "extremely careful" in opening new stores in Britain in a reaction to "cataclysmic" economic events.
The Seattle-based giant has cut back on its global expansion plans. Marcus Leroux reports.
It imported sophisticated, American cool all the way from Seattle, the America of Frasier and Niles bickering over a latte brought to your nearest high street. So unstoppable was its advance that it became the very epitome of globalisation - but now, after closing nearly 700 stores in the United States and Australia, the wheels appear to have come off the Starbucks juggernaut.
Last week it admitted that the slowdown would hit its expansion in Britain. Howard Schultz, the chief executive, who founded the chain from the first shop on a street corner in Seattle, said that the company would be "extremely careful" in opening new stores in Britain in a reaction to "cataclysmic" economic events.
"Over the last ten years we have built the leading position in the coffee category and established our store as a trusted brand and place based on the experience we have created. We want to continue to build on that, but this is a moment in time the like of which we have never seen and, as a result, we want to be extremely careful in how we grow the company," he said.
"This is certainly a time when a business needs to be extremely disciplined and thoughtful about the decisions they make, where and how they are going to grow. We are very mindful of the economic issues here as well as in the US."
Starbucks, which has 700 stores in Britain and Ireland, is a company for which growth has been a constant. Even last year, the chain opened in excess of 100 new stores, in the face of a slowing economy. Not for nothing was Starbucks chosen as the investment that made Dr Evil rich in the Austin Powers films.
But its recent troubles derive from an over-extension that some analysts say was the result of a target-driven corporate culture. As long ago as 1998, two years before Starbucks opened its store in Beijing's Forbidden City, The Onion, the satirical website, wrote: "Starbucks, the nation's largest coffee shop chain, continued its rapid expansion Tuesday, opening its newest location in the men's room of an existing Starbucks."
Times have changed. "We've got to show up in areas our customers want us to show up," Darcy Willson-Rymer, Starbuck's new managing director in Britain and Ireland, said.
Mr Willson-Rymer took charge of the British business, Starbucks' second largest after America, on the departure of Phil Broad. Mr Broad is said to have become disillusioned by the corporate diktat from Seattle. The chain is keen to push its environmental and ethical credentials and there are mutterings that the constant stream of initiatives was felt to have impeded the running of the day-to-day business.
Mr Schultz, however, in London to announce that all of Starbucks' espresso based coffees would be Fairtrade by the end of next year, asserted that the ethical initiatives were integral to the company's culture.
The Fairtrade Foundation said that the move would benefit 100,000 farmers in Latin America, Asia and Africa, guaranteeing them a minimum price and a premium for investing into their communities. It means that every cappuccino and latte sold in the store will be ethically sourced.
"Our philosophy as a company has been overlooked because of our growth," Mr Schultz said. "The foundation has been to achieve the balance between profitability and social conscience. The business model for Starbucks has been this balance between profitability and benevolence." Starbucks was, for example, among the first American companies to offer comprehensive health insurance to workers and to provide stock options to employees, he said.
Whether that will satisfy those who treat Starbucks as a corporate pinata remains to be seen - and the company has not done itself any favours by being exposed for keeping taps running constantly, or by picking a fight with Ethiopia in a trademark dispute that was resolved, eventually, last year. A Populus poll for The Times last week had Starbucks at the foot of the table of how it is perceived by ethical consumers.
Mr Schultz's message was unequivocal. "This isn't marketing. This is authenticity; this is truth," he said. Dr Frasier Crane, sipping his latte in a cafe on Pike Street (Starbucks' first store was at Seattle's Pike Place Market), would no doubt approve.