coffee it's part of our daily ritual and one company has changed the way we drink it it was new it was exciting and it took the world by storm turning the humble coffee bean into a 22 billion US dollar Empire Starbucks is one of these brands that people love to hate but keep going to anyway this is the story of how Starbucks conquered the world but then lost his way he become almost like a fast-food business kind of lost their charm a little bit a perception that they were a big bad corporate beings still stuck with them and how the man who made it great had to return you know we convinced ourselves that a new flavor a Frappuccino was innovation and that's not innovation - reenergize the Starbucks brand one cup at a time [Music] [Music] in today's world seemingly no one can live without their extra shot at skinny caramel latte Appetit know I always go for organic Fairtrade coffee it's actually not coffee it's the green tea latte from Starbucks it's actually the one I'm holding the remember the average person spends a thousand US dollars a year getting their caffeine fix and no one sells more coffee in more countries than Starbucks opening a store every 15 hours they're showing no signs of slowing up if this was a 20 chapter book we're in Chapter four and five we are just getting started but the Starbucks story didn't always make for easy reading bad coffee and a thirst for expansion plunged the brand into a rapid decline so how did Starbucks reinvent themselves it all started in Seattle in 1971 the city renowned for its relaxed atmosphere and hippie culture was bout to give birth to a company that would shake up the coffee industry as we knew it when they began there was this coffee roasting shop three young men were behind it who were obsessive about coffee and they wanted to do it in in a way that suited their own hippyish lifestyle and they were from Seattle which has his own very laid-back I have arrived about it in American terms these three hipsters Gordon Bowker Reserve's Eagle and Jerry Baldwin named their company after a character from Moby Dick first mate Starbuck and a twin tails mermaid became the image of their company but their real prize catch was the appointments of Howard Schultz as director of marketing in 1982 John Simmons interviewed Schultz for his book on Starbucks Howard comes from a pretty ordinary family he was the first person in his family who would have any form of higher education and he was doing pretty well from his family's point of view when he came to take this extraordinary risk by going into this unknown company but he was he was determined to do he was determined it was the right thing and I think that is an important element in his character at only 29 years old Schultz had big ambitions for the company even if he didn't always see eye to eye with the founders it was really a coffee retail place they sold coffee tea and spices the other founders did not agree with the vision because they wanted to remain a roaster so they wanted to remain in the we sell high-end coffee to discerning consumers and not we go into making coffee at first Starbucks only sold coffee beans and roasting equipment for home brewing but that all changed in 1987 where Schulz brought out the three founders and gained full control of the company his direction for the future was inspired by a trip to Italy that dream in many ways started with my first trip as a young man when I came to Milan for the first time in 1983 and I was captured emotionally by the Italian coffee bar the sense of community the third place between home and work and I raced back to America thinking this is what I'd like to try and do and transform the Italian coffee experience into the American Society returning inspired he introduced the word cafe latte into the American vocabulary for the very first time and it was a completely different drink to anything coffee lovers were used to but this is something where there was no competition that was new it was exciting and it took the world by storm so when Starbucks started they really brought something very European into the US market but it wasn't just the coffee that captivated us it was the artistry and craftsmanship behind each cup people stopping at a Starbucks was almost like a selfish act of self-love indulgence they would go in and buy themselves this relatively expensive coffee and they felt like they treated themselves in a way to the office the sound of the coffee machine the steam and the length of time they took and then on top of this the friendly baristas right there was a bit of personalization there you come to the same barista every day and personal bonds were formed crafting this new coffee experience Shultz management style was bold and unwavering that entrepreneurial flame lives in Howard Schultz have very strongly perfectionist sometimes very headstrong it's my way or the highway kind of approach it took Schultz years to accept skimmed milk in the coffee shops because he thought that ruined quality by the mid-90s Starbucks had over a thousand stores across America they were ready to go international arriving first in Japan then soon after in Singapore sue hi mister c'mon now runs his own independent roastery but his love for coffee all started when a new company came to town