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Brewing up success story

Updated: 2011-06-10 10:40

By Matt Hodges (China Daily European Weekly)

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When he returned in 2008, he closed 7,100 stores in the United States for several hours to re-educate baristas on how to pour the perfect espresso, an unprecedented gesture that cost the company $6 million.

Similarly, when it came to the annual Starbucks managers' meeting in 2008, an event worth approximately $30 million to the host city's economy, he chose New Orleans, which was struggling to recover from the effects of Hurricane Katrina three years earlier.

At the meeting, U2 front man Bono impressed upon store managers the need to fight against AIDS in Africa by promoting a new line of "RED" products in their stores to generate proceeds for the singer's charity. Meanwhile, Starbucks employees put in 50,000 man hours of charity work in the disaster-struck city.

"Consumers want to support companies that share the same belief systems," Schultz says. "I painted yesterday (here in Shanghai). I talked to children at a school. Then we toured a nursery home, and shook the hands of the people there."

"We wanted to earn the respect of the Chinese people," he says. "Our business in China used to be mostly expats. Today it is mostly Chinese."

He also spent four hours talking with 800 Chinese store managers, who admitted they were shocked at his transparency about the company's problems. As another gesture of goodwill, proceeds from the royalties of the Chinese-language version of Schultz's book will go to the Starbucks Foundation and the CUP Fund.

This points to another of the man's natural talents: he is nothing if not a marketing genius, eschewing traditional forms of advertising to build one of the best-known brands in today's consumer-driven society.

Even the Forbidden City incident was a winner in terms of raising awareness of the brand, and what it cost in terms of goodwill, Schultz has taken pains to make up for.

"You can't build a great company by just serving your customers. You must also serve your people," he says, explaining how he refused to do away with healthcare plans for employees to keep shareholders happy during the credit crunch.

He described his decision to close 600 stores - 8 percent of the US retail profile - and let go of 7 percent of Starbucks global workforce as heart-wrenching.

"The decisions we are making now in China are disciplined, thoughtful and researched", he said, adding that the hubris that led to Starbucks decline, and swathes of layoffs, is now gone.

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