Onward (41 page)

This would be the first time we'd held this conference outside Seattle. We'd chosen New York City, the hub of the global financial world, in large part because the burden of proof for Starbucks’ performance had shifted from the analysts to us. The company was not delivering as we had in the past and now we had to show the Street how we would rebound. Not by overpromising or making bold predictions, but by confidently reaffirming that we understood and were correcting our problems.

Sitting around the dining room table, we continued to write and rewrite the script and corresponding slides, a task we would have completed in Seattle had we not been consumed with other responsibilities. Pulling all the facts together in a cohesive, optimistic story, especially under such time pressure, was incredibly stressful. We'd accomplished a great deal during the past 11 months, but it seemed overshadowed by recent bad news. Our comps were down across the board: negative 9 percent in the United States, negative 3 percent internationally, negative 8 percent worldwide. Nine weeks into the first quarter, it was only getting worse, and we projected missing external earnings estimates of 22 cents a share.

Because I felt we needed an outsider's perspective, I'd invited one
non-Starbucks person to join us. Billy Etkin runs a successful boutique merger and acquisition firm and has one of the most intelligent business minds I know, especially when it comes to communicating critical and often complicated information to Wall Street. While some were cautious about an outsider chiming in, Billy's business acumen and unfiltered, respectful opinions helped us, I think, to see the forest through the trees and articulate the company's situation. I trusted Billy and his intentions implicitly, and he showed up for no other reason than to help Starbucks.

On Wednesday, December 3, 2008, the group gathered in an empty auditorium at the TimesCenter on West 41
^st
Street to rehearse our presentations. Sitting among rows of empty seats, my mood was spiraling to levels it had not sunk to in ages. Maybe ever. I sensed a level of insecurity, which was understandable given our lack of prep time and the challenges we were knee-deep in back home, which created a daily intensity, like hand-to-hand combat, as we fought to save the business. When members of the leadership team took the stage, I was quick to interrupt or redirect their presentations, not making it easy for anyone to muster confidence.

Finally Vivek turned to me. “Howard, I think you need to leave,” he suggested respectfully. Vivek was right. Everyone knew what he or she needed to do, and in this instance my input was more obtrusive than constructive. I grabbed my coat and left the rehearsal.

Later that evening, Billy and I sat down for dinner at a small table inside Vespa, a modern little Italian restaurant on Second Avenue between 84
^th
and 85th Streets. In summer, sunlight poured into Vespa's open garden, but this December night was dark and cold, and I felt an uncharacteristic level of angst. I even got frustrated trying to explain to our waiter that I did not want a specific dish off the menu, just grilled swordfish and pasta. Not fried or doused in spices. Just. Plain. Grilled. Swordfish. As the confused waiter walked away from the table, my head swirled with images of the dour faces of my team, the bad press about Starbucks, and the single-digit share price.

“The stock could drop to $5 tomorrow,” I said aloud to Billy, deeply concerned about what might happen if it did. “We could be taken over.”

This was, again, such an uncharacteristic fear for me, not to mention an unlikely scenario for the company, but my anxiety had reached a fever pitch. It had been such a long year. An endless treadmill as Starbucks planned and executed new products and events, one after the other. And we were still waiting for most to bear fruit. I had experienced such highs with the annual meeting, Pike Place Roast, and New Orleans, yet also such lows with store closures and the layoffs and Sorbetto and our sinking market capitalization. Our cfo quitting at such a crucial time had put me over the edge. As 2008 drew to a close, I was simply exhausted. Physically and emotionally.

“Howard, you have to stay the course,” Billy reassured me with his steady tone and even a smile. “You have to stay true to your values and true to the company's core. Those are your rudder now. And when the seas calm and the winds shift . . . and,” he went on, “the seas will calm and the winds will shift, unless you believe that the economy is never coming back. Or that all along Starbucks’ value proposition and connection to its customers has been a ruse. Or that the millions of people still walking into your stores every week all over the world are kidding themselves. Now is the time to stay focused on the moves you have to make to rightsize the business, to innovate, and to return to the core. The confluence of these factors will propel Starbucks forward and will make all of today's naysayers positive about Starbucks again. I am absolutely sure of this.”

Billy was not telling me anything I did not already believe.

But he was telling me things I needed to hear.

