ANALYSIS: Client Profile - Making coffee talk to a global marketplace/From Seattle to Shanghai, it seems you can’t walk 10 feet without running into a Starbucks. Its PR team makes sure its communications flow as smoothly as the cafe latte. Claire

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.

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

York’s Harlem.



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

store.



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

communications.



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.





Stock drop



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

business.



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

possible.



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

stores.



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

enough.



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

relations.



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.





STARBUCKS



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);

two-year relationship



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.



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