How Starbucks nearly collapsed | Inside The Storm | Full episode

Coffee is part of our daily ritual and one company has changed the way we drink it. It was new, exciting, and took the world by

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by turning the humble coffee bean into a $22 billion empire. Starbucks is one of those brands that people love to hate, but keep going anyway. This is the story of how Starbucks conquered the world but then lost its way. It became almost like a fast food business. It lost its charm a bit. The perception that they were big, bad corporate beings. We're still stuck with them and how the guy who made it great had to come back, you know, we convinced ourselves that a new Frappuccino flavor was innovation and that's not innovation: revitalizing the Starbucks brand one cup at a time in the world of Today, apparently no one can live. without your extra chance of skinny caramel latte.

Appetite, I know I always opt for organic Fair Trade coffee, it's not actually coffee, it's the Starbucks green tea latte, it's actually the one I have in my hand. Remember the average person spends a thousand dollars a year to get their caffeine fix and no one sells more coffee in more countries than Starbucks opening a store every 15 hours they show no signs of slowing down if this were a 20 chapter book we are on chapters four and five we're just getting started, but the story of Starbucks wasn't always easy to read. Bad coffee and a thirst for expansion plunged the brand into rapid decline.

So how did Starbucks reinvent itself? It all started in Seattle in 1971, the city famous for its relaxed atmosphere and hippie culture was about to give rise to a company that would revolutionize the coffee industry as we knew it when they started, there was a coffee roasting shop, behind There were three young men who were obsessed with coffee and wanted to make it in a way that suited their needs. hippie lifestyle and were from Seattle which has its own very laid back style. I've come to this in American terms, these three hipsters Eagle and Jerry Baldwin of Gordon Bowker Reserve named their company after a character from Moby Dick, the first companion Starbuck and a two-tailed mermaid.

He became the face of his company, but his real reward was the appointment of Howard Schultz as chief marketing officer 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 to have any form of higher education and he was doing quite well from his family's point of view when he took this extraordinary risk in entering this unknown enterprise, but he was determined to do it, he was determined that was the right thing to do and I think that's an important element in his character, at only 29 years old Schultz had big ambitions for the company, even if he didn't always agree with the founders, it was actually a coffee retail place where they sold coffee , tea and spices, the other founders.

They didn't agree with the vision because they wanted to remain roasters, so they wanted to stay in business: we sell high-end coffee to demanding consumers and we are not in the business of making coffee. At first, Starbucks only sold coffee beans and roasting equipment for making coffee at home, but all that changed in 1987, when Schulz brought out the three founders and gained

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control of the company. His direction for the future was inspired by a trip to Italy. That dream began in many ways with my first trip as a young man when I arrived in Milan. for the first time in 1983 and I was emotionally captured by the Italian coffee shop, the sense of community, the third place between home and work, and I ran back to the United States thinking this is what I would like to try to do and transform coffee Italian. experience in the American Society coming back inspired, introduced the word latte into the American vocabulary for the first time and it was a drink completely different from anything coffee lovers were used to, but this is something where there was no competition, that was new. exciting and took the world by

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, so when Starbucks started they really brought something very European to the American market, but it wasn't just the coffee that captivated us, it was the art and craft behind each cup.

People stopping at a Starbucks was almost like a selfish act of self-indulgence, they would come in and buy this relatively expensive coffee and feel like they were being treated like they were going to the office, the sound of the coffee machine, the steam and the time they took, and then they continued. On top of this, the friendly baristas there, there was a bit of personalization, there you meet the same barista every day and personal bonds were formed in creating this new coffee experience. Shultz's management style was bold and unwavering. The entrepreneurial flame that lives in Howard Schultz is very perfectionist. sometimes very stubborn is my way or the highway approach, it took years for Schultz to accept skim milk in coffee shops because he thought the quality had been ruined.

