China Represents the Largest Prize in All of Starbucks’ Global Geography – Schultz

In an interview to air on Countdown to the Closing Bell (3 PM/ET) Starbucks (SBUX) CEO Howard Schultz spoke with FOX Business Network’s (FBN) Liz Claman about the company’s expansion abroad and hiring in the United States. Schultz said that “China represents probably the largest prize in all of Starbucks’ global geography” and while there will “ultimately will be thousands of stores in China for Starbucks” the company remains vigilant not to “repeat the mistakes that we made earlier in the US.” Schultz went on to say the company “could have built that new plant offshore. It would have been less expensive” but they want to create jobs in America and won’t “wait for Washington. “ Excerpts from the interview can be found below, courtesy of Fox Business Network.

On Starbucks’ expansion into China:

“China represents probably the largest prize in all of Starbucks’ global geography. We’ve been there 13 years. We’re the leader in our business. It is a very profitable business for the company. And we think that the market is much, much larger than we originally thought. And there ultimately will be thousands of stores in China for Starbucks. But we will do it with discipline and thoughtfulness and we will never repeat the mistakes that we made earlier in the US. I think we’ll have thousands of stores in China and it will be our second largest market in the world.”

On unemployment in America and how Starbucks is trying to help:

“I think it’s primarily the government’s responsibility to set the foundation of confidence so that business can do the right thing. The government was just celebrating 8.3 percent unemployment. I don’t think that’s a victory. What we’re trying to do is use Starbucks’ scale for good. And we’re creating jobs. I don’t want to wait for Washington. We’re hiring thousands of people this year. We’re opening 200 new stores, remodeling 1,700, building a new facility in August, Georgia. We’re trying to do as much as we possibly can to make an investment back in this country.”

On the new Starbucks plant created in Augusta, Georgia:
“We could have built that new plant offshore. It would have been less expensive. We decided no, let’s do the right thing, let’s create jobs in America. Let’s build a new manufacturing facility in Georgia.”

On the company’s earnings success in light of the economy:

“I don’t think the economy is much better. I think we’ve executed fairly well. And I think most companies have to navigate through a very difficult time. And I think the economic environment is going to stay this way for quite some time.”

On the price of coffee down 18% and how that translates to the price for consumers:

Nothing has changed in terms of supply and demand. What’s happened is the financial spectators made their money, got out of the way and now market prices are normalized. We do not want to see those prices be a burden on the consumer. The challenge we have is that we are a year out. And so we won’t see lower prices come into the Starbucks P&L until 2013.”

On their entry into the juice business:

“We are very enthused about the category of health and wellness and what the Evolution brand can be. We’ve opened our first store. There will be more of those stores. Evolution Juice will be in every Starbucks store over the next 12 months. And we are deeply committed to building a health and wellness category under the Evolution brand.”

On whether Starbucks would ever sell soda:

“We have a unique partnership with Pepsi, that manufactures and sells Frappuccino. But I don’t see us selling soda. That’s not our business.”

On business in Europe today:

“I think Europe is very challenging for almost every consumer brand in the world today. We’re going to continue to build our European business, expand it. But we’re mindful of the challenges that are out of our control. But we’re there for the long-term.”

On the discovery that beetle juice was being used to color some Starbucks drinks:

“What we tried to do is create an all natural product that we thought embraced what the industry had been doing for many years. As an example, most women today in America who are wearing red lipstick are probably unaware this is the same extract that is in your lipstick. I’m not going to go there, but that’s a fact. So what we’re doing right now is, in view of the fact that there’s been so much concern, we are reviewing and trying to analyze other formulations. And I suspect, over time, we will make a change.”

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