I came across this hiring addresses that we are hiring locally in green we work in fill up the application form and the next thing you know we could have job the company Starbucks [Music] honestly I was a coffee drinker I couldn't tell the difference between an espresso a latte it was a place that I felt like home it grew on me because it is a slogan of a pet place another place or a home away from home dubbed as a third place now it's a coffee shop not just the home or the office became an important space in people's daily lives it was a phenomenal success his whole idea was when you're at home you have a family identity when you're at work you have a company identity and I want to give you a third place in between those two where you can just sit back relax be yourself chat and that was the home away from home that for third place will be recognizable elements about the space that made it seem like home so the furniture for example would be cities and comfortable armchairs the feeling of comfort of contribute to the feeling that you are actually in a place that you know very well although that could be the first time a store that you visit in the area I think that son of consistency kind of give you a feeling that he you are you are home the whole idea of sitting down somewhere having a 10-15 minute break between work or meetings or over lunch after people come to work they just hang out they sit on a chair outside somewhere in the Sun or inside a cafe in winter and chill out for a short period of time Shultz third place became ingrained into American culture our favorite characters from American hit comedy series friends made it's been cool it's not completely productive to while away hours in the local coffee shop the whole of the world's now socialized gossiped or struck business deals in the armchairs of Starbucks and the language Starbuck e'en refers to a lot of different things it's everything from saying I want a venti which you know if you don't go to a Starbucks you have no idea what that is okay that's a size of coffee cup there so there was that sense of you and I are part of the same Club because we both know what a venti is then there was that introduction of all the Italian sounding words which went back to Schultz's love for Italian coffee shops so the cappuccino even the americano the latter and so on all these words that we now refer to as if they were completely natural in our coffee terminology create a vocabulary that brought people together was a brilliant move Starbucks was more than a business it was a new place it was a lifestyle it was a language parodied affectionately in hit movies like Zoolander no one can really help you sort through these important issues what and all this boiled down to one thing skyhigh profits on the average three US dollars small darte the company is making about fifty cents profit for every cup they sell but size matters the real money lies in the super-sized drinks a large latte with extra toppings the cost of the raw materials packaging store overheads and taxes have increased slightly with the price tag soaring to an average of $4 30 their profit margin has almost tripled to around $1 40 per cup what is branding all about it is being able to sell a coffee for a couple of dollars rolling for 50 cents you've convinced people but it's worth paying that extra because you're paying for more than just simply the product in 2000 Schulz announced record sales of over 2 billion u. s. dollars but the company would have to enter the new millennium without their visionary at the helm later that year Schulz decided to step down as CEO and take a more hands-off position in the boardroom in his book he stated that after 14 years of growing the company as CEO his heart was no longer in it and he needed a new challenge he'd left the company in a strong financial position but under the new management Starbucks strategy would change drastically they made a number of appointments that were not the right kinds of people people who were too much driven by the finance rather than really having a deep understanding of the culture of the brand over the next decade Starbucks embarked on a relentless quest for expansion stretching their brand so thin it was a breaking point after Howard Schultz the key drive was growth growth and stars growth and sales growth and earnings and I think the original culture was a little bit secondary and during that growth face you couldn't move from a few hundred shops to a few thousand shops to over 20,000 shops without losing something and this is what's what many critics criticized you lost your soul in this journey [Music] throughout the early 2000s Starbucks underwent a period of incredible expansion the company's revenue doubling every three years they sold a coffee experience to the world and the world lapped it up the economy was just forming it was so hot so people were busy people had a lot of money people drank a lot of coffee and Starbucks used this to really grow rapidly but the spike in profits came at the expense of their brand as people began to get tired of the iconic mermaid logo popping up everywhere Starbucks expansion strategy was always one of saturation so you go into a city and use saturated well there was a perception there was a