Saturday, September 3, 2011

Onward by Howard Schultz

Onward: How Starbucks Fought for Its Life without Losing Its Soul
Onward: How Starbucks Fought for Its Life without Losing Its Soul (Kindle EditionOnward from, my user review on
4 stars
Where was the magic in burnt cheese?
Howard Schultz made Starbucks into a veritable synonym for many things, and a fixture on almost every block and intersection in the US. This is the story of his return as Starbucks CEO in 2007, the challenges he faced at the company, its turnaround, the successes and the failures in that turnaround, and at the end, as much a story about coffee as it is about the company. People familiar with Starbucks will find a lot to nod their heads about, while others will still find interesting anecdotes and information about coffee in itself.

Starbucks is a behemoth by any standard. "Today, Starbucks has more than $10 billion in annual revenue and serves nearly 60 million visitors a week in 16,000 stores in 54 countries. More than 200,000 people, whom we call partners, represent Starbucks." One of the most talked about events in Starbuck's return, after Schultz took over, was the closing of every single Starbucks store one Tuesday afternoon in February 2008, so that its baristas could watch a DVD explaining how the perfect cup of coffee had to be brewed.
If poured too fast from the spout into a shot glass, like water flowing from a faucet, the espresso's flavor will be weak and the body will be thin. A shot poured too slow means that the grind is too fine, and the flavor will be bitter. The perfect shot looks like honey pouring from a spoon. It is dense and tastes caramely sweet.
 Schultz also talks about his frustration and anger with some developments at Starbucks stores that he saw running counter to its culture, an obsession with "comps" ("the year-to-year differences in revenue generated by a retailer's existing stores") and signs of "hubris and invincibility".
It would be a while before I recognized that Starbucks’ amplified foray into entertainment, while it had its upside, was another sign of hubris born of a sense of invincibility.
The fruits of this “comp effect” could be seen in seemingly small details. Once, I walked into a store and was appalled by a proliferation of stuffed animals for sale. “What is this?” I asked the store manager in frustration, pointing to a pile of wide-eyed cuddly toys that had absolutely nothing to do with coffee. The manager didn't blink. “They're great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous.
The evil sandwiches, that so riled Schultz up that he had them removed from Starbucks' stores, did make a comeback, but that's a different story in the book.
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.
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?
There are several such accounts of Schultz's observations as he and his team went around trying to turn around the company in difficult times, even as the world threatened to sink into a global economic depression. The decision to close down hundreds of stores was particularly painful. The continued decline in earnings threatened the turnaround story. The very first act in the book, that of Schultz's return, is a delicate event - the current CEO had to be, to put it bluntly, fired. A person that had been appointed by Schultz.
This book is also very much an advertorial of Starbucks' products, its commitment to ethical coffee sourcing practices, and its employee-friendly practices. There are several pages of photographs of Schultz's visits to African countries from where Starbucks sources its coffee beans - these pages unfortunately have a very corporate brochure appearance about them. As does the section at the end that lists all the programs, products, and initiatives launched since Schultz took over the reigns at the company - like its launch of Pike Place Roast, or the launch of the Starbucks Loyalty Program, and more.

But there are some useful nuggets of information thrown in that provide a glimpse into the scale of the company's operations. Its IT infrastructure was antiquated and inadequate to handle the logistics involved in keeping every one of the 16000 stores stocked - "Every year in the United States and Canada, 608 million pastries were delivered to our company-owned stores. So were 103 million gallons of milk and 242 million pounds of coffee" - or that the stores' computers even more antiquated - "In short, a Starbucks store was essentially the equivalent of a $1 million-a-year business, yet an iPhone had more business application power than our stores’ technology"

I particularly enjoyed those pieces where the author talks about coffee. Like the difference between the two types of beans - robusta and arabica. Or why instant coffee is frowned upon by self-styled connoisseurs. 
Wherever the location, the best beans—the ones with enchantingly complex flavors and compelling characters, known as arabica—grow under some degree of stress, like high altitudes, intense heat, or long dry periods. Such harsh weather conditions can produce high-quality beans, but also fewer beans per tree. This makes arabica coffee more costly, which is why most mass coffee producers opt to buy cheaper robusta beans. Produced in more predictable and mild climates, robusta beans are less expensive because they deliver a higher yield per tree. But most robusta beans also taste harsh and rubbery, sort of like sucking on a pencil eraser. In its almost 40-year history, Starbucks Coffee has never used a single pound of robusta beans in our products. [pg 83]

The reason most instant coffee is so vastly inferior to high-quality brewed coffee is because its manufacturers subject poor-quality beans to intense water extraction and drying processes that strip the beans of their natural aromatic compounds and flavors. By the time the resulting powder, or “crystals,” are mixed with water, any quality in the raw bean is long gone. Yet instant coffee consumers accepted this mediocrity. [pg 243]
This is a good book for people trying to get a glimpse into how to build a brand, in the true sense of the word and not in the hackneyed, cliched sense that we get to hear about everyday, and the challenges that it can entail.

Kindle Excerpt:

© 2011, Abhinav Agarwal. All rights reserved.