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1077 of 1258 DOCUMENTS

The New York Times
March 3, 2007 Saturday

Late Edition - Final

A Double Shot Of Nostalgia For Starbucks
BYLINE: By JOE NOCERA
SECTION: Section C; Column 1; Business/Financial Desk; TALKING BUSINESS; Pg. 1
LENGTH: 1739 words
Is it possible that there are actually two Howard Schultzes lurking around Starbucks headquarters in Seattle? I think it is.

The first Howard Schultz is the man who has coffee in his veins. He's the one who bought what was then the tiny Starbucks company in 1987 and turned it into one of the dominant brands of the age. Starbucks coffee was a step above other coffee, and it also offered a ''coffee experience'' that made customers willing to pay $4 for something that used to cost them 60 cents.

Starbucks was a place where people could hang out, read the paper, and make friends with the ''baristas'' behind the counter; Mr. Schultz used to call it the ''third place,'' a respite from both the workplace and the home front. Starbucks had its own language and culture. Its part-time staff got stock options and health insurance. It didn't exploit its coffee growers. It had a huge social responsibility program. And Mr. Schultz, who is chairman of Starbucks, took deep pride in all the things that made Starbucks special.

Last week, this Mr. Schultz was on vivid display when an internal memo he wrote to his top executives was leaked to Starbucksgossip.com. The memo is a cri de coeur from Mr. Schultz, a lament for what has been lost as Starbucks has grown from 6 stores in 1987 to more than 13,000 stores today. He pointed, for instance, to the company's decision some years ago to install automatic espresso machines, which, he wrote, ''solved a major problem in terms of speed and service,'' but also made buying a cup of Starbucks coffee a more antiseptic experience.

He complained about the loss of aroma because the baristas no longer scooped fresh coffee beans from bins and ground them in front of customers. He said that streamlining the company's store designs had caused them to lose ''the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store.'' He said that the Starbucks experience was becoming commoditized, and he urged the executive team to ''go back to the core.''

The memo was widely lauded as an example of an entrepreneur who understood the importance of recapturing what made his business special before it was too late. ''While I wouldn't argue that the Starbucks brand is in its death knell, I would argue that the efficiencies and economies of scale have introduced a virus in need of serious care,'' wrote Mike Neiss on the Web site of the Tom Peters Company. ''And it looks like Howard Schultz just might be the healer they need.''

Warren Bennis, the leadership guru who has served as an informal mentor to Mr. Schultz, said, ''This is something every successful chief executive should do every once in a while.''

But then there's the other Howard Schultz, the one who signed off on the very compromises he complained about in the memo, precisely because they would help the company grow faster. This second Howard Schultz can talk Wall Street's language: he goes on the quarterly conference calls and spits out data about same-store sales, return on investment, and, most of all, growth. Though it has lagged recently, his company's stock price has risen 5,000 percent since it went public in 1992, in large part because Mr. Schultz has been so fanatical about growth. It closed yesterday at $29.88.

''Starbucks is the fastest-growing retail story of all time,'' said John Glass, an analyst with CIBC. ''It has grown faster than McDonald's ever did.''

This second Howard Schultz shows no signs of slowing down anytime soon. ''I want to say this as loud as I possibly can,'' he told Maria Bartiromo on CNBC last November, after Starbucks released its quarterly earnings. ''Three to five years, 20 percent revenue growth, 20 to 25 percent earnings per-share growth. And we're headed to 40,000 stores.'' Those are astounding goals for a company the size of Starbucks: no company in history has ever built 40,000 retail outlets. (McDonald's, by contrast, has 30,000 stores worldwide.) And 25 percent earnings growth is something only the most aggressive of growth companies shoot for.

The quandary Mr. Schultz faces, assuming there is only one of him, is that he wants two things that are incompatible. If he wants to recapture the soul of the old Starbucks, then he has to slow down the company's growth. But if he slows the growth, the stock will collapse. He has to choose. Truth is, though, Mr. Schultz has already chosen.

ONCE, maybe 10 years ago, Mr. Bennis asked Mr. Schultz why it was so important to him that Starbucks grow so rapidly. ''He said something to the effect that if he didn't do it, Starbucks could be cannibalized by another chain that would wipe it out,'' Mr. Bennis told me.

