Starbucks' Success

David Gardner:Starbucks (Nasdaq: SBUX  ) recently reported first-quarter earnings up 31%, thanks in part to strong sales of holiday products like its Christmas Blend coffee beans. Starbucks is opening an average of four stores a day these days and is on track to open its 10,000th store this year. The man who will soon be in charge of all those stores is Jim Donald, the CEO designate at Starbucks. He will take over the CEO position in March. He joins us from Starbucks corporate headquarters in Seattle, Washington. Jim Donald, welcome to The Motley Fool Radio Show.

Jim Donald: Thank you, David.

David Gardner: Jim, is Dr. Evil somewhere near you right now?

Jim Donald: Dr. Evil?

David Gardner: Yeah.

Jim Donald: What do you mean by that?

David Gardner: Well, my recollection of the Austin Powers movies (was) that Dr. Evil had aligned himself in some way with Starbucks and he was holed up somewhere there in one of your places.

Jim Donald: No, no. I have not seen him. And I have been all over the building.

David Gardner: OK, I am glad to hear that. Jim, some strong earnings for Starbucks. The company has enjoyed phenomenal success. When you take over the CEO position in March, is your job just not to screw things up?

Jim Donald: It is funny you asked me that. When I came to work for Starbucks, and I took over from Howard Behar, one of the partners said, "What are you going to do not to screw this company up?" That was two and a half years ago. I get that question asked a lot, but when I look at what we have done over the last two to three years, what we are going to do is just continue to march in that direction with regards to innovation, new store development, expanding the brand, and satisfying both customers and partners.

David Gardner: What is the biggest challenge for Starbucks? I think (for) a lot of us, the stores are ubiquitous. I have already had my Starbucks today. A lot of us are regular customers. It is hard for me to even see what the challenge to your business is. What do you see as a challenge to this business?

Jim Donald: It is a great challenge to have. It comes in two ways. First of all, our customers still tell us they want more Starbucks. We are trying to coordinate our growth with our ability to fill a pipeline of partners that can take over both the stores, take over districts, and actually come into the Starbucks Seattle Support Center. So people, getting people would probably be the biggest issue as we plot our growth over the next five years.

David Gardner: Getting people in the right places, with lots more stores.

Jim Donald: That is correct.

David Gardner: What is your biggest opportunity?

Jim Donald: I think, if I thought about this for a minute, our biggest opportunity is, we have a saying, "Grow big and stay small." Howard started this when he had one store. I think as we grow big, our biggest opportunity is still remembering that we operate this company one store at a time, one partner at a time, and one customer at a time. We have to continue to connect with every customer and partner as much as we can on a daily basis.

David Gardner: You mentioned Howard, and in that case you are talking bout Howard Schultz, right?

Jim Donald: Correct.

David Gardner: Howard Schultz is the founder of the company, and Howard remains the chairman of the board?

Jim Donald: That is correct.

David Gardner: Jim, what is your relationship like with Howard Schultz? What have you learned from him over the years?

Jim Donald: Well, I have had the opportunity now; I actually met Howard over three years ago, when I started talking to him about coming to work for Starbucks. What I have learned about Howard is that this whole human connection, this whole surprise and delight customers, it works and it works every day. But the passion that Howard has for this business is just unparalleled to the supermarket business that I was in prior to this. What Howard is big on is just reminding people: "Don't forget where you came from, and if you always think about that, you will be successful."

Catch up on the entire interview:

Valentine's Day is just around the corner, and The Motley Fool Radio Show wants to hear from you. What is the key to managing money with your honey? Do you and your special someone have a joint bank account? When it comes to family finances, is ignorance bliss? On this week's Motley Fool Radio Show, we want to hear your best piece of advice on dealing with money in marriage. If you want to participate, give us a call now at 866-NPR-FOOL. That's 866-677-3665.

David Gardner is co-founder of The Motley Fool and is the advisor of Motley Fool Rule Breakers. The Motley Fool isinvestors writing for investors.

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5/25/2016 12:52 PM
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Starbucks CAPS Rating: ****