Starbucks’ CEO Howard Schultz: ‘The soul of the company was being compromised’

Starbucks’ CEO Howard Schultz: ‘The soul of the company was being compromised’

Of all his executives, Ruggeri provides the best indication of how Schultz’s charisma translates into results. She felt some trepidation when he returned, she admits, because she remembers the days when she used to have to wake early to send him a report on the previous day’s sales by 4.30am. (Schultz still rises at that hour, starting by reading the Financial Times, The Wall Street Journal and The New York Times.) “He has a sense of urgency. He has a sense of ‘it’s never enough’,” Ruggeri adds. “I’m a very urgent person, naturally — if you drink nine shots of espresso [a day], you tend to be — but he has made me work harder, made me work better, made me think more broadly. Howard pushes in a way that makes you want to be better . . . I don’t know what drives a person like that, but I wish I could harness it for myself.”

The fruits of Schultz’s restless ambition were laid out at September’s investor day: US$1 billion of investment this year and another US$450 million in 2023 are being poured into higher wages, more training, store redesigns and new equipment, particularly in the US.

Schultz has long described Starbucks stores as a “third place”, neither home nor work but a comforting middle ground where friends can connect over a cup. The pandemic-driven surge in mobile and drive-through ordering has demanded an expensive rethink of its properties, but also of the jobs the employees in them do. “A big element of his strategy to counter unionisation in the US is to improve the partner experience,” says Schultz’s former colleague. So Starbucks executives rattled off plans to encourage customers to tip baristas and programmes to help staff pay off student loans. They talked of tools to automate time-consuming inventory checks and to help managers and baristas agree on schedules. And they showed off new coffee machines that will slash the time and effort needed to make its drinks.

One enables baristas to produce a Frappuccino in under half the current time, with less bending to pull milk and whipped cream from fridges. Another cuts a 20-hour, 20-step cold brew process to four steps and a matter of seconds. “When you consider that we spend over US$50 millon a year on labour to brew our cold coffee, this is a significant game-changer for us,” outgoing chief operating officer John Culver told analysts, dangling the notion of greater “labour leverage” in Starbucks’ future business model. It sounds like a euphemism for cutting partners’ hours. Ruggeri insists that it means partners will spend fewer of those hours on frustrating, unproductive tasks.

“There’s a fundamental change happening in the frontline workforce marketplace in this country, period, the end, regardless of whether you work at Home Depot, Starbucks, you name it,” says Britt.

Frontline workers are demanding more of almost every employer. With US unemployment near historic lows, the company’s new language about helping partners “thrive” in their careers is clearly more than just a way to rebut union leaders’ narrative about its working conditions. Staff turnover, which spiked last year, has begun to fall below pre-pandemic levels, Britt told analysts.

Wall Street paid more attention to the figures Ruggeri gave them. “A new era of growth” should see Starbucks’ earnings expand by 15-20 per cent annually over the next three years, she said, funding about US$20 billion in dividends and buybacks. After lagging the wider market at the start of the year, Starbucks’ shares have begun to rally. “It’s just the beginning” of the comeback, Schultz says.

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