The Future of Starbucks

David Gardner: ... Jim Donald, let's play Buy, Sell, or Hold together, and this is where I will be throwing out things happening in the business world. It is a game, and I will be asking you if they are stocks, which they are not, would you be buying, selling, or holding and a sentence as to why. Are you ready?

Jim Donald: Yes.

David Gardner: Let's kick it off with buy, sell, or hold; well, the Oscar nominees are out, and this film received a ton of nods. Buy, sell, or hold the Martin Scorsese film The Aviator?

Jim Donald: Hold. I saw The Aviator and I thought; do you want a comment?

David Gardner: Absolutely.

Jim Donald: Oh, I saw The Aviator, and while I was kind of really hot on it at the beginning, it just seemed pieced together towards the end, and I thought, even though it was close to a three-hour movie, it went through some segments quite fast.

David Gardner: Buy, sell, or hold the likelihood that there will be a caffeine backlash in this country, on par with low-carb diets?

Jim Donald: There is not going to be that. There is not going to be an anti-caffeine thing going on, so I don't know what --

David Gardner: That would be a strong sell, you are saying?

Jim Donald: Yeah, there will not be so strong a sell.

David Gardner: ... It is back on television for another season: buy, sell, or hold American Idol if it were a stock?

Jim Donald: Judging by the results of the first American Idol, I have to say a buy for this year.

David Gardner: Hmmm.

Jim Donald: I think a buy because of notoriety that that caused and also how other shows spawned off of that.

David Gardner: You know, past performance is often a pretty good indicator of what future results will be, contrary to all the financial disclaimers you hear out there. ... Next one for you, Jim. Buy, sell, or hold the chance Starbucks (Nasdaq: SBUX  ) will start putting ads on national television?

Jim Donald: We will not be putting ads on national television, so I guess that would be a sell.

David Gardner: That would be a sell. You know, Howard Schultz has always been very down on the idea, and that is why the company never really has. It is amazing to think back and think that Starbucks has built a recognized worldwide brand without really using television advertising.

Jim Donald: It is all grassroots.

David Gardner: Buy, sell, or hold children under the age of 12 drinking Starbucks coffee?

Jim Donald: In the future?

David Gardner: Sure.

Jim Donald: I don't think that will be happening, so that would be a sell.

David Gardner: When kids do come into Starbucks, what do you hope they will do?

Jim Donald: We hope that they are drawn into our drinks such as our ready-to-drink juices in our case as well as our hot chocolate and hopefully have a time to connect with some of their friends or some of their parents' friends and encourage their parents to come back.

David Gardner: Do you card these kids ever?

Jim Donald: Do we card the kids, no.

David Gardner: ... Fair Trade Coffee. Jim, define it first for those who don't know what it is, and then could you tell us if you are buying, selling, or holding?

Jim Donald: Well, Fair Trade Coffee is a coffee that we work in conjunction with fair-trade organizations that actually use some of the proceeds to make sure that the workers are taken care of. That is a big buy. We are bullish on Fair Trade Coffee, and we see that business growing in the future.

David Gardner: How much a portion of your business is Fair Trade Coffee today, just for a given store?

Jim Donald: It is hard for me to tell you the percentage. I can tell you, though, it has doubled over the last two years and will probably double again.

David Gardner: Just a couple more for you, Jim. Buy, sell, or hold wireless Internet access in every Starbucks store around the world by 2010?

Jim Donald: Buy. I think we are finding the Internet access, the WiFi, as another reason to surprise and delight our customers. I think that the WiFi will be doing other things besides just hooking up, letting people hook up to their Internet connections.

David Gardner: Then finally, Jim Donald, buy, sell, or hold the joke that Starbucks shops are now opening in the restrooms of other Starbucks shops?

Jim Donald: That is not happening, so that would be a sell.

David Gardner: I think that one came from theonion.com.

Jim Donald: That was way back.

David Gardner: Back in the day. We like to dip back into our memory chest. Jim Donald is the CEO-to-be at Starbucks. He will take over the spot in March. Jim Donald, thanks for joining us on The Motley Fool Radio Show.

Jim Donald: Thanks, David.

David Gardner: Good luck.

Jim Donald: Take care.

Catch up on the entire interview:

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


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