Opinion: Starbucks' rollercoaster has so many people steaming mad

Starbucks' huge size and ubiquitous brand makes it a target, Brooke Masters argues. Photo / Victor J. Blue

Opinion

OPINION:

Everybody hates Starbucks. The left, the right, even some of its millions of customers.

That's the reality that Laxman Narasimhan will face when he arrives in October to begin six months of understudying founder Howard Schultz as "incoming chief executive" of the $95 billion (NZ$157b) company.

The Seattle-based chain has long drawn brickbats for its ubiquity, elaborate drinks and even the way it roasts coffee.

Now it finds itself squarely in the crosshairs of America's culture wars and economic struggles. It has been targeted for unionisation by a resurgent labour movement, and was also sued last week by conservatives challenging its diversity and inclusion efforts.

Meanwhile, staffing issues and changing customer preferences have contributed to unpleasant experiences for all in many stores.

Outlets designed to fill 1,200 orders daily routinely serve 1,500, and increased customisation has made the task harder.

Labour and raw material costs have hit profits and the company's share price is down by 29 per cent this year, below the broader market.

Schultz may have boasted on a recent earnings call that "the Starbucks brand has real legitimacy and relevance outside our stores". But the resulting maelstrom of challenges on all sides is probably not what he had in mind.

Starbucks, which owns and operates far more of its outlets than other big chains, prides itself on treating staff well and creating an inclusive environment. In 2018, it shut all its stores for training about implicit racial bias.

While many US companies have workforce diversity targets, Starbucks has been particularly public about how it links executive pay to meeting those goals.

So conservative activists considered it an attractive target when they were deciding where to file a novel legal challenge to such policies. The shareholder lawsuit contends that diversity goals lead to illegal discrimination against white job applicants. Starbucks declined to comment.

"We're a small shop and we can't sue everybody all at once," says Scott Shepard of the National Center for Public Policy Research. Starbucks "are so twee and so pleased with themselves . . . that it seemed like a good place to start".

But Starbucks' progressive orientation has also made it fertile ground for organised labour. At a time when US popular support for unions is at the highest level since 1965, more than 230 of Starbucks nearly 9,000 stores across the country have voted to unionise since December.

"Starbucks is in some ways emblematic of the whole [US] economy . . . you have highly educated people ending up in low wage jobs," says Joseph Geevarghese of Our Revolution, a progressive political action group.

The company, from Schultz on down, has hit back hard.

It has resisted signing collective bargaining agreements and recently accused federal labour officials of working with union leaders to sway ballot results. Starbucks Workers United's claim that the chain illegally fired organising workers and closed unionising stores has resonated with some customers and staff.

"Because they are a progressive company, they attract progressive people," says Richard Bensinger, a veteran labour activist who is advising the Starbucks organisers. "Schultz's over-the-top reaction [to the union efforts] has outraged people."

Yet the customers keep on coming. Same-store sales in the US were up 9 per cent year on year in the last quarter and the unique customer count hit a new record. The company also jumped 22 places in the annual Harris poll of corporate reputations to 43rd among the 100 most visible US companies.

This is testimony to Starbucks' ability to adapt. A gathering place for coffee drinkers when it went public in 1992, the chain now attracts customers with a much wider offering: cold drinks popular with young people account for 75 per cent of beverage sales and nearly half of sales are from drive-through orders.

Schultz, who returned to active management in March, has revamped the senior leadership team and the company has been promising to unveil new "game-changer" plans at an investor day next week. The chain has been working for more than a year on updating operations to ease the burden on workers and speed up service.

The challenge for Narasimhan will be to pull off the next evolution, knowing that Starbucks' huge size and ubiquitous brand means it will continue to be a punch bag.

"What's happening in America is bigger than Starbucks," Schultz said in June. "Starbucks unfortunately happens to be the proxy."

-By Brooke Masters