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Chapter 1: The Empire Strikes Gold
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15 The Empire Strikes Gold 1 If you’d accidentally walked into Seattle’s McCaw Hall on March 30, 2004, you might have mistaken the spectacle for a Vegas-style stage show. There were musical acts, jugglers, video comedies, and a procession of percussionists. Someone read David Letterman’s Top-Ten List, “Things You Don’t Want to Hear in Starbucks.” Three thousand audience members whooped and cheered. Performance it may have been, but the purpose was not entertainment : this was Starbucks’ annual meeting. The attendees were stockholders—some of them large, most of them small—enjoying their yearly chance to sample free Starbucks treats and learn how the company was doing. Among them were baristas checking up on their Bean Stock, a stock option available to any employee who works at least 240 hours per quarter. “I’ve never had a chance to meet Howard Schultz in person,” confided one young employee, “so I decided to come and see for myself.” And then there was the suspense: trying to guess the identity of this year’s guest performer. Good music has always been part of the Starbucks store environment; but this year’s guest artist, who turned out to be Emmylou Harris, was also part of the business plan. After she wowed the crowd with “Red Dirt Girl” and John Lennon’s “Imagine,” the company announced that she would feature on the upcoming Starbucks/Hear Music Artist’s Choice CD, one of a series of compilations starring great musicians and sold only at Starbucks. The company was also kicking off another music venture: in-store kiosks allowing customers access to a library of 250,000 songs to download onto custom-made CDs. But the real star of the morning (aside from rising stock prices) was founder and chairman, Howard Schultz, who conducted the drummers on stage with the same flair he uses to conduct the company . In a style seamlessly combining the conversational and the charismatic, he spread news of growth and profit. And if the annual meeting—and the company’s aspirations—had as much to do with show business as Wall Street, the numbers hardly needed hyping. Starbucks’ fortunes were rising; and 2003 had been a very good year indeed, with net sales of 4.1 billion dollars (almost twice what it had earned in 2000) yielding a net income of 265 million dollars. Schultz later told the press, “Both domestically and internationally, we probably underestimated the size of the global opportunity that we have.” The company has aggressively chased that opportunity in every possible way. In 1999, when I first began to pay attention to Starbucks, the company had 2,498 stores and a net profit of less than 102 million dollars—but its detractors were already viewing it as a predator. As the 2006 fiscal year drew to a close, the company boasted 12,440 stores and a profit of 564 million dollars after an accounting adjustment. In real dollars, the earnings were even higher: 581 million dollars. You don’t need special training to understand that math: for seven years Starbucks was all feast, with hardly a day of famine. Its success could be attributed to years of smart ideas, adept management , the cultivation of mystique, and a lot of moxie. Starbucks innovates. Starbucks takes chances. This is the company that made drinking coffee an “experience,” brought you the Frappuccino, and in 2000 opened a store in Beijing’s Forbidden City. Not even six hundred years of Chinese insularity could stop the company’s relentless drive to open stores, expand sales, add products, and make money. And although the Forbidden City store finally succumbed to public outcry over degradation of the country’s cultural heritage, the controversy didn’t slow the chain’s expansion into the rest of China, where it now boasts more than two hundred outlets. Nor had missteps (such as a prolonged refusal to offer nonfat milk) or setbacks (such as a huge 1994 spike in world coffee prices) stopped the pace of 16 W R E S T L I N G W I T H S TA R B U C K S [3.89.56.228] Project MUSE (2024-03-28 15:57 GMT) innovation, risk taking, and profits. So even if stockholders had reservations about the music kiosks, those who had taken the time to attend this carefully scripted annual meeting were not about to argue. Chairman Howard Schultz and then-CEO Orin Smith plied the crowd...