As I discovered when I asked around, Mr. Schultz is an enormously competitive businessman; I wound up thinking that the idea of relentless growth is just as powerful a driving force for him as coffee itself. In the memo, he complained that Starbucks' competitors have become emboldened to go after Starbucks customers. ''This must be eradicated,'' were the startling words he used.

But to give him his due, Mr. Schultz has always struggled with the problem of trying to stay true to the company's roots while growing aggressively. ''Last October or November, he made comments very similar to the thoughts in the memo at a dinner with investors,'' Mr. Glass said. And according to Anne Saunders, Starbucks' senior vice president for global brand strategy, what he wrote in the memo was nothing Starbucks executives hadn't heard from him many times in the past. ''Howard is often challenging us,'' she said.

''We have grown as a company because we have chosen to do business in a different kind of way,'' she continued. ''If growth comes from doing things that are out of whack, then it is not the right kind of growth.'' Ms. Saunders went on to say that she, and the rest of the company's managers, believed that the company had grown in ways that remained compatible with its culture.

Maybe. But from where I'm sitting, it just looks as though whenever push has come to shove, the growth imperative has usually won out.

Take, for instance, food. ''I remember when Starbucks went public,'' said Ron Paul of Technomic, a food retail consulting firm. ''I went to one of the roadshow presentations. Howard said that they would never serve food. He thought it would dilute the experience.'' (A Starbucks spokeswoman said Mr. Schultz was pointing out that Starbucks was a coffee company, not a restaurant chain.)

But one of the most important metrics for Wall Street is same-store sales increases. If growth is being generated purely from the opening of new stores -- and not from increased sales in stores that are already open -- that's viewed as a bad sign. It means that once the company runs out of places to put stores, it will stop growing. For Starbucks, there was always going to be a limit to how much coffee it could sell in any one location, so to goose same-store sales, it began selling food. (Not very good food either, but that's a whole other story.) Most recently, it has begun selling hot breakfast sandwiches in a number of markets, yet another move it would never have made, say, five years ago. The same principle applies to music, to books and all the other things Starbucks now sells in its stores.

The food and brand consultants I spoke to were unanimous in their feeling that Starbucks had hurt itself by expanding so far beyond its coffee and coffeehouse roots -- and that it needed to return to those roots. ''He is right that Starbucks is losing its soul,'' said Harvey Hartman, who heads the Hartman Group in Bellevue, Wash. ''They were built on the coffee experience, and by moving so far beyond that, they are jeopardizing everything else.''

Robert Passikoff, president of the brand consultant Brand Keys, said that Starbucks had taken its eye off the brand. ''In trying to migrate from a coffee brand to a lifestyle brand, there has been a certain brand dilution.'' He agreed that the ''whole European coffeehouse experience'' was no longer how people thought about Starbucks, to the company's detriment. Mr. Passikoff's firm just completed a survey of 20,000 people by phone and in person that showed that Dunkin' Donuts now had higher customer loyalty than Starbucks. He also pointed out that Consumer Reports recently asserted that McDonald's coffee was superior to Starbucks's. Both Mr. Passikoff and Mr. Hartman felt that the memo made a great deal of sense.

The Wall Street folks I spoke to, though, saw the memo differently -- as a kind of longing for a memory that will never return. ''When you grow as big and as fast as they have, you have to make compromises,'' said Howard Penney, who covers the company for Prudential. ''The complexity of the menu has changed dramatically since it first opened,'' he said. That complexity required automation and other techniques to keep waits for coffee from being too long. (As anyone who buys Starbucks coffee in New York knows, the company doesn't always succeed.)

Mr. Glass of CIBC said: ''If it remained a coffee destination and nothing else, same-store sales would not increase. It's a public company. Their job is to make money for the shareholders by selling more stuff.'' Both Mr. Glass and Mr. Penney pointed out that Starbucks plans to open 2,400 stores this year. That's more than six new stores every day. Tell me how you're going to do that if the baristas start grinding coffee by hand again?