By the mid-90s, Starbucks had over a thousand stores across the United States and they were ready to go international. first in Japan and soon after in Singapore demand Hello sir, you now have your own independent roaster, but your love for coffee began when a new company came to town. I found these hiring addresses where we are hiring locally in green where we work. Fill out the application form and the next thing you know, we could work at Starbucks. Honestly, I was a coffee drinker. I couldn't tell the difference between an espresso and a latte. It was a place where I felt at home.

It grew on me because it is the motto of a place for pets, another place or a home away from home, called as a third place, now it is a coffee shop, not just home or office, it became an important space in life people's daily life, 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 between those two where you can just sit back, relax, be you himself, chat and that was home. away from home which thirdly 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 contributes to the feeling that you are really in a place that you know.

Very good, although it might be your first time visiting a store in the area, I think that consistency gives you the feeling of being at home, the idea of ​​sitting somewhere and taking a 10 to 15 minute break. between work or meetings or during lunch, after people come to work, they just hang out, sit on a chair outside somewhere in the sun or inside a cafe in winter and relax for a short time frame. Shultz's third place became ingrained in American culture. Favorite characters from hit American sitcoms made friends. It has been great. It's not entirely productive to spend hours at the local coffee shop.

All the now socialized people of the world were gossiping or closing deals on Starbucks couches and the language Starbuck e'en refers to. 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's okay, there's a cup size of coffee there, so there was that feeling of you me too. we 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 that goes back to Schultz's love of Italian coffee shops, so cappuccino, even Americano, the latter and so on successively, all these words that we now refer to as if they were completely natural in our coffee terminology creating 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 parodied language affectionately in hit movies like Zoolander, no one can really help you solve these important issues, and this all came down to one thing: sky-high profits at an average of three US dollars, a small dart, the company makes about fifty cents profit per every cup you sell, but size matters, real money. lies in the oversized drinks, a large latte with additional toppings, the cost of raw materials, packaging, overhead and store taxes have increased slightly and the price has skyrocketed to an average of $4 .30, their profit margin has

nearly

tripled to about $1.40 per cup.

What the brand means is being able to sell a coffee for a couple of dollars for 50 cents. You've convinced people, but it's worth paying that extra because you're paying for more than just the product in 2000. Schulz announced a record. sales of more than 2 billion US dollars. dollars, but the company would have to enter the new millennium without the visionary at the helm. That same year, Schulz decided to step down as CEO and take on a less hands-off position in the boardroom. In his book, he stated that after 14 years of growth, the company would have to enter the new millennium without the visionary at the helm.

As CEO of the company, his heart was no longer in it and he needed a new challenge. He had left the company in a strong financial position, but under new management, Starbucks' strategy would change dramatically. They made a series of appointments that were not appropriate. People who were too financially driven rather than truly having a deep understanding of the brand's culture Over the next decade, Starbucks embarked on a relentless pursuit of expansion, stretching its brand to such an extent that it was a breaking point. after Howard Schultz keyed it. The drive was growth, growth, growth of stars, growth of sales and profits, and I think the original culture was a little bit secondary and during that growth phase you couldn't go from a few hundred stores to a few thousand stores and more than 20,000 stores without losing anything. and this is what many critics criticized: you lost your soul on this journey in the early 2000s, Starbucks went through a period of incredible expansion, the company's revenue doubled every three years, they sold a coffee experience to the world and the world took advantage of it, the economy was just forming, it was so hot that people were busy, people had a lot of money, people drank a lot of coffee and Starbucks took advantage of this to grow really quickly, but the increase in profits was came at the expense of its brand when people began to tire of the iconic mermaid logo appearing everywhere.

Starbucks' expansion strategy was always saturation, so you go to a city and use saturated. There was a perception that there was a Starbucks on every corner. There was no doubt there was an element of well, we might have gotten tired of this. You know, while before it was something new and fresh and exciting, well, we became much more familiar with it, while before, American popular culture was in third place, now Starbucks and its expansion strategy was mocked as captured here at the ever perceptive Simpsons, may I? help I would like to get my ear pierced better do it quickly kid in five minutes this place is turning into a Starbucks the expansion was too fast it was too focused on driving sales in rapid growth and not somehow on the original value proposition, so original value proposition very often you sit down on that purchase and have a cup of coffee but of course real estate is expensive.

