Starbucks Gets Into The Holiday Spirit
Thursday, November 09, 2006SUSIE GHARIB: Starbucks decked the halls today, all 9,000 of them. It wrapped all of its U.S. coffee shops in red and rolled out a slew of holiday offerings -- Christmas coffee blends, gift items and gift cards. Starbucks' CEO was making the rounds in New York today, starting at the NASDAQ where he rang the opening bell. When I talked with James Donald this morning, I asked him how important the holiday season is for Starbucks.
JIM DONALD, CEO & PRESIDENT, STARBUCKS: The holiday season for Starbucks is very important for a lot of reasons. For financial reasons, it's our biggest quarter in terms of total revenue, but it is also the opportunity to connect more with partners as our transaction growth grows as well and we're able to provide the environment that we do every day to even more customers over the holiday season.
GHARIB: Mr. Donald, you announced recently that Starbucks is going to open 2400 stores worldwide with the goal ultimately of 40,000 stores. What is the goal? What is the strategy here?
DONALD: Our goal is one store at a time, one customer at a time, one partner at a time, meeting the needs for our customers and our partners alike. And if it gets to 40,000 stores in a certain amount of time, that's great, but there could be some upside to that as well.
GHARIB: It seems like everywhere you look there is a Starbucks store. Where do you see this opportunity to grow?
DONALD: As the urban environments and suburban environments change, as they spread out or as they contract, we find that we might not have a store in the location that we might have missed or it wasn't populated enough to put one there. So we find those sites as well and there's opportunities for us in malls across the world as well as remote locations which are smaller areas or off highway areas.
GHARIB: You were telling me that this expansion works out to six new stores a day. How do you manage that growth and still maintain and grow your current store base?
DONALD: Our business is all about people and our partners are our biggest asset. And so from a one-store neighborhood to a 12,500 store company, we look at it that way and the train that we put in place and how that we connect with our partners, enables them to execute on a daily basis in every store across the world.
GHARIB: We know that people who regularly get their coffee from Starbucks are very sensitive to any price increases. What kind of pricing flexibility do you have?
DONALD: We like to think that we notify our customers of these increases, usually a week ahead of time. We help explain to them where and our partners know where these price increases (INAUDIBLE) are being put in place and what they are going to do. And the customers understand that. And as we've seen in the past in '04 and in '06, our transaction growth continues to be robust and has not changed in terms of the normal growth patterns.
GHARIB: How do you feel about the big push from Dunkin' Doughnuts? We are seeing it opening many more coffee shops all over the place and their coffee is cheaper. Are you concerned that they are going to eat into Starbucks market share?
DONALD: Our competitors in the other coffee companies that are getting into super premium coffee are actually helping us educate the overall customers about super premium quality coffee and what a great cup of coffee tastes like. So what we're finding is that there's room for all kinds of individual companies and independents to get into the super premium coffee and it helps us at the end of the day.
GHARIB: I see that Starbucks is also moving into entertainment, music movies, books. How much does this add to the bottom line?
DONALD: Well, we don't look at entertainment as a driver of the top and bottom line. It is a piece of that for sure. But what it adds to the experience can't be measured. It's just a big -- it's a big surprise and delight for our customers and it adds texture to that experience and texture to what Starbucks stands for.
GHARIB: What is the next big surprise that we're going to hear from Starbucks?
DONALD: The next big surprise at Starbucks will be -- I can't tell you that.
GHARIB: Well, we're here at the NASDAQ and Starbucks stock has been moving up. What do you think it's going to take to keep the momentum going?
DONALD: We're very excited about our international business. We're very excited about the returns still of our stores in the U.S. and there is so much territory yet for us to expand. And if you look at our track record, it has been consistent as any company that I have ever known or worked for but we are still in the very early days of opportunities at Starbucks.
GHARIB: Mr. Donald, thank you very much.
DONALD: Thanks, Susie.
