Howard Schultz knows the economy on a level that only a guy selling coffee a cup at a time could comprehend. And at the height of the financial meltdown, Starbucks looked like a company headed for the grinder. "At that time, we were on the short list of things to cut out. We were on every list," says Schultz, Starbucks' founder. There is no purchase more discretionary than a $5 latte. The company's decision to close 900 underperforming stores had a way of underlining that point.
What Schultz has figured out since stepping back into the CEO spot from chairman several years ago is that there are two economies--call them the 2% and the skim. Staying attuned to the stronger part of the economy that has spending money has made Starbucks as vibrant as a quad espresso. The company's recent quarter was its best ever, with sales up 15% to $3.2 billion at over 17,000 stores worldwide. Annual sales are approaching $13.4 billion.
Starbucks is now using its position of strength to move beyond coffee: it has unleashed a blitz of new products and begun expanding into the fresh-juice and bakery businesses with the acquisition of two companies, the Evolution Fresh and La Boulange chains. It will also add 300 Starbucks stores this year in the U.S., including prototypes that offer beer, wine and small meals in a comfortable setting. A new coffee called Blonde debuted in January to address the 40% of consumers who prefer lighter roasts. Globally, the company is in the middle of a major push in China, which will more than offset weakness in Europe. "There are more customers going through our stores today than any other time in our history," says Schultz, pouring a cup of French-press-brewed Sumatra for a visitor.
Schultz, who has used his CEO platform to insert himself into the national debate, also has a plan for the non-Starbucks economy, where unemployment is high and jobs are scarce. Since the financial crisis, large global companies--including much of the FORTUNE 500--have floated above national troubles. Many CEOs don't see the country's problems as their own. That doesn't include Schultz, who sees economic divide in America as an issue that will ultimately create a more difficult climate for business. "What Schultz and other CEOs might say is, We are looking ahead of the curve at the long-term threats to the business, including climate change, income inequality and educational disparities," says Aaron Chatterji, who teaches strategy at Duke's Fuqua School of Business.
Whether because the economic issue resonates with him personally (Schultz grew up poor) or because he believes American companies must reach beyond Washington's poisoned politics to boost the economy--or a combination of both--he is walking the walk. The company's foundation is helping underwrite a campaign called Create Jobs for USA, designed to fund job development in poor areas. To support the campaign, Starbucks is introducing a brand called Indivisible, which will include coffee, mugs and other items, with a portion of the sales going toward the jobs program. Starbucks is even working with a struggling ceramics company in Ohio to make mugs for its stores to keep jobs in the U.S. "We have an opportunity to demonstrate both our relevance in terms of the experience of our stores and perhaps a redefinition of the role and responsibility of a corporation," says Schultz.