Starbucks and Growth

https://www.mckinseyquarterly.com/Starbucks_quest_for_healthy_growth_An_interview_with_Howard_Schultz_2777

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"If the only tool you have is a hammer, you tend to see every problem as a nail." (Abraham Maslow)

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I have always tended to see Starbucks as part of the ritual of starting my day. I thought that they were very well managed so, if they grew so they were on every corner, I figured they knew what they were doing. It reminded me of having gas stations on every corner when I was growing up (now, it's banks).

The McKinsey interview attached goes a long way toward my understanding what went wrong with growth at Starbucks and why Howard Schultz returned as CEO after 8 years. For him, growth had become a "carcinogen" which really got my attention. His perspective: growth should not be - and is not - a strategy; it's a "tactic." His primary lesson: growth and success can cover up a lot of mistakes. So, when Starbucks had to shut down so many stores, most of the stores that had to be closed had only been open for 18 months or less. The most recent stores represented growth for growth's sake.

Part of the pressure for that kind of growth is Wall Street. Wall Street creates metrics that pressure managements. A metric that tends to be, in Schultz's words, an "albatross" around the neck of most retailers was: the calculation of the growth of stores open for more than one year. Because Wall Street is enamored with that number, most retailers and restaurants report comp-store sales on a monthly basis. What that does is produce tremendous fluctuation in stock prices on a monthly basis because "God forbid" you should have a down month. So, he removed the "albatross" from the necks of the operators.

That was the beginning of his second run as CEO.

Starbucks' potential in emerging markets is another key concern. Starbucks has 800 stores in greater China, 400 in the mainland. They are headed for thousands of stores but the idea is to grow right and part of that is being consistent with the culture. Now that China has 140 cities north of 1 million people, the idea is to provide stores that sell foods/snacks that are consistent the expectations of the local populace in that region. This means "putting our feet in the shoes of our customers" and that means careful growth.

Since Starbucks is sitting on about $2 billion in cash, their growth constraint is not money. It's human capital. Schultz wants to attract world-class people who have values that are well aligned with the company.

He will succeed.