I make a lot more money if you buy and take away, so if you push too hard, take back what's left of the Starbucks Experience management had sacrificed the Starbucks experience in favor of greater sales and expansion. People no longer felt special going to a Starbucks. Saturation increased competition. The loss of contact with the consumer's automated machines made him feel so special. baristas in one store were now ordered to prioritize speed of service and help them produce more cappuccinos. Starbucks ditched the traditional coffee machine and went

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y automatic. Thanks vanity when I started we saw each other in 1988 we were all using a semi-automatic machine this really requires at first I would receive technical training just before I left the business in 2007 stop moving to fully automatic machines where the coffee is extracted at the touch of a button and I think that kills the romance a bit. a little bit about the art of how the copies made it become almost like a fast food business and I personally feel like it lost its charm a little bit throughout Asia.

Starbucks' profits began to stagnate in Japan, its largest market outside the U.S. The company's stock price plummeted by more than 50% as consumers began to move away from the brand, and after all , they had much better quality options at their disposal, although Japan is famous for its teeth and has one of the richest coffee traditions in Asia. Kiss, attendcoffee shops like this one. in Tokyo they still practice centuries-old sabatello techniques uncritically and with mathematical ideas Tara Zuma Kazuya is the resident coffee master, he is one with the coffee bean and offers his customers a unique experience Sanjana Sanjana kitchen wall sangeun we have to eliminate yes, a mosquito but on the call Martin I know my taste opportunity I know the color palette overnight you after a while Starbucks focused on speed and market dominance Japanese coffee lovers preferred the traditional drink original Toton in Brazil Guatemala obey the system Tanzania Jamaica my mom the Godfather snow globe mall moving back to normal today even reopened, she wrote the Chiefs a guilty message in the boardrooms of Seattle headquarters, apparently Schultz was aware that the brand he created was weakening in 2007, a memo was leaked to senior management where Schultz warned against further growth in this The memo he wrote was not intended for the public, it was not intended for all of Starbucks, it was intended For the current leadership to reconsider its strategy and think again, shouldn't we really slow down and consolidate instead of continue and grow?

Apparently, Starbucks management didn't heed Schultz's warnings, instead of consolidating their business, they continued to expand their product offerings as Starbucks got more into food and also CDs and sponsored two movies and whatnot. was losing touch with the reasons why people When we got to Starbucks, they asked us all to put on badges, you know, encouraging people to make their own Jing and of course it was packed for the barista, it was painful for those who took the order, the line tends to be a little longer and that. when such requests must be entered if you add additional flavors additional machinery additional products things that work perfectly well suddenly no longer work the staff will not work as well as before they will not be as fast as before they will not be as knowledgeable as before around the world, The Starbucks empire seemed to have become unwieldy, especially in the lucrative Chinese markets - here the American company had posted losses for nine straight years as they struggled to attract a nation of tea drinkers to buy coffee instead - but it was a particular branch in Beijing's revered Forbidden City that would give the company a public relations headache.

You have a tourist destination that a large number of people pass through every day on the surface. This seems like a potential and profitable place to put a Starbucks despite the coffee shop. Being open for seven years, the public perceived the Starbucks brand as an icon of Western globalization imposing itself on Chinese cultural heritage. Social media was just starting to take off in China and what happened is there was a CCTV broadcaster, Rach and his gang, who took to social media. The media asked the critical question: would they put a Starbucks in the White House or Versailles?

The obvious answer is no, we wouldn't. This turned into a storm very quickly. This was the first time they really faced cultural resistance to their global business model. Companies like Starbucks, McDonald's, Dunkin Donuts, etc. They are always targeted by anti-globalization movements that say yes, we are trying to copy and paste a certain model everywhere in the world, the perception that they were big, bad corporate beings is still present. with them and there were the globalization protests that were happening at the time there was anti-big business sentiment in late 2007 the company's value plummeted almost 50% as the markets reacted to the weakening of the brand and the start of a global recession Starbucks stock price was in free fall and its brand had skyrocketed could someone rescue the Coffee Giants or was it time for Howard Schultz's return in 2008 the world's largest coffee company was in disarray management seemed to have confused growth with success by expanding globally?

