While a breakfast sandwich made business sense, Schultz thought it didn’t go with the image of the Starbucks brand. Can brand strategy be at loggerheads with corporate strategy?
By summer 2007, it was no longer enough for me to talk about my frustrations with our executives in Seattle. I had to go out on my own and speak to our store, district, and regional managers directly, as well as talk with baristas. I considered the fact that it might have bothered Jim that I was talking to other partners about what I perceived was wrong with Starbucks, but still I took it upon myself to have these direct conversations about the deteriorating store experience.
For me, the most acute example of this, the most symbolic representation of how Starbucks was deviating from its heritage and losing its magic, was the breakfast sandwich.
Starbucks first began serving sandwiches in 2003. Over the years we had experimented with many types, from bagel sandwiches to, in 2006, warm combinations of sausage, turkey bacon, and ham and egg on English muffins. We called the latter warm or breakfast sandwiches, and most of them included cheese. I understood why sandwiches made financial sense. For years customers had come into our stores with competitors’ food products, or only bought our coffee and then went elsewhere, or were buying lower-quality coffee where they purchased their breakfasts. The sandwiches met a need. As a result, they drove sales, drove profit, and drove comps.
But I had resisted the idea of serving hot food from day one. While I encouraged innovation, I never envisioned people coming into Starbucks for a sandwich. Many customers, however, embraced the warm breakfast sandwich, grateful for a tasty, more substantial food offering. In fact, they gained quite a loyal following. The more popular they became, the more our baristas had to heat them in our warming ovens. And when they did, the sandwiches’ cheese would inevitably drip and then sizzle in the ovens, releasing a pungent smell. Whatever rich, hearty coffee aroma remained in the store was overwhelmed by singed Monterey Jack, mozzarella, and, most offensively, cheddar. The smell further chipped away at our narrative. Where was the magic in burnt cheese?
People who have known me for years will tell you that few things had ever piqued my ire as much as that smell. As far as I was concerned, nothing could be further from the romance of the Italian espresso bar.
I could not stand it.
One day I walked into a Seattle Starbucks and immediately felt frustrated because burnt cheese had, once again, enveloped the store. I spoke to the manager about it. But she did not understand my concern because, she told me, the store had already far exceeded its sales goals for sandwiches for that week. I left the store depressed. What would be next? Hash browns?
The breakfast sandwich became my quintessential example of how we were losing our way. “Get the sandwiches out!” I pointedly told Michelle Gass, then our head of global products, even as we continued to introduce them into hundreds of new stores. An hour later, Jim told Michelle that Starbucks needed the sandwiches and would not take them out. Research and anecdotal evidence had told him that customers liked them, bringing into our stores more people who now included our sandwiches in their morning coffee rituals.
Not surprisingly, Michelle and others felt uncomfortably pulled between two leaders. Both Jim and I had good intentions and similar goals, but differing opinions about how to achieve them. Removing the sandwiches would have cost the company sales and customer loyalty. I was willing to trade some short-term pain for longer-term gain. Jim and others were not.
My adamant stance was admittedly dispiriting for partners in our food department who had worked for years to create the new food offerings. Months of planning, research, and testing had gone into the sandwiches’ development, including hundreds of hours trying to minimize the smells of sausage, bacon, and, of course, burnt cheese. At one point, an “aroma task force” was pulled together as the team wrestled to eliminate the offending smells.
They experimented with different ovens.
They retrained baristas to clean the ovens more often.
They replaced the parchment paper that held the sandwiches.
Cook times were narrowed to prevent dripping cheese.
Manufacturers were asked to rework their ovens’ vents to keep aromas from entering the air, and our own operations people tried to improve the stores’ heating, ventilation, and air-conditioning systems to pull odors from the air.
Nothing seemed to work. Internal disagreement about the sandwiches’ benefit to Starbucks as a business—versus their detriment to Starbucks as a brand—continued to heighten tensions within the company’s most senior ranks. The debate was as divisive as the memo. Maybe even more so. The question at hand was whether the company should follow customer data or my intuitive sense. At the time, I was not interested in finding a compromise.
Adding to my frustration was the reality that the sandwiches were not alone in detracting from our stores’ essence. There was also the loss of coffee aroma, the resteaming of milk, the too-tall espresso machines. The list was getting longer. Such negative incrementalization, like one thread after another pulling at our seams, could be the company’s undoing.
I saw it. I felt it. I could not ignore it. A founder’s perspective is unique.
Entrepreneurs are builders, and the lens through which I view Starbucks and the marketplace is somewhat different from what it would be if I were a professionally schooled manager.
Such a lens, however, has its strengths and weaknesses.
On the plus side, founders know every brick in the foundation. We know what inspired the company and what was required to create it. That knowledge, that history, brings with it a high level of passion to do whatever it takes to succeed, as well as an intuition about what is right and what is wrong. But sometimes we are too close to a situation. Entrepreneurs can be blinded by emotion, by our love of what we have built, unable to see it fresh and with the eyes of a more objective outsider.
Whether I was right or wrong about the sandwiches was less telling than my obsession with removing them, which was a manifestation of my mounting frustration. Twenty years after purchasing Starbucks, I felt like a former captain who could sense his ship slowly sinking. In a knee-jerk attempt to keep us afloat, I pushed to eradicate the sandwiches from our menu. But my efforts were only a gasping attempt to plug one hole when, in reality, there were so many other holes bringing us down.
By the fall of 2007, six months after I wrote the memo, I did not think anything substantial had changed inside the company or in our stores. Day by day my disappointment edged toward anger, and at times fear, that Starbucks was losing its chance to get back the magic. That’s when I began to seriously consider if the time had come for me to return as CEO.
ONWARD
AUTHOR: Howard Schultz, Joanne Gordon
PUBLISHER: Wiley
PRICE: £14.99
Excerpted with permission from the publisher. Copyright Wiley. All rights reserved.