Starbucks CEO: Coffee Can Be World's First Sustainable Crop

Photo Credit: Ted S Warren/AP/Shutterstock
March 20, 2019

By Carlo Versano

Starbucks CEO Kevin Johnson, who succeeded founder (and potential presidential contender) Howard Schultz in 2017, came from a career in tech, and he has spotlighted innovation and digital technology as one of the pillars of Starbucks' ($SBUX) future. As the coffee chain kicked off its largest-ever shareholder meeting on Wednesday, those priorities were showcased in announcements about a new $100 million food startup venture and a continued push to shrink the company's environmental footprint.

In a press release accompanying the shareholder meeting, Starbucks announced it would invest $100 million into a new food start-up venture fund with Valor Equity Partners, a VC firm known for its bets on Tesla and SpaceX. Starbucks also outlined plans to make its products and process more sustainable, including by introducing greener cups and fewer straws. In addition, Starbucks said it will embark on a modernization of its stores that focuses on "convenience, comfort and connection" based on feedback from customers.

"We're really in the business of people," Johnson said, echoing a famous refrain attributed to Schultz when he was building the company in its early days in Seattle: “We are not in the coffee business serving people, but in the people business serving coffee."

But in 2019, any retail strategy has to include a robust digital component, Johnson said. He noted that Starbucks counts 17 million active rewards members ー that rewards program is being overhauled, it was announced this week ー and that it's expanding its online ordering platform through partnerships with Uber in the U.S. and Alibaba in China. Those partnerships allow Starbucks to focus on how to make drinks work in a delivery environment, such as brewing them a little bit hotter to stay hot longer, and leave the delivery infrastructure to its partners. The Alibaba deal has proven to be "rocket fuel" for Starbucks' growth in China, where the company opens a new store every 15 hours on average, Johnson said.

He downplayed recent concerns about a weakening of the Chinese economic outlook. "The long term opportunity in China is significant and we're playing the long game," he said.

At Starbucks' shareholder meeting last year, the company launched a series of sustainability initiatives around its business that Johnson said were the first steps toward making coffee a truly sustainable product ー from beans to cup. Johnson told Cheddar that Starbucks is ready to test the first finalist in its competition for designing a compostable and recyclable cup.

For a company that sells a staggering 4 billion cups of coffee a year, a green coffee cup is an innovation that is critical to its mission of building a sustainable business, Johnson said. But it's not the only thing. He said Starbucks is funding research into ways to improve coffee bean yield and grow disease-resistant trees, as well as innovations that will be more readily seen by customers, like strawless lids and ways to digitally track the journey of their beans.

Starbucks, with its 380,000 employees and 30,000 global stores, is still an old-fashioned brick-and-mortar food service play at its root. "Our stores are gathering places," Johnson said, referring to them as the "third place" that people congregate aside from work and home. He said the five new Reserve Roastery stores, massive high-end outposts in cities like New York and Tokyo, have proven to be "brand amplifiers" ー corporate speak for stores that are valuable for being popular with customers even if they don't turn a profit.

Starbucks routinely ranks among the most valuable brand names in the world, but has taken a hit with the news that Schultz is considering a presidential run as an independent. Many liberals have taken to social media to excoriate the billionaire founder, who has no political experience and whose run could potentially split the vote against President Trump and secure him a second term. Starbucks even went so far as to instruct employees on how to handle questions from angry customers about Schultz. Johnson told Cheddar that the company remains focused on the business, and that Schultz is no longer involved in management.

"We don't get involved in national political campaigns," he said.

For full interview click here.