If you thought you could go to China to get away from Starbucks, think again - the ubiquitous coffee conglomerate already has a shop in Shanghai, and has just announced plans to open up in a second Chinese city later this year.
If you thought you could go to China to get away from Starbucks,
think again - the ubiquitous coffee conglomerate already has a shop in
Shanghai, and has just announced plans to open up in a second Chinese
city later this year.
The move is part of an aggressive expansion plan that has kept
Starbucks’ stock on analysts’ ’buy’ lists for quite some time now. The
speed of the global rollout even earned the company some gentle ribbing
from Mike Myers’ Austin Powers: The Spy Who Shagged Me. The headquarters
of Dr.Evil’s empire was a Starbucks.
Starbucks, named after the first mate in Melville’s Moby Dick, is
sailing along quite nicely. The company opens two stores a day and now
has 2,800 of them operating in 35 states and 13 international markets.
Most of its stores are light years away from the one in Seattle’s Pike
Place market, which stared it all back in 1971.
Such rapid expansion has kept Wanda Herndon’s public affairs team on its
feet. The firm has the support of Edelman, its national agency, and
three international PR shops. Meanwhile, nine agencies work on a
regional basis, handling mainly store openings and community relations.
According to Herndon, Starbucks’ international operations rely heavily
on the internal marketing staff, which is trained in PR.
More than just coffee brewing
The number-one mission of the Seattle-based PR team is to communicate
the firm’s success in bringing the Italian-style coffee drinking
experience to the world. But it is also instrumental in promoting the
firm’s products through events such as ’Coffee College,’ where the PR
team shows journalists how to brew the perfect cup.
As well as the proliferation of stores, Starbucks has been expanding its
range of product offerings. It has joint ventures with PepsiCo for the
cold bottled drink Frappuccino; Breyers for coffee-flavored ice cream;
and Capitol Records, which produces CDs sold in Starbucks.
Herndon, who served stints at DuPont and Dow Chemical, says she works
hard to ensure the company is at the forefront of socially responsible
programs. Starbucks has linked up with celebrities like Mark McGwire and
makes a donation of dollars 5,000 to local literacy programs for each
home run he slugs. It also has a joint venture with basketball legend
Magic Johnson to open stores in underdeveloped urban areas such as New
Starbucks has even formalized this effort, installing a senior vice
president of corporate social responsibility.
But it’s not all warm-fuzzy coffee talk. One of the most significant
tests of Starbucks’ PR mettle came last year when three employees were
killed in a robbery attempt on one of its Washington, DC stores. The
Starbucks team called in its regional PR agency, Brotman Winter Fried,
to clear the horde of reporters and cameras from the front of the
Because the East Coast media were baying for some kind of statement from
Starbucks, Herndon put out an initial release, which basically admitted
that the team didn’t have much information about the event. Herndon
later identified a media spokesman, regional director Dean Torrenga.
Director of public affairs Alan Gulick recalls, ’It was a very sad day
for the company. It was important to reach out to the partners
(employees) and to the families.’
The public affairs team was at the forefront of organizing a memorial
service. Starbucks CEO Howard Schultz made the decision to donate net
profits from the store to a charity benefiting victims of violence. At
the end of the memorial service Schultz talked to the media, but Herndon
answered all media queries.
Starbucks’ PR chief reports directly to the CEO, a former marketing man
himself. ’I am looking directly at his office, that’s how accessible he
is,’ Herndon says, adding, ’He is always involved in key
We strategize about how we can use him as a brand visionary.’ Schultz is
often available for interviews and recently spoke to The Motley Fool
financial Web site and the staff newsletter of retail giant Costco.
Although Starbucks was voted one of Fortune magazine’s ’Top 100
companies to work for’ last year, it is not without its critics, from
button-down financial analysts to environmentalists.
Around a third of Starbucks’ stock value vaporized on June 30 of last
year when Schultz discussed the firm’s new Internet strategy and
announced a dollars 19 million profit shortfall for the fiscal year.
Herndon says the investment community was briefed a few days earlier.
’We were open and honest that we’d miss the quarter and we advised the
analysts of that,’ she says.
But it was Starbucks’ Internet strategy - which involved buying stakes
in the likes of Cooking.com, Oxygen.com and TalkCity.com, among others -
that frightened off investors. CEO Schultz acted swiftly to assure Wall
Street that the firm would not pursue Internet activities that would
dilute earnings per share or divert attention from the retail
Salomon Smith Barney equities analyst Mark Kalinowski was impressed by
Starbucks’ ability to bounce back: ’Restaurants are a very difficult
concept to run well. Everyone wants them to be as focused as
To their credit they reacted quickly, and I think the company learned a
lesson from it.’ Kalinowski, who has just initiated coverage of
Starbucks, gives them ’very high marks’ at communicating.
A more recent deal with urban delivery service Kozmo.com received a
warmer welcome. Starbucks is set to receive dollars 150 million over
five years by allowing Kozmo customers to return rented items to its
Starbucks has been under pressure from environmental groups such as
Global Exchange to pay coffee growers better prices for their product.
Although Starbucks issued a press release in March that encouraged
customers to come and recycle used ground coffee, many felt it wasn’t
To assuage its critics, the public affairs team announced an agreement
to purchase so-called ’Fair Trade’ coffee beans from Nicaragua and
Guatemala, which are approved by monitoring organization TransFair USA.
But Herndon admits that pleasing environmental advocates is a thankless
task: ’We try to be proactive. We purchase Fair Trade coffee, but who is
to say what is enough for these people.’
Steve Gelsi, a reporter at CBS Marketwatch, covered Starbucks while at
BrandWeek. He says the PR team is responsive and deems it ’a category
killer, just like Nike.’ But sometimes it’s not a boon to be in the same
boat as Nike - a downtown Seattle Starbucks was looted during the unrest
surrounding the World Trade Organization’s summit late last year.
Starbucks has yet to run a national brand advertising campaign, which is
probably the greatest testament to the success of its public
In addition to its appearance in the Austin Powers sequel, the brand has
also appeared on numerous TV shows and movies, including Ally McBeal,
Bowfinger and You’ve Got Mail. But according to Herndon, none of this
onscreen promotion was her team’s doing. It just goes to show you how
popular those grande lattes can be.
PR chief: Wanda Herndon, SVP worldwide public affairs Internal PR staff:
Alan Gulick, director of public affairs; Cheri Libby, manager of PR;
Soon Beng Yeap, manager of international PR; Maura Donaghey, manager of
internal communications; Helen Chung, senior media relations specialist;
Tracy Moran, IR manager Agency of record: Edelman (San Francisco);
Regional agencies: Regan Communications, Price McNabb, Barnhart CMI,
GCI, Brotman Winter Fried Communications, Douglas Cohn & Wolfe, Stanton
Crenshaw Communications, MWW/Savitt, Metropolitan Group
Annual PR budget: dollars 3-5 million.