Onward (63 page)

As we set out to do, Starbucks has drastically improved how we operate our business by reducing costs, building a world-class supply chain, and creating a culture that drives quality and speed and manages expenses on an ongoing basis.

Cost Reductions
The $400 million we told Wall Street in
December 2008 that Starbucks would cut from its cost structure for fiscal 2009 ultimately grew to $580 million, much to the surprise of the financial community. The cost cuts are permanent, and in 2010 we have preserved them and continue to achieve additional savings, as evidenced by ongoing improvements in our operating margin. The work to keep costs in check will never end, and the challenge ahead is to sustain what we have achieved and strive for more while continuing to wisely invest in our people, in growth, and in innovation.

Supply Chain
Back in 2008, only three out of every 10 orders were delivered perfectly to our stores. Today, nine out of 10 orders to 16,500 stores are delivered on time, with every item included and no errors. SCO's safety performance has improved by 90 percent, we are recruiting talent from top-ranked supply chain schools, and in the last two years SCO realized cumulative savings of $400 million.

Store Technology
In fall 2009, US store managers received laptops loaded with software that automates and eases once cumbersome processes like scheduling, hiring, and performance reviews. Our more intuitive point-of-sale system hit company-owned stores in the United States and Canada in 2010, and pilots are planned for our international stores. Once the rollout is complete, we will be able to cut an estimated 700,000 annual hours off our customers’ wait-in-line time in the United States alone. To ensure that we stay relevant to consumers’ lifestyles, our new systems will be optimized for mobile technologies, allowing our customers to eventually order, pay, and connect with us using smartphones and other mobile devices.

Building Our Senior Leadership Team
Of the dozen individuals currently on Starbucks’ leadership team, the majority have joined the company or the team since I returned as ceo. Since the fall of 2009, in addition to appointing Annie Young-Scrivner, John Culver, and Jeff Hansberry, I also found the right person to head partner resources in Kalen Holmes, who joined Starbucks that November, bringing almost 20 years of human
resources experience, most recently at Microsoft. In June 2010, we added two more members to the senior leadership team: Mary Egan from Boston Consulting Group now serves as senior vice president for global strategy, and SYPartners’ Dervala Hanley came on board as vice president of corporate initiatives and planning.

Our team meets weekly as well as monthly, and as a group we are open to building consensus, we welcome creative tension, and we always try to learn from our past.

Today's Starbucks leadership team is by far the most talented and collaborative group I have had the honor of working with in my history at the company.

Biennial Analyst Conference
On December 1, 2010, two years after we last presented to Wall Street in our most desperate hours, Starbucks senior leaders and I took the stage in New York City to tell a very different story, one no longer based on predictions of our transformation, but on irrefutable proof of record financial results. Starbucks performance was “. . . nothing short of remarkable,” wrote Marc Greenberg from Deutsche Bank, “and quite honestly the most significant business turnaround we have witnessed.” The day after the conference, compared to December 2008, Starbucks’ stock closed at $32.76, up almost 400 percent.

The leadership team gathered around the huge roasting machine—each of us wearing a yellow safety vest, goggles, and green hard hat—and waited. Behind us stood about 50 partners who were among the 163 working at Starbucks’ coffee roasting plant in Kent, Washington, located about 30 minutes from our offices. I'd requested that we hold part of our monthly senior leadership team meeting at the plant on this special day.

It was the first time in 40 years that Starbucks was roasting beans not just from Ecuador, but from the Galapagos Islands, that cluster of volcanic islands in the Pacific Ocean that is home to an amazing variety of species. The beans being roasted today came from the island of San Cristobal. They were rare—organic, shade grown, even bird
friendly—and the coffee—we named it simply “Galapagos”—would be sold in less than 700 Starbucks stores in the fall of 2010. Galapagos was the first product in Starbucks Reserve, our new line of premium whole-bean coffees that we roast only in small batches and make available for a limited time.

Standing not far from pallets that transport some 65 million pounds of green coffee beans into the facility each year, I was reminded of Starbucks’ earlier days, when my office was located in the former roasting plant. Back then, at the end of every day and before I headed home for the evening, I would walk the plant's floor. The partners always expected me, knowing I would make the rounds, usually stopping at the roasters’ cooling tray to rake my hands through the beans and feel the coffee between my fingers before saying goodnight and thank you to everyone. At that time, the company was small enough that I knew each partner's name. Small enough that I knew their families. Two people from those days still work for Starbucks, Michael McNulty and Dave Seymour.

Visiting our Kent roasting plant is often bittersweet. No longer do I have time to walk the floor daily or even to come by as much as I would like. But I never forget the partners in our roasting facilities around the world who are responsible for bringing our coffee to life; they are the critical link in every bean's journey from farmer to cup. Without their expertise, passion, and daily dedication to excellence, Starbucks simply could not succeed.

“Reserve could not happen,
it would not happen
, if roasters were not putting the final touches on the coffee here at Kent,” announced Tom Barr, vice president of global coffee, whose team sourced the beans for Reserve. Tom has been with Starbucks for 10 years.

So even though we had come to Kent to celebrate a new coffee, this day was really about celebrating people—including the roasters, mechanics, operators, technicians, managers, and devanners (the first partners to handle and then prep the beans when they arrive from afar). An impressive amount of people at Kent have been with Starbucks well over a decade, having stayed with the company during our roughest times and as we transformed.

