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A taste for concepts

Starbucks' new CEO has Tampa roots, an international outlook and predictions for coffee, music and the future.

By MARK ALBRIGHT
Published June 18, 2005

[Times photo: Lance Aram Rothstein]

Jim Donald, the new president and chief executive officer of Starbucks Corp., takes a sip of the brew he sells during an interview Friday at the new test Starbucks that shares a building, and a door, with a Washington Mutual branch on State Road 54 in Land O'Lakes.

Jim Donald grew up in Tampa, got his first job in retailing as a bag boy at Publix and taught Wal-Mart how to buy and sell groceries in its supercenters.

Three months ago he was named president and chief executive officer of Starbucks Corp., a retailer that in about 15 years rode the coffee snob phenomenon from a tiny regional chain to 9,500 stores and annual sales of $16-billion. A $25,000 investment in the Seattle-based company in 1992 would be worth more than $1-million today.

Donald, 51, took over day to day operations of the coffee maker, while chairman Howard Schultz, the 49-year-old entrepreneur who guided the company to its current heights, focuses on being chief strategist of the chain's global aspirations.

The St. Petersburg Times caught up with the energetic, hands-on executive when he was in Land O'Lakes Friday for the opening of a test Starbucks that shares a building, and a door, with a Washington Mutual branch.

What's the point of sharing a door with a bank?

Convenience. We've done about 20 of these with banks. We are always testing new ways to add our coffee-drinking experience to other things people do. We're in supermarkets, airports, along interstate highways. WaMu wants a similar philosophy about changing the way people view transacting business at their branch bank. So there will be an open door between the bank lobby and our Starbucks.

Plenty of people have run coffee bars. But nobody has 9,500 of them usually filled with people. What sets Starbucks apart?

We're selling an experience. It's created by our coffee and our partners - we call our employees partners. I was in a store in Carrollwood this morning where the manager knew about 20 of the 30 people who came by name. People are looking for a respite. But they like to be recognized. We like to say we grow big by staying small.

You rose from a 16-year-old bag boy to an assistant store manager in six years at Publix. What was the biggest lesson?

I worked for (Publix founder) George Jenkins, Joe Albertson and Sam Walton in my career and they all taught me the same thing. The customer is what matters. Treat them like royalty. How you treat them determines the success of your business.

Is the supermarket mentality still with you?

I was being interviewed by Forbes recently when somebody spilled a drink. I quickly found a mop and cleaned it up. The reporter asked how I knew where to find a mop. I told her: "A supermarket guy always knows where the closest mop is.' I was talking with a Dallas store manager last week who proudly claimed she was the best bathroom cleaner in the company. "No,' I told her, "I hold that honor.'

With 33-million customers a week dropping by a Starbucks, you have remained incredibly disciplined about keeping the stuff you stock to an absolute minimum. How do you do that?

We remain true to our core of being about coffee. We can make 21,000 different items from the ingredients we have in stock. Everything else is aimed at complementing that. We also constantly rotate products to change the experience, but everything must complement the coffee.

What about music? You sell CDs of songs by hand-picked artists, some of them exclusively such as the new Alanis Morissette acoustic version of Jagged Little Pill. You program a channel of music on satellite radio and in 40 stores customers can burn their own CDs from a selection of 150,000 songs. How does music fit in?

It's complementary to our store experience. We've found customers who trust us for coffee also have trust in our choice of music. At first it was jazz. Now it crosses many genres. We're not sure where it can go but, yes, we see music as a new platform for us.

Lots of people chill for hours in your stores. Others don't like the lines. Is that a problem?

We see it as an opportunity. We've recoined the phrase as speed with service. We've added automated espresso machines and premeasured ingredients. We have self-serve drip-coffee in some stores. About a third of the stores have drive-through windows. Our goal is 40 percent. In the Tampa Bay area (where there are 45 Starbucks) we're aiming to have drive-thru windows at 75 percent of our stores. We cannot retrofit them. But lines mean we need more stores.

Some people think Starbucks is as ubiquitous as McDonald's. You have almost 7,000 stores in the United States. Including your Seattle's Best Coffee, you sell a dozen types of coffee in supermarkets. Where does it end?

We open four stores a day, 365 days a year, so do the math. That's about 1,500 a year. We plan to have 15,000 stores in the U.S. and ultimately about 30,000 worldwide.

Howard Schultz's inspiration for Starbucks was the coffee bar experience he saw in Italy. Now you have about 2,800 stores in other countries. Where is the company going internationally?

We aren't in Italy yet. But we are in the United Kingdom, Australia, Latin America and Asia. We have 300 stores in China. Ultimately we think it will be our biggest market after the U.S. The Chinese are moving in the direction of a coffee culture.

Sam Walton hired you away from head of procurement for Albertsons in Texas to learn how to buy and sell groceries during the infancy of Wal-Mart Supercenters in 1991. What did you teach them?

You cannot sell food unless you hire executives with a food industry mentality. Most of the team we put together is still there. I learned more from Wal-Mart about keeping quality at a low price than they learned from me. They can take any seed and grow a forest.

Which supermarkets learned how to compete with Wal-Mart?

H.E.B. in Texas and Publix are the only two chains that didn't flinch when Wal-Mart came at them. The only way to compete is to differentiate yourself with service and high quality food. Whole Foods is probably one of the premier grocers, too, but it's a different mindset.

Why a supermarket guy at a coffee company?

Both businesses are powered by people.

Who was your best boss?

My mother. Even though our family was splitting up and we had to live simply, my sister and I never knew it. She always had two bucks when I asked for it. She never let on that it may have been the last two bucks in her pocket.

Some critics call your coffees Char-bucks because your beans are roasted longer. Consumer Reports called them "severely over-roasted." Some rivals even claim the extra cooking allows you to mix in cheaper robusta beans with the higher quality arabica. How do you respond to such talk?

A: All of our coffees are 100 percent high-altitude arabica beans. We never compromise on that. We roast our beans until they pop twice. Competitors do it once because it makes the beans shatter. But you really do get more extra flavor with that second pop. Clearly our customers agree.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified June 18, 2005, 00:45:19]