Of course, that's never going to happen, as Ms. Saunders of Starbucks quickly acknowledged when we spoke. ''Our business has never been better,'' she said. ''We are really doing well.'' But the company didn't want to ever rest on its laurels -- and it didn't want to sacrifice what made it special just for the sake of growth, she said. ''The question is always, How do you keep things in balance?''

For lovers of Starbucks, I suppose it's comforting to know that Mr. Schultz and his team sit around worrying about whether they are watering down the customer experience. But it would be even more comforting if they actually did something about it. Because someday, the growth will slow and the stock will slide -- that's inevitable. And how will customers feel if, when that happens, their customer experience has been turned into a drive-through window, just like McDonald's.

Oops, I forgot. Starbucks has already started putting in drive-through windows.
URL: http://www.nytimes.com
SUBJECT: COFFEE & TEA STORES (90%); COFFEE (89%); COFFEE FARMING (77%); ENTREPRENEURSHIP (77%); RETAIL MERCHANDISE MANAGEMENT (76%); COMPANY STRATEGY (69%); RETAILERS (69%); BUSINESS COACHING & MENTORING (68%); ANTI-INFECTIVES (64%); HEALTH INSURANCE (53%); LANGUAGE & LANGUAGES (53%); RESTAURANTS (69%); STOCK OPTIONS (68%) Restaurants; Company and Organization Profiles; Coffee; Restaurants
COMPANY: STARBUCKS CORP (93%)
ORGANIZATION: Starbucks Corp
TICKER: STB (LSE) (93%); SBUX (NASDAQ) (93%)
INDUSTRY: NAICS722213 SNACK AND NONALCOHOLIC BEVERAGE BARS (93%); SIC5812 EATING PLACES (93%); NAICS722213 SNACK & NONALCOHOLIC BEVERAGE BARS (93%)
PERSON: HOWARD SCHULTZ (97%) Joe Nocera; Howard Schultz
GEOGRAPHIC: SEATTLE, WA, USA (92%); BEIJING, CHINA (78%) WASHINGTON, USA (92%); NORTH CENTRAL CHINA (65%) UNITED STATES (92%); CHINA (79%)
LOAD-DATE: March 3, 2007
LANGUAGE: ENGLISH
GRAPHIC: Photos: Howard Schultz has made Starbucks, and its cups, ubiquitous. (Photo by Ted S. Warren/Associated Press)(pg. C1)

Starbucks's 13,000 stores include one in the Forbidden City in Beijing. Howard Schultz, the company chairman, says he wants 40,000. (Photo by Peter Parks/Agence France-Presse -- Getty Images)(pg. C8)

PUBLICATION-TYPE: Newspaper

Copyright 2007 The New York Times Company

1078 of 1258 DOCUMENTS

The New York Times
March 1, 2007 Thursday

Late Edition - Final

TODAY IN BUSINESS
SECTION: Section C; Column 5; Business/Financial Desk; Pg. 2
LENGTH: 857 words
CALM AFTER THE STORM -- Stocks rose modestly in United States markets, a day after a global sell-off. The Dow Jones industrial average, which tumbled as much 545 points on Tuesday, closed yesterday up 52.39 points, or 0.4 percent. [Page C1.] AND A REBOUND IN SHANGHAI -- The Chinese stock market in Shanghai rebounded, recovering a substantial amount after Tuesday's 9 percent drop. But elsewhere in Asia markets fell in reaction to the sharp drop on Wall Street and to disappointing figures on the American economy.

