Howard Schultz Decoded: We Aren't, But We Are

The Starbucks experience often gives Jack Flack the creeps, but he's still thankful that he can get espresso in approximately 4,000% more places in America than he could a decade ago. Few bosses, however, understand their role as corporate spokesman better than Starbucks' chairman Howard Schultz, who engages often, and with the intensity Jack Flack usually associates with high school wrestling state champions.

In the NYT's "Saturday Interview," Elisabeth Malkin put the barista capitan through his familiar paces, and Jack Flack was struck by Schultz's ability to sell two contradictory messages.

Message 1 -- We're tiny in the coffee world, and we can sustain our torrid growth rates.
News media and analysts have fretted about the company over-saturating the market since the company went public 15 years ago, and Schultz uses highly instructive tactics to make his case about Starbucks' future potential.

He quantifies in absolutes. He repeatedly states nice, concrete targets of a simple metric -- number of stores.

"We currently have over 14,000 stores in 43 countries. It roughly breaks down to 4,000 outside of North America, 10,000 in the United States and Canada. And what we said publicly at an analysts' conference was that the long-term growth plans are for 40,000 stores, 20,000 in the United States and Canada, and 20,000 outside."

He quantifies in relative concepts. He knows many people understand ideas easier when they are expressed in relative terms.

"I said at the annual meeting that we would roughly double the size of the company in four years..."

"Statistically, if you look at some of the data, we have less than 10 percent share of total coffee consumption in North America and less than 1 percent share of total coffee consumption internationally."

He inflicts history. By recalling similar skepticism from the past, he shows that the company has track record of defying the conventional wisdom of the day. Even better, he makes its clear that the conventional wisdom is often short-sighted, failing to predict that one day a five-dollar cup of coffee would seem typical, not bizarre.

"I think people have been writing about saturation since we went public in 1992..."

He attacks media "cynicism." He implicitly positions those who challenge his optimism as being victims of their own blinding negativity.

"When I was here (Mexico) five years ago for the opening I remember doing interviews with so many cynics who said, 'Why are you coming here?'"

Schultz must be getting really tired of having 26-year-old sell-side know-it-alls tell him he should shutter the juggernaut he's built, as he lets some loose with some sarcasm (which is always ill-advised, but particularly in print interviews, in which the required intonation doesn't ever really come through). When asked why Starbucks stock isn't currently tracking his optimism, Schultz allows:

"You'd have to ask the sophisticated analyst on the Street."

"Sophisticated" is obviously Schultz's polite synonym for "moronic."

But here's what really got Jack's attention.

Message 2 -- We own the supply chain, and the upcoming shortage will hurt others and help us.

After spending great energy trying to convince Malkin that his little company is just getting started, Schultz shifts gears when the specter of a shortage of high-end beans is raised. Suddenly we hear the cold, veiled euphemisms of a practiced dominant player:

"I believe that we have established a competitive advantage in the marketplace that is not only sustainable but will differentiate us because there won't be enough of that high-quality coffee to go around."

OK, so the veil is thinner than a skinny Tazo Chai Tea Latte. There won't be enough high-quality coffee to supply everybody, but Starbucks will not be shorted a single bean because of its "competitive advantage?" Got it.

Jack Flack can only admire a boss who sells like start-up entrepreneur, but procures like a good monopolist.