At the expense of the company's core values, Howard Schultz, the man who had built the brand, was enjoying life away from Starbucks by purchasing the Seattle SuperSonics basketball team, but with his beloved Starbucks on the brink of crisis, the temptation to Coming back was too strong and I returned in January. Seventh as CEO of Starbucks for a word that is not used in business and that is love. I love this company. I love people. I feel like we were drifting a little bit towards mediocrity and we were 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 a critic and I was worried about having to get back into the game.

I think they asked him to come back as CEO in 2008 and there was a sense of the responsibility was his, his son, Starbucks was his dream. Howard's presence when he returned to the CEO position just revitalized the company because you have the original person, you have the person who created the vision, the person who is so good at preaching the Starbucks story and building relationships, survival and people have confidence in Howard Schultz. He was the first to confess that we went from a business, creative and innovative culture to a mediocre bureaucratic culture. Howard Schultz's return had galvanized a global workforce of more than one hundred and seventy-five thousand employees, but his first real step was to revamp the company's top management, which became complacent as the companies became large and successful. , and this happened to the point that the people at Starbucks have rights and success is not a right, you have to earn it, you have to earn it every day. especially in the retail business and we've gotten to a point where I believe in our company culture and values ​​where we just believe we're Starbucks, we've had 15 or 16 years of public life that's been pretty lovely and this is It's just going to continue because it's always been that way, that's not the case Kona is not a presenter, so neither Muto nor the company is a pleasure to also meet Muhammad al-mustafa Hanukkah that Thomas Naya dr.

Schultz personally appointed Maxwell Walter as the new CEO of Starbucks Japan after a fairly rigorous selection process that will chase us MSS crickets a new home are his home county Cyber ​​Satori today in Yaquina sell houses out there rocket hunters means a state star emotion Amoy threw a box into the co-inventor's stomach look how the shooter has it in the Starbucks equation on that gimme honey I know I know the condo market or the model on now come on take it no I'm not a model , stop I don't have a body on a chip or Queen's victim's name is Joey Tenorio's notch music walk again tomorrow in Osseo to Camille Thibideaux the party I didn't know I had to bring Starbucks back to its core a good cup of coffee and on February 26, 2008, he surprised the American media by demonstrating that his strategy involved more than simple motivational speeches.

Baristas at more than 7,000 stores across the United States were asked to turn off the automatic machine and were lectured on the lost art of brewing coffee by the guy who runs the company. now it says we have to retrain everyone, we'll bring everyone back today at 5:30 and say, ok, now this is how we make the double espresso mocha latte, okay, I suspect there was a lot of cynicism about it, it was a dangerous move because it would certainly lead to a lot of obscenity and there was a big and dangerous Starbucks would become a laughingstock and affect my pumpkin spice latte so this is all lost sales and contributions it's incredibly expensive to make a statement so expensive indicates urgency to everyone so that everyone is Wow, we took this so seriously that the stunt cost Starbucks approximately six million dollars. dollars in lost sales, shills were banking on the credibility it would restore to the brand would be much more valuable, whistle walking patterns and tell me so she made Twitter not get my stuff it's me so they were hard on you or not.

I did, I should ask what your name is, yeah come on dre are you guys cool Starbucks at the state office today? I think in the end what I did was establish that we take this seriously and that we are committed to the quality of the coffee. the standards that our people will implement with our customers and that we are not prepared to support service that is below the standard that we have set as a benchmark for Starbucks. Schultz's next move is to reduce product offerings and eliminate hot food from the cafe. It's a small change, but it's a big statement that the company would no longer value stock price and profits over customer experience. .

