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5 Things Starbucks and CEO Howard Schultz Want Shareholders to Know

By Daniel B. Kline - Apr 2, 2016 at 8:24PM

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The company has big plans in China and remains committed to its employees.

Calling Starbucks (SBUX -0.33%) a coffee chain would be a bit like describing Michael Jordan as simply "a former basketball player."

Like the athlete who now stands as a global brand, the one-time chain of coffee shops has become so much more. In addition to selling coffee, Starbucks also stands as a technology and thought leader. The company has pioneered mobile payment, and it's led discussions on social issues. In addition, Starbucks has long stressed its responsibility to its own workers by offering them everything from heath insurance to the opportunity to attend college for free. "We are a performance-driven company through the lens of humanity," CEO Howard Schultz said at the company's most recent annual meeting. "We have to have financial performance. That is the price of admission on all the things we are trying to do with regard to social impact."

Howard Schultz. Source: Starbucks.

Those topics, as well as a number of others, were front and center at the company's 2016 shareholder meeting [Adobe Flash required]. During the webcast of the live annual event, CEO Howard Schultz and COO Kevin Johnson addressed the audience, explaining some past decisions and laying out a future direction for the more-than-coffee brand.

China is a key to the company's growth
"We've been in China now for 17 years," Schultz said. "People thinks it's an overnight success, The truth of the matter is that we actually lost money in China for a number of consecutive years."

The CEO noted that during those money-losing years, there were "cynics" and "doubters" who didn't believe the company would make money in the country. "Today," he said, "I'm so proud to tell you that we are sitting in China with over 2,000 Starbucks stores in 100 cities." China, he added, has become one of the company's most successful markets. To further that success, the chain plans to add 500 stores in the country for each of the next five years -- opening more than one a day. "I wouldn't be surprised if one day our business in China is bigger than the U.S. market," the CEO said. "It's that big an opportunity."

It's about brand and relationships
Schultz credited the company's success in China and around the world with the equity Starbucks has built with its brand. He also cited the relationship the company has with its "partners" (Starbucks-speak for employees) and its customers.

"The brand has been defined all over the world and in China quintessentially by the relationship we have with our partners and our partners have with the customers," he said. "That has never been more true than in the past few years, when we have really elevated a level of trust we have with out partners and our customers."

The free-tuition program is working
During his remarks, Schultz touched on a number of areas where the company was working to better serve its employees. He noted Starbucks' expanded efforts to hire the disadvantaged and touched on the progress the company has made toward its goal of hiring 10,000 veterans and military spouses. He also spent some time talking about the company's efforts to make sure more people get the ability to not only go to college, but also graduate debt-free.

He said there are currently more than 5,000 Starbucks partners taking advantage of its free-tuition program at Arizona State University (ASU) online. Schultz also shared that he expected there to be 25,000 graduates from the program by 2025.

"There's over a trillion dollars' worth of debt sitting on the backs of young people in America because of their college student loans," he said. The Starbucks program with ASU, he explained, gives those young people another option. 

Loyalty drives results
Johnson took the stage to talk about the evolution of the company's successful loyalty program, which has over 20 million members globally. The COO introduced the next iteration of that program by announcing a new partnership with JPMorgan Chase

"Wouldn't it be nice to have a payment card that enabled you to earn Starbucks Stars for every dollar you spent using that card?" he said. "If this card were accepted virtually anywhere, you could use it as your primary card for shopping, travel, and other payments with the Stars you earned deposited right into your Starbucks Rewards account."

To accomplish that goal, Johnson said the company was introducing the Starbucks Rewards Prepaid Card, "a prepaid, reloadable card with JPMorgan Chase, which will allow customers to earn stars anywhere Visa is accepted." 

The card will be available by the end of the year.

The American Dream
Schultz closed the meeting by readdressing a topic he dealt with during the same meeting two years ago. At that time he asked, "What is the role and responsibility of a for-profit company?" At the 2016 meeting he reframed the question, asking, "What is the role and responsibility of all of us, as citizens?"

The CEO said he had "struggled for weeks to find the right words to express the pain I feel in my heart about where America is headed and the cloud hanging over the American people." And he added there are times when he's had a hard time recognizing "who we are and who we are becoming."

Schultz closed his public rumination by saying that the American Dream is a "reservoir" that is replenished with the values, work ethic, and integrity of the American people. "Sadly, our reservoir is running dry, depleted by cynicism, despair, division, exclusion, fear, and indifference," he said. 

The CEO suggested citizens fill the reservoir of the American Dream back up:

[N]ot with cynicism, but with optimism. Not with despair, but with possibility. Not with division, but with unity. Not with exclusion, but with inclusion. Not with fear, but with compassion. Not with indifference, but with love.

He noted that what he was asking for goes beyond who the country picks as its next president.

"It's not about the choice we make every four years," Schultz said. "This is about the choices we make every day."


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