Starbucks on every corner there was no doubt an element of well we could have been tired of this you know whereas before it have been something new and fresh and exciting well we became a lot more familiar with it whereas before American popular culture embraced the third place now a Starbucks and their expansion strategy was mocked as captured here in the ever perceptive Simpsons can I help you I'd like to get my ear pierced well better make it quick kiddo in five minutes this place is becoming a Starbucks expansion was too fast it was too focused on driving sales on growing fast and not somehow on the original value proposition so the original value proposition very often you sit in that buy and have a cup of coffee but of course real estate is expensive I make a lot more money if you buy and and take away so if you push too much on take away again what's left of the Starbucks experience the management had sacrificed the starbucks experience in favor of increased sales and expansion people didn't feel special going to a Starbucks anymore the saturation increasing competition loss of a touch with the consumer automated machines which kind of made it feel as special as well the baristas on a shop floor were now ordered to prioritize speed of service and to help them churn out more cappuccinos Starbucks ditched the traditional coffee machine and went fully automatic Thank You vanity when I first got started we saw us in 1988 we were all using a semi-automatic machine this actually requires by start would be technically trained just before I left the business in 2007 stop move on to fully automatic machines where coffee is actually extracted by a touch of a button and I think that kind of kill the romance a little bit about you know the art of how copies made he become almost like a fast-food business and I personally feel like it kind of lost the charm a little bit all over Asia Starbucks profits started to stagnate in Japan their largest market outside the USA the company's stock price slumped by over 50% as consumers started turning away from the brand and after all they had far better quality options available to them although famed for its teeth Japan has one of the richest coffee traditions in Asia kiss attend coffee shops like this one in Tokyo still practice century-old techniques sabatello uncritically and mathematical idea Tara Zuma Kazuya is the resident coffee master he's at one with the coffee bean and he offers his customers a unique experience Sanjana Sanjana kitchen wall sangeun we have to cut away yes a mosquito but on the call Martin I know my taste opportunity I know color palette overnight you after a while Starbucks focused on speed and market dominance Japanese coffee lovers were favoring the traditional brew [Music] Toton original in Brazil Guatemala obey system Tanzania Jamaica my mama the mall snow balloon Padrino moving to normal today was even back open she wrote the Chiefs a guilty back in the boardrooms of the Seattle HQ it would appear Schultz was aware that the brand he created was weakening in 2007 a memo to senior management was leaked where Schultz warned against further growth [Music] this memo he wrote wasn't meant for the public it wasn't meant for the whole of Starbucks it was meant for the current leadership to rethink their strategy and and think again shouldn't we really slow down and consolidate rather than continue and grow but Starbucks management's seemingly didn't heed Schultz warnings instead of consolidating their business they continued to expand their product offerings as Starbucks went more into food and also CDs and it sponsored two movies and all of that it was losing touch with the reasons why people came to Starbucks we were all asked to put on badges you know encouraging people to make their own Jing and of course it was been full for the barista it was painful for those who's taking the order the queue tend to get a bit more longer and such when such requests have to be entered in if you add additional flavors additional machinery additional products things that work perfectly fine suddenly don't work anymore staff will not perform as much as well as before they will not be as fast as before they will not be as knowledgeable as before all over the world the Starbucks Empire seemed to have become unwieldy none more so than the lucrative Chinese markets here the American company had recorded losses for nine consecutive years as they struggled to entice a nation of tea drinkers to buy coffee instead but it was one particular branch in Beijing's revered Forbidden City that would give the company a PR headache you have a tourist destination large numbers of people going through every single day on the surface this looks like a tential e profitable place to place a Starbucks despite the coffeehouse being open for seven years the public perceived the Starbucks brand as an icon of Western globalization imposing itself onto Chinese cultural heritage social media was just starting to take off in China and what happened is that there was a CCTV newscaster Rach and gang who went to social media and asked the critical question would you put a Starbucks in the White House or in Versailles obvious answer is no we would not do that this became a firestorm very very quickly this was