Finally, Thursday morning, December 4. The auditorium filled with some 200 influential people. Buy-side and sell-side analysts, institutional investors, a few guests, a smattering of press, and 11 of our top 30 shareholders—almost double the crowd that typically attended the conference in Seattle. Close to 1,000 more, including Starbucks partners, would tune in via a live webcast. I did not think there had ever been a more important meeting at which Starbucks needed to communicate with clarity and confidence.

Backstage in the greenroom, I waited with the rest of the Starbucks team. I would speak first, followed by Troy, Michelle, Terry, and Cliff. Then Troy again to emphasize the company's heightened rigor concerning cost management. More than 100 slides were ready to
flash on the overhead screen, an impressive photo album documenting a very full year. On one hand, we were proud. On the other, we felt intense pressure. How we discussed our business that day had to instill confidence in our ability to build long-term shareholder value. Dinner the night before had been cathartic for me, but I was still soaking up the tension of the room. Something had to break.

“Bill!” I stood up and walked over to Bill Bradley, who had quite unexpectedly entered the greenroom. I hadn't known he was going to be at the conference and was glad, if not relieved, to see one of our board members. The former US senator, Knicks player, and two-time NBA champion towered over us, smiling as if he knew something we did not. And then, like a coach with the starting lineup of a team about to take the court, Bill corralled our attention and delivered what must have been a 15-minute pep talk, reinforcing our strengths and, like Billy the previous evening, reminding us of what we already knew to be true. Every company was feeling pain. But Starbucks had a good story to tell. An authentic story. A story about a year in the life of one of the world's most respected brands. A year spent taking stock and taking risks. He reminded us all of how far we had come during the crisis. Bill was so confident in his belief in us, so sure that the company would prevail, that we would shine that day—it was contagious.

Like other members of Starbucks’ board of directors, Bill Bradley had unique gifts to share with the company and seemed to know just when to bestow them. For all the wisdom and talent among our team, a locker-room speech was exactly what we needed, an unexpected burst of positive energy. Amazing, actually. And the wind shifted. When Bill left the greenroom, I think we all stood a little taller, ready to go onstage and get the job done, as a team, with conviction.

As I walked onto the stage, I knew I had to set the tone, to build on the faith Bill had instilled in us backstage and provide the rest of the team with a little bit of tailwind. I was also keenly aware of my responsibility not just to shareholders, but to everyone back in Seattle and all of Starbucks’ partners. Representing the company was my job. It is also my life.

“Good morning. Thank you for coming. We are all obviously living in extraordinary times, and we appreciate the fact that you've
come here today.” I was not performing. I was just speaking honestly, and with each word my conviction in Starbucks’ purpose and our potential came rushing back.

There are some who say, “Perhaps you should change your business model because the environment is so different.” And I ask rhetorically, for all of you that are in your own business, who have built something, you have guiding principles. You have a culture and a set of values. This is not the time to change strategies so significantly that you lose your reason for being. . . . Things are going to get better. People will continue to drink coffee, and the equity of our brand and the relevancy of the sense of community in the third place and the growth opportunities for Starbucks, domestically and around the world, will be stronger than ever.

We have assembled a very strong team. We have a common purpose. We certainly have creative debate, but we are up for this challenge. Let me share with you who they are.

One by one, each took the stage to articulate aspects of our unfolding story.

Troy, in his first time presenting as cfo, rose to the task and did a great job of setting a somber, practical tone by outlining our cost-saving efforts and projections: $400 million in permanent cost take-outs, $200 million of which would be realized in 2009 on top of the $205 million resulting from actions we had taken earlier in the year.

“These are sustainable changes to our cost structure,” he reassured the Street before ceding the floor to Michelle.

“So let's talk about what's been happening in our business,” Michelle said, alluding to an overhead graph that showed the 12-month correlation between Starbucks’ declining US traffic and weakening consumer confidence. “If we look at our transaction comps, they started decelerating about a year ago, which as we all know this week was reported to have been the start of the recession.” It was true. A report released the day before by the National Bureau of Economic Research had pegged December 2007 as the beginning of the US recession. A statement I had made a year ago was now official.

Michelle, with her impressive command of numbers, provided an extensive overview of our past as well as our future: our more extensive customer research, our strategy to maintain our coffee authority,
and the new beverage and food platforms we'd brought to market in 2008, including expanding the Tazo tea line and bringing back the infamous breakfast sandwiches.