Schultz Transcript Clip 2
Moving the Brand Overseas
HOWARD SCHULTZ:
I would say that we're not really in the coffee business. We're in the people business in which the physical place--and let me say it this way--is that most consumer brands over the last 50 years have been based and been built in a traditional way: advertising, promotion, ubiquitous distribution.
Starbucks really is the quintessential experiential brand. And, in fact, we spend almost no money. It would be embarrassing the amount of money we spend on marketing. And people think we're a marketing machine; we're not.
GARRICK UTLEY:
But now you're going to go overseas, and these are new challenges. As you expand overseas, because your goal is to have, what, 40,000 stores in 40 countries?
HOWARD SCHULTZ:
Well, we're in 40 countries now. We have 4,000 stores outside of North America. We believe we can have 40,000 stores world wide, 20,000 in the U.S and 20,000 outside.
GARRICK UTLEY:
By when?
HOWARD SCHULTZ:
We haven't said when, but we open about 2,500 stores a year, so you can do the math.
GARRICK UTLEY:
Now, when you go overseas, whether it's outside the boroughs [?] of America will be as important if not more important than what's happening here, how will you present yourself? Are you going to be a quintessential American company like Coca-Cola and McDonalds? Because you're now really going overseas, do you have an opportunity to market yourself or position yourself in a different light?
And I ask this question, as you might suspect, because of how many people around the world, including consumers, view the United States.
HOWARD SCHULTZ:
Yeah.
GARRICK UTLEY:
Not just our foreign policy but our culture et cetera.
HOWARD SCHULTZ:
We opened our first store overseas in August of 1996 in Japan. And we've gone to, as I said, 40 different countries, very diverse places, all over the world, including 200 stores in the Gulf. And what we've learned is that people want the authentic Starbucks experience. They don’t want it watered down, and they don’t want it changed or refined for their market.
To your question about America's brand or America's foreign policy, we've also seen a little bit of a change over the last few years. Where, say, five years ago the angst and concern about American foreign policy did not bleed over to American companies or American brands, and I think there has been somewhat of a sea change.
And as a result of that we benefit from having local partners. The local partner co-authored a strategy with Starbucks all over the world. They insulate us from being totally an American company. They bring us to market, using a lens of the local business community and help us.
But there's no doubt that any American company, especially a consumer brand, doing business overseas today, needs to take into consideration the geopolitical issues as well as the grave concern about America's foreign policy, specifically in the Middle East.
GARRICK UTLEY:
So it is gotten to the point where it has had a commercial, or potentially a commercial, impact on companies operating across the world?
HOWARD SCHULTZ:
Yeah, I mean, I think there's no way you could do business outside North America today and not take into serious consideration America's foreign policy and America's image, and specifically the concern about what America today stands for.
GARRICK UTLEY:
All right, let's get specific with some key countries like China, India, and Brazil.
HOWARD SCHULTZ:
Yes.
GARRICK UTLEY:
Not exactly tiny places, but great potential--China first: how big do you want to be in China?
HOWARD SCHULTZ:
We have 500 stores now in China, having opened the first store in '99. Now we said publicly that China will be the largest market for Starbucks outside of the U.S. There will be thousands of stores in China. Now, having said that, it is a very difficult, challenging place to do business.
GARRICK UTLEY:
Tell us about that.
HOWARD SCHULTZ:
China is a country of contradictions. Nothing is what it appears to be. You know, the most important hire we've had in China, which took us about four years to make many mistakes and realize, was a very significant government relations executive who could help us navigate in and out of that part of the world.
What is surprising is that there are 250 million Chinese people who can afford Starbucks. It's an incredibly aspirational society. Starbucks is iconic. And the biggest surprise is the awareness of Starbucks that we had before we opened our first store there. We never went to the market. We opened our first store, and everyone knows what a frappuccino is.
GARRICK UTLEY:
All right, they know that. Now, many people will say, all right, my image of China has been the land of tea.
HOWARD SCHULTZ:
Yes.
GARRICK UTLEY:
So here comes Starbucks in with hundreds or thousands of stores and saying, we're selling you frappuccinos and lattes and so on.
HOWARD SCHULTZ:
Yeah. The interesting thing about that is we did not go to China to replace tea. We came to China to create a complementary beverage. But what has happened in China is the physical place of Starbucks has become as important as anything we do, maybe even more important than the coffee itself.
And the reason for that is the physical stores of Starbucks in many ways are larger and more dynamic, more interesting, than where people live. They commute one hour, two hours, three years, every day. So the Starbucks store has become an extension of their lives. People are doing things in Starbucks stores in China that we never dreamed they would, and because they're using the physical place as an extension of their lifestyle.