“We are using 11 different roast curves to meet the unique roast and flavor profiles of some of the coffees that we roast here,” Ruben Maglaya told us. Ruben has worked for Starbucks for
18 years
. I reached through a group of people to shake his hand.

Finally, it was time. Everyone watched and listened as the rush of coffee beans spilled from the silo into the large, flat, round, rotating roaster. As the beans slowly churned, the rich aroma of coffee filled the air.

Moments like this are among my favorite. When the past and the present overlap. When I am at the heart of Starbucks’ operations. And when I cannot contain my smile because I am quite literally witnessing the magic that happens behind the scenes.

Times such as this, surrounded by people who think of each other as family, solidify my belief that Starbucks’ best days are ahead of us.

Writing a book, like building a company, is a collaboration, and I am grateful to many people for helping me tell Starbucks’ story.

Most important, to my wife, Sheri, and my two children; nothing in my life would be possible without your love.

The research, writing, and editing processes were made almost seamless by the extraordinary talent and grace of Joanne Gordon, who was able to find my voice on the page. She routinely and unselfishly accommodated my own busy schedule. I am so proud of the book and could never have done this without her.

Joanne and I would both like to thank everyone at Rodale, especially Maria Rodale, for their passion and commitment to this project from day one. Colin Dickerman and Karen Rinaldi were true editorial partners, and we were blessed to benefit from their intelligence, respect, humor, and ability to balance the needs of readers with the intentions of authors. Also, a special thanks to Steve Madden for his support.

At William Morris Endeavor Entertainment, Jennifer Rudolph Walsh was, as always, a tireless advocate who routinely steered us in the right direction.

More than 150 partners from throughout Starbucks candidly shared their memories and expertise, helping us to even more authentically re-create the company's shared history. A special thank-you to Starbucks’ senior leadership team and board of directors for their time as well as their trust in my decision that publicly telling a difficult part of Starbucks’ history would make us a stronger organization.

In my office, Nancy Kent, Tim Donlan, and Carol Sharp provide knowledgeable support every day, responding to each request with a calm smile and always delivering. Thanks to Chris Gorley for her discretion and precision in noting every word; Gail Resnik for her diligent legal review; and Gina Woods, whose leadership, expertise, creativity, and candor make her the ideal partner to manage
Onward'
s unusually complicated production and marketing processes. Thanks also to Vivek Varma, Corey DuBrowa, and Dervala Hanley for their honest editorial insights; and to Heidi Peiper, Trina Smith, Christina McPherson, and Deb Trevino for their research and attention to details
throughout the process. The book's elegant design is due to the talents of Christopher Riggs, Kelly Clark, Nichole Guy, and Lisa Maulhardt at SYPartners. We are also grateful to the many people who read early drafts and final versions of the manuscript and provided feedback, including Jeffrey Hoffeld, Betty Sue Flowers, Richard Tait, Suzanne Sullivan, Bill Bradley, Mike Ullman, Mellody Hobson, Billy Etkin, and Len and Nancy Kersch.

Thanks also to Beth Lamb, Aly Mostel, and Yelena Nesbit at Rodale, as well as the team at Edelman and Mark Fortier.

For their friendship and support over many years, I want to acknowledge, in addition to those mentioned in the book, Plácido Arango, Ana Maria van Pallandt, Warren Bennis, Walter Robb, Amy Kavanaugh, Bill Campbell, Tony La Russa, Tim Ingrassia, Daniel Auerbach, Kenny G., Sharon Waxman, John Yamin, Steve Kersch, Colin Cameron, my cousin Alan Cohen, my sister Ronnie Schultz, and my brother, Michael Schultz. And to my mother, who has always been and continues to be a tremendous influence in my life.

Onward
was primarily about Starbucks’ transformation period and thus the story heavily focused on our US business even though the company's ongoing success is also due to our joint-venture partners and licensees around the world, many of whom I have known and called friends for years: in Japan, Yuji Tsunoda of the Sazaby League; in Spain, Plácido Arango's Grupo Vips; in Mexico, Alberto Torrado of Grupo Alsea; Starbucks’ business partner for the Middle East, Turkey, and Russia, Mohammed Alshaya's M. H. Alshaya; in the Philippines, Jun and Menchu Lopez, owners of the Rustan Group; the Marinopoulos Group in Greece, Cyprus, Austria, Switzerland, and Romania, run by Panos Marinopoulos; in Hong Kong and parts of China, Michael Wu and the Maxim Group; in Taiwan and other regions of China, John Hsu of UniPresident Group; in Indonesia, V. P. Sharma of P. T. Mitra Adiperkasa; in Perú, Alfredo de Ferrari Morello's Delosi Group; and Henry McGovern of AmRest, Starbucks’ business partner for Central Europe. Also, Fred Hazelwood of the John Bull Group in the Bahamas; I. C. Hur from Shinsegae Corporation in South Korea; Russel Creedy of Restaurant Brands New Zealand; and in Malaysia, Francis Lee with Berjaya.

Finally, not a day goes by when I do not think about Starbucks’ tens of thousands of partners. Their hard work and fortitude transformed the foundation of our business, and the values, the passion, and the ideas that they show up to work with every day are what makes us such a special organization. For all they do, my heartfelt thanks.