Starbucks CEO Howard Schultz is all abuzz

Mix a strong cup of coffee with a forceful personality and the next thing you know you've got your customers ALL ABUZZ. "CBS Evening News" anchor Katie Couric saw that combination at work first-hand at a coffee shop in lower Manhattan:

When you look around a Starbucks, Couric asked the company's CEO, what do you see?

"I see a deep sense of community," Howard Schultz replied. "We've intended, from day one, to really kind of build a third place between home and work. And really, I think at a time in America where people are hungry for human connection, we're providing that."

Wow, that's a tall order for a coffee shop ... unless you're Howard Schultz.

He's a born salesman, a cheerleader on caffeine for the company celebrating its 40th anniversary, having grown a single store in Seattle selling only beans, to a global chain of some 17,000 outlets.

So what's up with the apologies?

"We were never perfect; we made mistakes," Schultz told workers at a 40th anniversary ceremony. "And we will make more mistakes."

Here's what's up: After leading Starbucks through grande-sized growth in the 1980s and '90s, Schultz stepped down as CEO in 2000, to focus on global expansion.

"People around the world, they want the authentic Starbucks experience," he told Couric.

But then, things took a bitter turn.

"In a sense, we were on this magical carpet ride - everything we touched, everything we did, turned to gold. Everything worked," he said. "Growth became a strategy, as opposed to an outcome."

"So, it was all about growth?" Couric asked.

"It was."

"Not about quality?"

"Wasn't about quality," Schultz said, "And more importantly, it wasn't about the customer or the partner."

"Partner," by the way, is Starbucks-speak for "employee."

It all came crashing down, starting in 2007. Starbucks' profits, and its stock, plummeted.

McDonald's and Dunkin' Donuts poured into the coffee market, and Starbucks' pricey Frappuccinos and lattes collided with the failing economy.

Does Schultz believe he and the company had a "tin ear" about what people were experiencing during the height of the recession, Couric asked.

"No," he said.

"You know, maybe they couldn't spend $5 on their coffee every day?"

"Katie, it's not $5," Schultz laughed. "Let's get that right. It's $1.50!"

"But no, for these fancy coffee drinks that people are addicted to, it's a lot more than $1.50," she said.

"Okay. Okay," he said. "We did not have a tin ear."

"Little bit?"

"Remember, the entire country, every company was going through a financial crisis," Schultz said. "Starbucks was not alone."

Schultz was so worried about his beloved Starbucks going down the drain, that he returned to the top job as CEO in 2008.

He closed hundreds of stores ... a traumatic downsizing for a company that had been all about getting bigger.

As he writes in a new book, "Onward: How Starbucks Fought for its Life Without Losing its Soul" (Rodale), Schultz was also under pressure to cut health benefits for his employees.

Starbucks was an industry pioneer in offering health insurance ... a priority that Schultz says he learned the hard way.

"At a young age, I saw firsthand what it meant to live on the other side of the tracks," he told Couric.

He grew up in a housing project in Brooklyn. His dad drove a delivery truck.

"And in 1960, in the winter, he fell on the job, broke his leg and hip," Schultz said. "And I walked in to the apartment, and saw him laid out in a cast. There was no workman's compensation. There was no salary. Obviously, there was no health insurance.

"We were done."

With that lesson in mind, Schultz pledged to continue providing health insurance.

Then he tackled a series of other problems, like why the breakfast sandwiches were making the stores smell like burnt cheese, and why the partners were hidden behind the espresso machines.

"Primarily, we wanted to remove all of the physical barriers between us and our customers, so that there was direct sightline - they could see everything," Schultz explained.

Schultz says there's a renewed focus now on the product that put Starbucks on the map - Coffee - which puts the pressure on Andrew Linneman, the director of coffee quality.

He told Couric, "I can't imagine a day without coffee. I can't imagine!"

Every day in the tasting room at the Seattle headquarters, Linneman and his team slurp - and, I'm sorry to say, spit - their way through dozens of cups, taste-testing batches from around the world.

"It's challenging," Linneman said, "because it's already a very intense flavor profile. There's a lot going on. And it's really hard to differentiate between coffees."

These days Howard Schultz - and Starbucks - are again pushing ahead, full steam.

Schultz is back in salesman-mode, showing off a new brewing system that he claims makes the ultimate cup of coffee.

Couric was told that this cup of joe would cost about 30 cents more than the traditionally brewed coffee - about $2.75. "Not four or five dollars," Schultz laughed.

There's a big new deal to market single-serving pods for home use.

And coffee purists, look out: Schultz is pretty excited about his new instant coffee, called VIA.

But for all the coffee talk, have you seen the new logo? There's something missing. That's right: It doesn't say "coffee"... or "Starbucks," for that matter.

Which means Starbucks can sell tea, or nutrition bars, or anything else at your neighborhood grocery store.

"Well, why not just put 'Starbucks Coffee' on the coffee, and 'Starbucks' on the other products?" Couric asked.

"That would be more confusing, Katie," Schultz said. "That's why you're in news and not in marketing!"

But when she asked if he wants to take over the world - "Gonna have, like, Starbucks tennis balls?" - Schultz said no.

