The lines at many Starbucks stores every morning attest to the company’s robust business, despite an economy that isn’t. Starbucks’ sales, earnings, and stock price are soaring, powered by new store concepts — including offerings of beer and wine — and new products such as Blond. The company is taking off in China, where it could eventually reach 5,000 stores, and expanding into new categories, having recently purchased a fresh juice company called Evolution Fresh and a Bay Area bakery chain called La Boulange. Each has significant growth potential.
But, as I point out in my article in this week’s issue of TIME, unemployment lines have also been on Starbucks CEO Howard Schultz’s mind. Distressed by a politically polarized Washington, D.C., Schultz is taking direct action, even though no one really asked him. Through the company’s foundation, he’s helped bankroll a program called Create Jobs for USA Fund that works with community development banks to fund small business growth. The fund has helped create some 3,500 jobs this year, roughly the same number that Starbucks will be hiring in its stores.
The company is also introducing a new line of coffee and mugs called Indivisible, that will donate profits to the fund. Indivisible’s mugs will be made by a company in Ohio, American Mug and Stein, that was struggling to survive until Starbucks signed on.
Purists such as the late economist Milton Friedman argued that a company’s job is to do well — by earning profits for its shareholders — before doing good. In this struggling economy, though, Schultz is adamant that corporate behavior has to change — and change quickly — to take more responsibility for the society around it. There’s nothing wrong with that, says Ray Fisman, director of the Social Enterprise Program at the Columbia Business School, “because [Schultz] thinks it’s right. But on the morality of doing well versus doing good, it’s far from clear to think that this is the issue that resonates with Starbucks customers.”
What is clear is that Starbucks customers are back in the latte mode. In the depths of the recession, the company had to close more than 600 underperforming stores — many of which were opened just to spur growth. Schultz, now in his second turn as CEO, won’t make that mistake again. The company cultivates its 30 million Facebook friends, many of whom now use their mobile phones to buy their coffee. Starbucks is recording a million mobile transactions each week. Schultz says this constituency is cool with his activism. “Our customers have respected what we’ve tried to do,” says Schultz, “and I think our people are proud of the position the company has taken.”
It may have value, too. Starbucks rose 30 places in a recent list of the world’s most valuable brands compiled by MillwardBrown, a marketing consultancy. Its brand value rose 43% to $17.1 billion.
Read my full account of Schultz’s plan to perk up the economy in this week’s TIME magazine.