We've removed those things and are putting them into something else that may not look like it. It's a big problem, but it's a big problem within Starbucks' cultural values ​​because we can't serve two masters, you can't serve the customer's master and the tradition and heritage of the company while trying to satisfy the short-term mentality. On Wall Street, Schultz attempted to rebuild the brand integrity he now needed to address the company's enormous size. Over the last decade, fueled by the economic boom, the company had ballooned to more than 16,000 stores worldwide, but At the end of 2008 the economic climate was changing and these stores became a massive loser in profits, suddenly Lehman Brothers happens, all this stopped, many people lost their jobs and cities in the big cities, the money was no longer so easy and growth had already become a little The marginal margin for Starbucks suddenly became negative, so the new stores that opened already had lower revenue per square foot than the previous stores.

The new stores started cannibalizing the existing stores and suddenly the growth disappeared and the opposite actually happened: there was a contraction da da da. ok - da da da Cunha today Nanako Nina no kimochi kami sake no joseki no honey the typical shells closed 600 stores in the US alone. 70% of them had only been open for less than three years and Starbucks laid off more than 12,000 employees in The biggest part of Your historic battle cry in business today is how to get so big and stay small and the way to do that 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.

I know there is a muscle cut, I find myself in a caucus, a small step aside, the hunters, Kazuto Yosuke, dominate this way, press a key, teacher, come out about codependency. I'm also a second move action, a guy has a second. Oh, in Japan, a set of water to implement. Schultz's vision for doing this was inspired by the coffee masters in the traditional Japanese kiss assists, she earned ten, which is satin, you must earn it, so it's about my master, my own business, who talks a lot, so kind, oh, it's soooo, it's only ten. shows me oh, pretty key, it's my job, you know, to attack every once in a while I want kimochi, it's not what she's cute, just so good.

Oka temesta, see king successful in money, anti-labeling act, turn on Simone Tommy a little, some static achievement, that's the key, Nagato, mom, who knows? I loved it, I gave it to student empowerment and wow, oh wow, that's my luck. Today, in May 2010, sales in Japan reached a record US$1 billion as consumers responded to the more personalized feel of stores. It was a lesson in localism for Starbucks. would be rolled out to other markets in Asia and left territory to enter the fastest growing coffee drinker market in the world. China. The return of Starbucks visionary Howard Schultz had stabilized the brands, but to grow even more, he saw success in one particular market with thirty two hundred stores in China we are opening a new store every day in China and I have said publicly that our business in China will be bigger than the business in US, it's already said and done.

Coffee consumption in China is growing by fifteen percent. every year, but for the past decade, Starbucks had been unable to translate this into substantial profits; The public relations disaster at the Forbidden City may have left Starbucks with a sour taste in their mouth and now, to succeed, they would have to employ a more culturally sensitive approach to their customers. For a brief period, Starbucks symbolized in China a foreign company that didn't understand the culture, didn't appreciate the values ​​of the culture and they had to reshape that and they have done very, very well working with communities, working with parents. be a major employer by partnering with Alibaba and creating the kind of experiences valued In May 2008, 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 toget involved and adapt to local needs. They would involve the community in the design and delivery of the Starbucks experience. Why guess when you can go ask people directly if you came here for what kind of coffee? of experience Would you like Starbucks to demonstrate how serious they are about long-term success in China by opening a 30,000-square-foot roastery in Shanghai, the first of its kind outside the company's Seattle headquarters, all in a attempt to convert more Chinese consumers to premium coffee? lovers and to stay ahead of strong local competitors, Starbucks is big, now we have to put this into perspective.

Starbucks has approximately 5,000 stores in China right now and a new store reportedly opens every 15 hours in China, that's surprising, but if we put it this way in perspective, they are still the second largest player in coffee in China and the Tea consumption still represents more than 50% of the market. Asia is a very different market. If you go to Manila, you go to International or Bangkok. In any of these cities, Starbucks costs. It's a lot of money for the average middle class consumer, so a visit to Starbucks is seen a little more as a luxury and in those markets it's much harder for Starbucks to really capture the mass market.