"We're not doing any of that," he said. "We're staying within our core, but there will be adjacent products that I think will be complementary to the coffee. That's the story."

And that's Howard Schultz's story: After the bitter and the sweet, he remains a man on a mission ... a mission in which coffee is just the beginning.

"I think, at the end of the day, we were never in the coffee business serving people; we were in the people business serving coffee," he said.

"That sounds like a bumper sticker," Couric said. "Do you have that embroidered on a pillow at home?"

"No, but it's true!" he laughed. "We're in the business of humanity."

For more info:

• "Onward: How Starbucks Fought for its Life Without Losing its Soul" by Howard Schultz with Joanne Gordon (Rodale Books)
• starbucks.com

[geraldledbetter]

Katie Couric's interview with Howard Shultz is a very large part in the marketing mix. The element in the marketing mix for Mr. Howard Shultz's Starbucks to be promoted on his part, and the marketing element of place to have the human interest news valuable information available to readers of the CBSNEWS.com WEB site, television viewers on CBS's part.

I'm an aspiring journalist.

[Nate650]

Sadly people have become accustomed to the overly roasted beans Starbucks uses and have associated this with good coffee. But once the bean turns nearly black and becomes oily, most of the delicate flavor is lost. Once you try coffee brewed from properly roasted quality beans in a French press, from Four Barrel Coffee for example, I doubt you'd ever go back to Starbucks. No I don't work for Four Barrel, I just think their coffee is outstanding.

[zarls]

It is time to stop the charade and myth that Howard Shultz grew up in a dangerous New York City Housing project. Bayview Houses was from 1955 through the 70's an idealic place to be raised. The tenants were primarily jewish and italian from the Bronx, East New York and Brownsville. Our parents were blue collar, civil servants, taxi cab drivers, garment workers, self employed merchants, teachers, etc. Many young people prospered, John Brockington became a Green Bay Packer and went onto the Hall of Fame, Neal Tauber owns Veterinary Centers of America with over 1,400 clinics, World B. Free and John Salley were in the NBA, and Al Roker grew up there too. Others became doctors, lawyers, teachers, civil servants, and entrepeneurs. Howie became a success because of Bayview and not in spite of Bayview Projects, and he owes our parents and all of us with precious memories of a special comraderie an apology, You can check this out on Facebook or Googel. The true story is why did so many successful people come from this one place. Maybe Katie should do a story on that.

[hgriffin1]

The story was one long Starbucks commercial that was full of mis-information. I hope CBS was compensated for this.... Here are just a few examples of Starbucks "spin". The footage and commentary was presented as if everything was "current". The baristas and the equipment depicted in many scenes are no longer used. e.g. La Marzocco Linea espresso machines. Starbucks has employed fully automatic machines for several years now, opting away from the more operator dependent (and much better) La Marzocco machines. The reason? Automated machines don't require any skill. Unfortunately, since no skill is present, the coffee produced can be dreadful and there is no quality control. The segment portrayed the "Clover" brewer as a "new" piece of equipment. They actually bought Clover back in 2008 (and I think they must regret it). The Clover makes ok coffee but not worth what they charge. It is essentially a mechanized French Press so the coffee has sediment that affects mouthfeel. It is also operator dependent which is a problem... I think it will disappear quietly over the next couple of years. Price was another area where they played fast and loose with the truth. Howard insisted a cup of coffee was $1.50. Moments later, when talking about the Clover he said the coffee from this machine was just .30 more than a regular coffee: $2.70... hmmm... interesting math... I thought the comment about Katie being hostile was not accurate. I don't think she pushed back on anything and didn't catch any of the mis-information. CBS edited the segment and contributed to the hype... Again, I hope they were well compensated...

[BaristaBen]

Wrong book. His new book is titled "Onward: How Starbucks Fought for Its Life without Losing Its Soul"

It's a great read, especially for Starbucks Partners.

[newsworthy8]

Balogna, he is all business, monie, monie, don't try to pull the wool!!! and you know, there are as lot of people who don't care for your coffee and establishments..

[spaceatoms]

I can buy coffee for a month while others are buying it for a day, a cup of Joe for 5.00 is a brainwash of a governmental idea of paradise!

[acehiker]

I don't need a $5 Starbucks latte every day, but I do get one once or twice/week. I no longer stop for a brewed coffee on my way to work for 2 reasons, I don't have time, and many times the coffee would be burnt tasting. Now that I've discovered Via I've got the best of both worlds!

[trashmaiden]

I hate how corporate Starbucks is so corporate but I have to admit that ts the best place to meet someone for coffee. So many of my local coffee places either get the coffee wrong or the shop ambience wrong. I cant enjoy a cup of coffee with a friend if theres nowhere to sit or the coffee is horrible. Starbucks always has good coffee and a calm atmosphere.

[vassquat]

This interview would have been much more enjoyable to watch without Katie Couric's cynical and smarmy comments.

[UAGAL]

I agree. Katie Couric was so hostile to her guest. She was combative to the point of being ultra-rude. CBS should trade her in for Charlie Sheen - he would be a "winning" addition to the CBS lineup...and that's hard for me to say - I'm not Charlie fan, but Katie is not "winning." I was so upset I went out and order a $5.00 Starbucks and enjoyed every buck I spent.