[C4.] SLOWER PACE IN LATE '06 -- The Commerce Department reported that economic growth inched ahead by 2.2 percent in the fourth quarter -- a downward revision of 1.3 percentage points. The new rate is substantially below the economy's long-term trend rate of growth. [C6.] A NEW DIRECTION AT S.E.C.?-- Christopher Cox, the chairman of the Securities and Exchange Commission, is signaling that he is moving toward the view that the administration overreacted to the corporate scandals that began with the collapse of Enron in 2001, some investor advocates and securities law experts say. [C1.] REASSURING WORDS -- Ben S. Bernanke, the chairman of the Federal Reserve, said that he saw little cause for alarm in either stock market plunge or new evidence of slowing economic growth. [C5.] HAVEN'T I SEEN YOU BEFORE? -- Madison Avenue is hiring venerable actors, once known for serious, straight roles, to display cleverly self-mocking sides of their personalities in campaigns aimed at younger as well as older consumers. The spots offer celebrities like William Shatner, above, another day in the limelight. Advertising. [C11.] FEELING THE PRESSURE -- NBC has made plans to replace the executive producer of its ''Nightly News with Brian Williams,'' according to several NBC executives -- a sign that its dominance in the evening news race is undergoing its most serious challenge in a decade. [A1.] ORACLE NEARS A PURCHASE -- Oracle is near a deal to acquire Hyperion Solutions, which makes software that allows corporations to analyze and track their performance, for about $3 billion, according to people briefed on the deal. [C1.] HURRICANE KATRINA CLAIMS -- Mike Moore, a lawyer who engineered a settlement with State Farm, argued in court that the deal should be approved partly because it could put hundreds of millions of dollars into the hands of victims of Hurricane Katrina by the end of the year. [C2.] READY TO DEAL -- Mel Karmazin, the architect of a proposed merger between the nation's two satellite radio companies, XM and Sirius, announced at a hearing in Congress that the companies would agree to government-imposed price controls and other unspecified measures to gain regulatory approval. [C3.] AIRBUS WALKOUT -- Nearly 14,000 blue- and white-collar employees at four Airbus production sites in France stopped work as long as two hours to protest the company's decision to eliminate 10,000 jobs and sell as many as six factories over the next three to four years, union officials said. [C3.]A COOKIE JUGGERNAUT -- With a sales force of 2.7 million, the Girl Scouts have kicked off their 90th season of cookie sales -- but with some modern entrepreneurial twists aimed at encouraging more bulk sales. Small Business. [C7.] A PACT TO FREE KOREAN FUNDS -- China and the United States are close to an accord to let North Korea regain some of the $25 million in its funds frozen in a bank in Macau now that it has agreed to start dismantling its nuclear arms program, American officials said. [A13.] GETTING THE WORD OUT -- Some writers, rejected by book publishers, are attracting audiences by turning their novels into podcasts. And sometimes the podcasts become so popular that they attract publishers who want to publish the book. [E7.] MERCK RAISES FORECASTS -- Citing strong revenue in the current quarter, Merck released a forecast for first-quarter profit well above analysts' expectations, and also increased its forecast for 2007. [C11.] FOUNDER OF HOTEL EMPIRE DIES -- Charles Forte, the owner of a hotel and restaurant empire that ranged from the Waldorf Hotel in London to the budget chain Travelodge, died at his home in London. He was 98. [C14.] ONLINEBusiness BriefingArticles on these developments are at nytimes.com/business.MOTOROLA, the cellphone maker, said that the billionaire investor, Carl Icahn, who is already the leading shareholder, had notified the company that he might buy more shares. (AP)LOUIS W. ZEHIL, a former lawyer, was charged by federal prosecutors with earning more than $10 million by obtaining and fraudulently selling securities in companies he represented. Separately, the Securities and Exchange Commission filed a civil complaint against Mr. Zehil in Federal District Court in Manhattan. (REUTERS)THE INTERPUBLIC GROUP of Companies posted slightly lower quarterly revenue but swung to a profit as expenses fell and public relations clients increased spending. Wall Street gave the results a tepid response, suggesting that the company still must persuade investors that it has overcome past client losses, earnings restatements and management changes. (REUTERS)
URL: http://www.nytimes.com
SUBJECT: US FEDERAL GOVERNMENT (90%); STOCK INDEXES (90%); ECONOMIC GROWTH (90%); EMERGING MARKETS (90%); SECURITIES LAW (90%); HURRICANE KATRINA (89%); MERGERS & ACQUISITIONS (89%); STATISTICS (78%); BANKING & FINANCE (78%); BANKING & FINANCE REGULATION (78%); TRENDS (77%); COMMERCE DEPARTMENTS (75%); ECONOMIC DEVELOPMENT (74%); MATURE MARKET (73%); BANKING & FINANCE AGENCIES (72%); APPROVALS (72%); EVIDENCE (70%); CELEBRITIES (69%); LAWYERS (67%); COMPANY STRATEGY (66%); CORPORATE WRONGDOING (66%); ENTERTAINMENT & ARTS (65%); HURRICANES (64%); TROPICAL STORMS (60%); SATELLITE RADIO (60%); CABLE & OTHER DISTRIBUTION (60%); MERGERS (78%); STOCK EXCHANGES (90%) Terms not available from NYTimes
COMPANY: ENRON CORP (55%); STATE FARM MUTUAL AUTOMOBILE INSURANCE CO (51%); AIRBUS SAS (50%); ENRON CREDITORS RECOVERY CORP (55%)
ORGANIZATION: SECURITIES & EXCHANGE COMMISSION (83%); US DEPARTMENT OF COMMERCE (57%)
INDUSTRY: SIC4911 ELECTRIC SERVICES (55%); NAICS336411 AIRCRAFT MANUFACTURING (50%); SIC3721 AIRCRAFT (50%)
PERSON: BEN BERNANKE (55%); CHRISTOPHER COX (56%)
GEOGRAPHIC: SHANGHAI, CHINA (93%) CHINA (94%); UNITED STATES (93%); ASIA (92%)
LOAD-DATE: March 1, 2007
LANGUAGE: ENGLISH
GRAPHIC: PhotoGraph tracks XM Satellite Radio's share price for last week.
DOCUMENT-TYPE: Summary
PUBLICATION-TYPE: Newspaper