Starbucks was forced to backtrack on its 2018 projections that now predict they will remain stable. Slightly negative growth in China Competition in the Asian coffee industry has never been stronger and current leaders Starbucks are under pressure at both ends of the market. We must not forget that Starbucks faces increasing competition, the markets are increasingly saturated, so that does not mean that the doors are open to involve it in an expansion like the one it was going through, there is a lot of competition that really It targets artisanal coffees, bespoke coffees, very small chains, individual corner stores, types of coffees, but it is very difficult at scale to move to.

Like artisanal coffee shops, I don't see Starbucks being effective competing with them. The boom Independent coffee shops like the company's Heinie's Dutch Colony in Singapore are an increasingly attractive option for those of us who want an artisanal cut. It comes down to flavor. That's what it gives us and the top of each sub is definitely not doing coffee the way we make it. I think the good news at the table is that you are starting to see the boat of appreciation, you are starting to make coffee the way the local guys make it or the way the artisans make it, you also need to learn from more of the independent center and can Starbucks somehow manage to be sympathetic and in tune with them without losing its own experience and core offering? 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 a lot of lattice that you didn't have in other cities flavors around the mango, all these things that speak of the localization of preferences, national holidays Deepavali or Hari Raya and work more with national cultures, but it is not just coffee that has gone local, but the design of Starbucks coffees employs a global network of architects and artists from 18 countries different, whether in Japan or China, the fabulous reef aims to give global cafe chains a distinctively individual feel.

Starbucks in China has localized itself in a very different way rather than catering to the individual with a laptop. Starbucks serves groups in China, so the seating arrangement would more easily allow four or six people to sit together and share the experience, but despite this local focus, Starbucks, like any global brand, has to guard against scandals that can instantly become international news in April 2008. were arrested at a Starbucks in Philadelphia for waiting in the cafe without purchasing food or drinks. The response was truly multifaceted. We had responses on social media exactly like what we saw with Starbucks in the Forbidden City.

We saw protesters. There was even a call for people to boycott. Starbucks so soon, if you look at those first 24 to 36 hours, this was literally brewing as a major problem for Starbucks, by refusing personal compensation of two hundred thousand US dollars, the two men Rashon Nelson and Dante Robinson asked Starbucks to fund a program of grants for aspiring entrepreneurs and the closure of eight thousand stores in the US. Starbucks also shows its staff this video lesson that reminds them of the history of racial discrimination in the United States. Discrimination against African Americans in public spaces has a long history in the 1960s.

Black and white students attempted to desegregate, buses were firebombed, black customers were routinely denied service in restaurants and hotels, today discrimination is against the law, it is the people and systems that support our communities that must do the same, of course, there is a lot of discussion, there are many critics. of detractors, you can train a culture, you can't train prejudices of many, many types, they may be right, but I think Starbucks tried hard and put in an honest effort and I think it pushed the company in the right direction. Starbucks nobody. McConaughey Teague Dumont I'm getting civilized, so are you going to Tyson?

He's fine, we'll come, boys, shorter stocky names, what's up? You say Hudson and the toughest suits are a huge identity. We're meeting tonight, so no, how do you know? You can't Moscone, but in June 2018. Starbucks would lose a part of its DNA for the second time thank you for believing, thank you for believing in what our core purpose truly is, thank you for believing in each other, thank you for believing in the company and thank you for believing in me in an emotional farewell ceremony the shelves announced that he would be retiring as CEO. It would 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 type of personality despite the uncertainty caused. Following Schultz's resignation, new CEO Kevin Johnson announced record revenue of $6.3 billion. dollars in April 2018, under his leadership, Johnson aims to increase the number of Starbucks stores worldwide by 40 percent to 37,000, but the challenge will be managing this growth while preserving the heart of the company or As Howard Schultz says, how is this achieved? Large companies are left in the swamp and close, it is part of the natural cycle of things, Starbucks is not immune to that, what it must do is what every surviving brand must do, it must remain true to its fundamental principles and essence. of your brand while it is still happening