the first time where they really faced cultural resistance to their business model global companies like Starbucks like McDonald's like Dunkin Donuts and so on are always targeted by anti-globalization movements who say yes we're trying to cookie cut and paste a certain model everywhere around the world the perception that they were a big bad corporate beings still stuck with them and there were the globalization protests that were happening at that time there was a feeling against the big company in late 2007 the company's value plummeted by almost 50% as the markets reacted to the weakening brand and the beginning of a global recession Starbucks stock price was in freefall and their brand had gone off the boil could anyone rescue the coffee Giants or was it time for the return of Howard Schultz [Music] by 2008 the world's biggest coffee company was in disarray the management seem to have confused growth with success expanding at the expense of the company's core values Howard Schultz the man who had built the brand was enjoying life away from Starbucks buying the Seattle SuperSonics basketball team but with his beloved Starbucks on the brink of crisis the temptation to return was too strong and I came back on January 7th as CEO of Starbucks because of a word that's not used in business and it's love I love this company I love the people I feel that we were drifting a little bit towards mediocrity and kind of losing our voice and I needed to come back and I came back because I didn't want to be a critic from the sidelines if I was going to be critical and concerned I had to get back in the game I think he was asked to come back as CEO in 2008 and there was a sense of responsibility it was his his child Starbucks was his dream Howard's presence when he returned to the CEO role simply reinvigorated the company because you have the original person you have the person who created the vision the person who's so good at at preaching the Starbucks story and building relationships and getting by and people have confidence in Howard Schultz he was the first to confess we went from an entrepreneurial creative innovative culture to a mediocre bureaucratic culture Howard Schultz return had galvanized a global workforce of over a hundred and seventy-five thousand employees but his first real move was to freshen up the company's senior management's that a grown complacent as companies get big and successful and this happened to a degree of Starbucks people get entitled and success is not an entitlement you have to earn it you have to earn it every day especially in the retail business and we've got to a point I believe in the culture and values of our company where we just believe we're Starbucks we've had 15 16 years of public life that has been fairly charmed and this thing's just going to continue because it always has well that's not the case Kona no presenter so Muto neither company nice to meet also Muhammad al-mustafa Hanukkah that Thomas Naya dr.
Maxwell Walter was personally appointed by Schultz as the new CEO of Starbucks Japan after a rather rigorous selection process gonna haunt us MSS crickets a new home they are their home county cyber Satori today in Yaquina they sell houses out there hunters rocket a it means a state star excitements [Music] Amoy cast a box on co-inventor stomach see how the shooter has him at the Starbucks equation on that give me honey I know I know condo market or the model switched on now come on take away no I ain't a model stop not got a body on a chip on me o Queen victim's name is Joey musica a notch de Tenorio walk again tomorrow in Osseo to Camille Thibideaux the party me no chance knew he had to bring Starbucks back to its core a good cup of coffee and on February the 26th 2008 he shocked American media by proving that his strategy involved more than just motivational speeches [Music] baristas in over 7,000 stores across the USA were told to switch off the automatic machine and were retort the lost art of brewing coffee the guy who's running the company now says we've got to retrain everybody we're gonna bring everybody back in today at 5:30 and say ok now this is how we make the double expresso mocha latte okay I suspect there was a lot of cynicism about it it was a dangerous move because it would no doubt lead to a lot of ribaldry and there was a big dangerous starbucks would just become the laughingstock thing is will affect my pumpkin spice latte so this is all lost sales and lost contributions it's incredibly expensive making such an expensive statement signals urgency to everyone so everyone is Wow we are so serious about it the stunt cost Starbucks an estimated six million u. s. dollars in lost sales the shills was banking that the credibility it restored to the brand would be far more valuable bubble whistle walking patterns and tell me so she made that twitter won't get my stuff it's me so there were hard on you or not so I did I should put what's your name asked yeah come on dre do you guys cool Starbucks in the state office today I think in the end what I did was established that we are serious about this that we are committed to the quality of the coffee to the standards that our people will enact with our customers and that we're not prepared to put up with a service that is