Starbucks vows to preserve 'intimacy'

"This is really hard to do," Schultz said in an interview at the Seattle headquarters of the world's largest coffee-shop chain. "And because very few people have done it before, they're out there waiting for us to fall."

Schultz's concern about damaging what he calls "the intimacy of the experience" at Starbucks surfaced in February, when a memo he wrote was published in newspapers and on the Web. In it, he urged executives to re-think decisions such as using automatic espresso machines instead of having baristas draw shots by hand. He said such moves could lead to a "watering down" and "commoditization".

"He's rightfully questioning things like whether the restrooms are clean, and how long the lines are," said Reed Bender, who helps manage $300 million at Robert Bender & Associates in Pasadena, California. "Now is a good time to be thinking about these things, especially as they add all these new stores."

"I've written hundreds of memos," Schultz said. "There's a common thread to all of them, really sharing with our own people that success is not an entitlement."

No slowdown in growth

The memo doesn't signal that Starbucks will temper its growth plans, he said. "There's no slowdown," he said. "There's no erosion of the equity of the brand."

Founded in 1971, Starbucks grew to 13,168 stores at the end of 2006. The company plans 10,000 new stores in four years, and has a long-term goal of 40,000 worldwide.

Starbucks shares were sliding before the Valentine's Day memo on investor concerns about higher coffee and labor costs as well as competition from McDonald's Corp and Dunkin' Donuts. The shares have dropped 21 percent in the past four-and-a-half months and fell 15 cents to $31.34 in composite trading on Wednesday.

Bloomberg News

(China Daily 04/06/2007 page16)