KANSAS CITY — Fascination with the Howard Schultz/ Starbucks story, recently shared on the Acquired podcast, begins with the poignant challenges the company’s longtime leader endured in his efforts to acquire the Seattle coffee-bean purveyor and establish the craft coffee category in the United States. Schultz’s shared recollections as well as what he chose not to share should be of great interest to grain-based foods leaders.
Schultz participated as a special guest on the podcast in late spring. Hosted by Ben Gilbert and David Rosenthal, Acquired offers lengthy cas
Josh Sosland, editor of Milling & Baking News.
Source: Sosland Publishing Co. e studies often telling the stories of how great companies achieved their greatness, including Nvidia, Costco, Novo Nordisk and Amazon.
Schultz, who stepped down as chief executive officer in September 2022 and rolled off the Starbucks board last year, weaves his stories artfully. The format of the Acquired podcasts, which run three hours and longer, is conducive to the many absorbing experiences he relates. Two examples from many:
Starbucks was dramatically ahead of the curve with its move to mobile payments. The idea of a Starbucks app was brought to management only months after Apple in 2008 first launched the apps concept. He recalled, “They explained it to us, but I didn’t really get it until I saw it. And then holy #&$t, overnight, it was just an unbelievable new vehicle.” The app has been an amazing growth catalyst, but Schultz worries if not handled properly it will undermine the experiential essence he still insists is central to Starbucks’ success.
Starbucks entered the Japanese market against the adamant counsel of a consultant the board insisted management engage. “The economics won’t work,” Schultz recalled from the consultant’s report. “No one in Japan will ever walk in the street with a cup of coffee — they would lose face.” In fact, the launch in Japan was highly successful, reminiscent of Krispy Kreme openings in the heyday, setting off Starbucks’ global expansion. Today, there are more non-US stores than locations in the United States.
For a company able to transform quixotic vision into reality repeatedly over the last 50 years, Starbucks’ struggles to find success with its baked foods program was a noteworthy omission in the podcast. Avoiding the topic of baking may have been the easiest way to paper over important code Starbucks has yet to crack despite several attempts.
In 2012, the company paid $100 million to acquire the La Boulange bakery brand, based in the Bay Area, with the intent to boost the quality of its baked foods. Not an incidental bolt-on investment, Schultz at the time emphasized La Boulange’s fundamental importance.
“Our key strategic goal will be to introduce artisan bakery products under the La Boulange brand into our stores in the US, giving customers more reasons to frequent and enjoy their experience during multiple dayparts, and as a result, drive incrementality,” Schultz said at the time. “We see an incredible opportunity to bring the artistry of the best French bakery product to the US marketplace.”
Three years later, the company closed its La Boulange operations but didn’t give up on finding success in baked foods.
In 2016, Starbucks invested in Princi, a Milan-based bakery and cafe.
“We have never baked in our stores in 45 years,” Schultz said in announcing the transaction. “But all of that will change with the creation of this unique partnership.”
Princi baked foods are part of a handful of Starbucks Reserve stores, but baking inside stores across the Starbucks network has yet to materialize many years later. Princi has not been mentioned in any of the company’s last four earnings calls with analysts. Asked about its status, a company spokesperson reiterated the company’s soft 2023 commitment to “introduce an elevated baked offering over time.”
The quality of baked foods remains a black eye for far too many gourmet coffee shops. Overcoming this hurdle may yet prove key to Starbucks moving beyond its recent challenges, kicking off a new chapter in the company’s remarkable story.