Copyright 2007 The New York Times Company

1079 of 1258 DOCUMENTS

The New York Times
March 1, 2007 Thursday

Late Edition - Final

Girl Scout Cookies in Bulk
BYLINE: By ELIZABETH OLSON
SECTION: Section C; Column 1; Business/Financial Desk; SMALL BUSINESS; Pg. 7
LENGTH: 1271 words
In an annual rite that is still going strong, Girl Scouts across the country have kicked off their 90th season of cookie sales-- but with some modern entrepreneurial twists.

The Thin Mints, Samoas, Tagalongs and other cookie stalwarts remain remarkably the same (although trans fats were removed this year). And Girl Scout cookies remain a sales juggernaut: some 200 million boxes now generate $700 million in sales yearly.

But the Scouts, with a sales force of 2.7 million, have moved from traditional box-by-box selling methods to more varied approaches to get bulk sales. Now there are cookie academies and cookie colleges, as well as more intense sessions in marketing, selling and business skills for girls 11 and over.

The cookie season today is all about individual entrepreneurship -- using cookie selling to teach Girl Scouts how to manage money, create a business plan and win customers.

Kicking off the selling season, a Kentucky Scout group last month held a five-hour cookie college in three cities, with 10 classes in marketing, money management, goal setting and the etiquette of approaching customers. In January, 600 Girl Scouts attended a one-day cookie college in Sacramento, sponsored by Merrill Lynch; the seminars included ''Entrepreneur 101'' and ''Creative Marketing.''

Displaying the entrepreneurial flair the Scouts movement encourages, Sarah Cain, 16, reaped a batch of orders last year from local businesses in her hometown, Arlington, Wash., north of Seattle. She found a number of car dealership listings when she researched possible customers in the phone book, and, she said, that gave her the idea of ''asking them to give a box to people who take a test drive.''

Stephen C. Brown, general sales manager of Smokey Point Buick Pontiac GMC, bought eight cases initially (there are 12 boxes of cookies in a case, and a box costs $2.50 to $4 depending on locale) then ordered four more cases after he ran out.

''My understanding of Girl Scout cookies was one box at a time in front of a grocery store,'' Mr. Brown said, ''but she went for volume and bulk.''

For this cookie-selling season (which usually begins in February or March), Ms. Cain has prepared a Power Point presentation and is aiming at hotels -- she is already lining up appointments -- hoping to persuade them that every room needs a box of familiar cookie comfort.

Ms. Cain, a high school sophomore, who hopes this year to nearly double her sales -- from 1,114 boxes to 2,000 boxes -- is among the youthful cookie-sellers who are using innovative methods to sell large quantities of the boxes. The proceeds go for Scout activities and special trips. Scouts who make a certain number of sales may receive small prizes like a T-shirt.