anything below the standard that we've set as a benchmark for for Starbucks Schultz next move to cut down product offerings and remove hot food from the cafe's a small change but a big statement that the company would no longer value stock price and profits over customer experience we've taken those things out we're taking those things out and placing it something else it may not seem like a big deal but it is a big deal inside the culture values of Starbucks because we can't serve two masters you can't serve the master of the customer and the tradition and heritage of the company while trying to satisfy the short-term mentality of Wall Street a Schultz tried to rebuild the integrity of the brand he now needed to address the sheer size of the company throughout the last decade fueled by the economic boom the company had ballooned to over 16,000 stores worldwide but in late 2008 the economic climate was changing and these stores became a massive drain on profits suddenly a Lehman Brothers happens this whole thing came to a stop a lot of people lost their jobs and the cities in the big cities money wasn't so easy anymore and growth that already became a bit marginal for Starbucks suddenly turned negative so the new shops that were opened already had lower revenue per square foot than the earlier shops new shops started to cannibalize existing shops and suddenly the growth was gone and actually the opposite happened there was a contraction da da da - ok - da da da Cunha today Nanako Nina no kimochi kami sake no joseki no honey typical shells closed 600 stores in the US alone 70% of them had only been open for less than three years and Starbucks made more than 12,000 employees redundant the most in their history battlecry in the company today is how do you get this big and stay small and the way you do it is one customer one partner one cup of coffee at a time reducing it to the lowest common denominator and focusing maniacally on the customer experience then I know muscle cut up I meet on a caucus a tiny step aside hunters Kazuto Yosuke master this way press a key master come out on the codependency I'm also a second motion action a guy got a sec Oh in Japan a water set about implementing Schultz's vision to do this he took inspiration from the coffee masters at the traditional Japanese kiss attends she won ten which is satin do you must earn it so it's about my master my own asunto who talks a lot so nice oh it's sooo it is only ten shows on me oh nice key it's my job you know attack on occasion wanna kimochi not what she cute only so good I oka temesta see successful king in money anti tagging act ignite a little Simone Tommy some static achievement that's the key do Nagato ma who knows I adored it give it to empowerment of students and so good oh wow that's my luck today in May 2010 sales in Japan hit a record 1 billion US dollars as consumers responded to the more personalized feel of the stores it was a lesson in localism the Starbucks would implement in other markets across Asia and there was one territory left to crack the fastest-growing market of coffee drinkers in the world China the return of Starbucks visionary Howard Schultz had stabilized the brands but to grow further he eyed success in one particular market with thirty two hundred stores in China we're opening a new store every single day in China and I've said publicly that our China business will be bigger than the US business we're all said and done Chinese coffee consumption is growing by fifteen percent every year but for the last decade Starbucks had been unable to translate this into hard profits the PR disaster at the Forbidden City may have left Starbucks with a bitter taste in their mouths and now to succeed they would have to employ a more culturally sensitive approach for a short period Starbucks symbolized with in China a foreign company that did not understand the culture did not appreciate what the culture values and they had to go about reshaping that and they've done that very very well by working with communities by working with parents by being a great employer by partnering with Alibaba and creating the kinds of experiences that are valued in May 2008 een in an extravagant ceremony Starbucks announced a high-profile deal with Jack Mars Alibaba Alibaba would operate a mobile payment system and delivery service exclusively for Starbucks coffee it was a partnership in line with Starbucks strategy to engage and adapt to local needs they would get the community involved in the design and the delivery of the Starbucks experience why guess when you can just go ask people directly if you came here for coffee what kind of experience would you like Starbucks showed how serious they were about long-term success in China by opening a 30,000 square foot roastery in Shanghai the first of its kind outside of the company's Seattle home all this an attempt to convert more Chinese consumers into premium coffee lovers and to stay ahead of strong local competitors [Music] Starbucks is is large now we have to put this into perspective Starbucks has approximately 5,000 stores in China right now and a new store is reportedly being opened every 15 hours in China that's amazing but if we put it into perspective they are still the number two player for coffee in China