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From: Howard Schultz
Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin
Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor
Subject: The Commoditization of the Starbucks Experience
As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.
Over the past ten years, in order to achieve the growth, development, and scale necessary to go from
less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in
retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the
commoditization of our brand.
Many of these decisions were probably right at the time, and on their own merit would not have created
the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more
damaging than the individual pieces. For example, when we went to automatic espresso machines, we
solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the
fact that we would remove much of the romance and theatre that was in play with the use of the La
Marzocca machines. This specific decision became even more damaging when the height of the
machines, which are now in thousands of stores, blocked the visual sight line the customer previously
had to watch the drink being made, and for the intimate experience with the barista. This, coupled with
the need for fresh roasted coffee in every North America city and every international market, moved us
toward the decision and the need for flavor locked packaging. Again, the right decision at the right time,
and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We
achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful
non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and
grinding it fresh in front of the customer, and once again stripping the store of tradition and our
heritage? Then we moved to store design. Clearly we have had to streamline store design to gain
efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy
the financial side of our business. However, one of the results has been stores that no longer have the
soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people
even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our
coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the
message from being in our stores. The merchandise, more art than science, is far removed from being
the merchant that I believe we can be and certainly at a minimum should support the foundation of our
coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee
filters.
Now that I have provided you with a list of some of the underlying issues that I believe we need to solve,
let me say at the outset that we have all been part of these decisions. I take full responsibility myself,
but we desperately need to look into the mirror and realize it's time to get back to the core and make
the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true
Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to
competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to
position themselves in a way that creates awareness, trial and loyalty of people who previously have
been Starbucks customers. This must be eradicated.
I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's
be smarter about how we are spending our time, money and resources. Let's get back to the core. Push
for innovation and do the things necessary to once again differentiate Starbucks from all others. We
source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world,
and we have an enormous responsibility to both the people who have come before us and the 150,000
partners and their families who are relying on our stewardship.
Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and
commitment, we would not be where we are today.
Onward...
Source: http://www.public.iastate.edu/~sjwong/shultz_starbucks_memo.pdf, accessed June 20, 2011.

Who is current CEO of Starbucks?Starbucks CEO Kevin Johnson is retiring after five years on the job. Howard Schultz will return as interim chief executive, once again taking the helm of the company he elevated to a global brand.

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