Leah Koch, 14, of Chicago uses e-mail messages to snag cookie orders. Starting two years ago, in sixth grade, Ms. Koch began e-mailing a list of prospects, drawing on names from previous order forms. She went from selling 700 boxes a year to 1,000. Then, expanding her e-mail efforts, sales zoomed up to 1,510 last year -- making her a top seller locally.

''It saves me time,'' she said of e-mailing, ''because I used to make a lot of phone calls, and people weren't there so I would have to call back again. Now people respond when they're ready to order.''

Officially, Internet sales are banned -- although cookies can still be found on eBay -- because the Scout umbrella group, the Girl Scouts of the USA, wants to forestall confusion over the cookies' price. Even so, the scouting movement moved this year to expand its Web presence, setting up www.girlscoutcookies.org, so buyers can use their ZIP code to find their nearest cookie-selling troop.

For the first time this year, the Scouts also posted vintage cookie ads and other information on social-networking Web sites including MySpace, YouTube and Friendster.

But the essence of cookie sales is still on the ground. The stepped-up sales training was prompted by teenage Scouts who wanted to sell cookies but had limited time because of schoolwork and sports, and also who found they had tough competition from adorable little Brownies (who also sell Girl Scout cookies).

In 2001, the Girl Scouts Tres Condados Council in Santa Barbara, Calif. -- one of 315 councils across the country -- developed an initiative that became the C.E.O. in Training Program, to teach entrepreneurship fundamentals.

Grace Tynan, 16, a Tres Condados Scout, took part in the program, where, with one-on-one mentoring, she learned how to set a sales goal, find prospects among local businesses and service organizations, make appointments, create a sample script for telephone contacts, prepare and make a presentation, take orders, coordinate deliveries and make a final report.

Her pitch, which she used successfully last year with a local bank and realty firm, was to provide cookies as incentives for employees, as a treat at the company's weekly staff meeting or to show client appreciation.

''This has really helped me understand business,'' she said.

And that's exactly what it should do, according to Katherine Cloninger, the Girl Scouts chief executive, who says cookie selling fosters independence, self-esteem and confidence.

''We see this as a cutting-edge leadership experience,'' she said. And it is often a girl's first exposure to the working world, where women own about 10.6 million businesses, according to government data. That and the number of Girl Scout alumnae among women executives and members of Congress have encouraged the Scout movement to recruit mentors.

Last year, Catherine M. Coughlin, president and chief executive of AT&T Midwest, along with some sales and marketing colleagues, gave feedback on the sales plans of a dozen Chicago-area girl scouts, including Leah Koch. They plan to do so again this year.

Ms. Coughlin, a former Girl Scout, said: ''Selling cookies used to be pounding the pavement, calling on family and friends, but now these girls really know so much more.

''We asked one girl, for example, how she defined success. And she said: 'We have to make more money than we spend,' '' said Ms. Coughlin, adding ''I wish everyone in business was that smart.''

Members of the National Association of Women Business Owners are mentoring girls in Chesapeake, Va., where Deborah Mollura, who owns a custom gift basket business, is helping local Scouts put together cookie gift baskets -- complete with recipes -- to attract large orders from local companies.

Scouts are also looking for customers at new sales sites, away from the usual like grocery stores. In Chicago, Girl Scouts will be selling cookies at downtown office buildings like the Sears Tower. Troops in other parts of the country have set up sales booths in tax preparation offices, churches, barber shops, beauty salons and even at marathons.

Despite the emphasis on training, sometimes entrepreneurial moxie just mixes with chance, as happened to Kaitlyn Richardson, 9, who was at her mother's office in Springfield, Va., early last year when a marketing director for Paxton Van Lines asked her mother for corporate client gift ideas.

''I thought about Thin Mints because they come in a green box,'' she said, ''and that would be good for St. Patrick's Day.'' So she piped up with her suggestion, and Frederick D. Paxton, the marketing officer, agreed that they would be great in the company's holiday gift bag for corporate relocation directors.

''Everybody enjoys them,'' said Mr. Paxton, whose order for 320 boxes more than doubled the amount of cookies that Kaitlyn already hadsold, ''and the money goes to a good cause.''

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