and tea consumption still holds well over 50% of the market Asia is a very different marketplace if you go into a manila you go in int or Bangkok in any of these cities Starbucks costs you serious money for the average middle-class consumer so Starbucks visit is a bit more seen as a luxury and in those markets so it's much harder for Starbucks to really capture the mass market Starbucks was forced to backtrack on their 2018 projections now predicting flat to slightly negative growth in China competition in the Asian coffee industry has never been stronger and the current leaders Starbucks are coming under pressure at both ends of the market we shouldn't forget that Starbucks is facing increasing competition the markets are increasingly saturated so that doesn't mean it's open the doors to as wrap it in an expansion as it was going through you have a lot of competition that really goes into craft cafes bespoke cafes very small chains individual corner shop type of cafes but it's very hard on scale to move to the same as the craft coffee bars I don't see Starbucks being effective competing with them the rise of independent coffee houses like su Heinie's Dutch colony company in Singapore are an increasingly appealing option for those of us who want an artisan cut it comes down to flavor that's where it gives us and the upper each sub us is definitely not doing coffee the way that we we are I think the good news was table is that they start to see the ship of appreciation they are beginning to actually brew coffee the way the local guys does it or the way the artisan guys does it it also needs to learn from the more of the independent center and can Starbucks manage somehow to come across as sympathetic to them and in tune with them without losing his own core expertise and offer in an attempt to stay ahead of this competition Starbucks now Taylor new types of drinks exclusively for the Asian market there are coffees that are now created specifically for that market much lattice which you didn't have in other cities flavors around mango all these things that speak to the localization of preferences national holidays Deepavali or Hari Raya and they work with national cultures more but it's not only the coffee that has gone local but the design of the cafes Starbucks employs a global network of architects and artists across 18 different countries whether in Japan or China fab reef is to give the global chains cafes a distinctively individual feel Starbucks in China has been localized in a very different sort of way rather than catering to the individual with a laptop Starbucks caters to groups in China and so the seating arrangements would more easily allow for four or six people to sit together and share the experience but despite this local approach Starbucks like any global brands have to guard against scandals that can instantly become international news in April 2008 een two African Americans were arrested in a Starbucks in Philadelphia for waiting in the cafe without purchasing food or drink the response really was multifaceted we had the social media responses exactly like what we saw with Starbucks in Forbidden City we saw protesters there was even a call for people to boycott Starbucks so early on as we look at those first 24 to 36 hours this was literally brewing to be a major problem for Starbucks turning down personal compensation of two hundred thousand US dollars the two men rashon Nelson and Dante Robinson asked for Starbucks to instead fund a grants program for aspiring entrepreneurs and closing eight thousand stores across the USA Starbucks also show their staff this video lesson reminding them of the history of racial discrimination in America discrimination against African Americans in public spaces has a long history in the 1960s black and white students trying to desegregate buses were firebombed black patrons were routinely denied service in restaurants and hotels today discrimination is against the law it's the people and the systems that support our communities that must follow suit of course there's a lot of discussion there are a lot of critics a lot of naysayers a you can train culture you can't train biases of many many many types they may be right but I think Starbucks did try very hard and were to put an honest effort and I think it pushed the company into the right direction Starbucks nobody McConaughey Teague Dumont I go civilizing so do you go to a Tyson okay we'll come on guys shorter stockier name what's on you say hudson and the harder suits are enormous identity meet up tonight so no how do you know cannot Moscone but in June 2018 Starbucks would lose a piece of its DNA for a second time thank you for believing thank you for believing in what our core purpose really is thank you for believing in each other thank you for believing in the company and thank you for believing in me [Applause] in an emotional farewell ceremony shelfs announced he would retire as CEO be very difficult for me to imagine Starbucks having the same success with a traditional top-down authoritarian leader it would be a very different story if Howard Schultz had that kind of a personality despite the uncertainty caused by Schultz resignation the new CEO Kevin Johnson announced a record revenue of 6.
3 billion u. s.
