Loading summary
Transcript70 lines
- [00:00]
David Brown
Wondery plus subscribers can binge all episodes of Business War's the Whole Foods Rebellion early and ad free right now. Join Wondery plus in the Wondery app or on Apple podcasts.
- [00:21]
Howard Schultz
That was a really good slurp. Let's see if we can go a little louder. Let's try it again.
- [00:29]
David Brown
It's November 2021 in Buffalo, New York, and Starbucks is having labor pains. Baristas who have been keeping America caffeinated throughout the global pandemic want Starbucks to give them a jolt. They're asking for more pay and better working conditions. And at a few Buffalo stores, they're even talking about forming the first union in Starbucks 50 year history. Starbucks executives have spent months trying to stop that from happening. And tonight, in a hotel ballroom filled with executives and employees, many of whom are wearing Starbucks trademark green aprons, the company's anti union push will come to a head with a speech from Starbucks legendary former CEO Howard Schultz.
- [01:15]
Howard Schultz
So welcome Howard Schultz.
- [01:22]
David Brown
As he soaks in the cheers, Schultz projects a relaxed coffee house vibe. The man who built Starbucks from a sleepy Seattle coffee cellar into a billion dollar behemoth is wearing a tan cardigan, khakis and brown suede shoes. But Schulz is anything but chill. He's come on his own accord to speak at this emergency meeting because he sees the unionization effort as a threat to the familial corporate culture he helped build during his two stints as CEO, the last of which ended four years earlier. To save that culture, Schulz makes an appeal that he says comes from his.
- [02:01]
Howard Schultz
Heart in a very vulnerable way. I have to share with you my own origin story, my own personal story, because much of the values, the guiding principles and really the culture of the company comes out of what I experienced as a young boy.
- [02:20]
David Brown
The room is silent. As Schultz speaks and slowly paces the room, he shares a story of his father getting fired after being injured at work and the family sunk into poverty.
- [02:32]
Howard Schultz
And when I knew I wanted to start something, I always knew that if I got the opportunity, I was going to build the kind of company that my father never got a chance to work for. A company that was steeped in respect and dignity for everyone who worked in the company.
- [02:51]
David Brown
Schultz doesn't say the word union, but his message to the workers. Actually Shultz calls them partners is this sure, he's a billionaire, but he's also offered stock options in health care to all Starbucks workers, including part timers. They can trust him now to protect them without needing a union. But then Shultz's speech takes a turn. He tells a story about the Holocaust. Eyes widen in the room as Shultz says that one out of every six people sent to concentration camps was given a blanket when they arrived at those camps.
- [03:28]
Howard Schultz
Not everyone, but most people shared their blanket with five other people. And so much of that story is threaded into what we have tried to do at Starbucks is share our blanket.
- [03:45]
David Brown
Comparing the tragedy of the Holocaust to the challenges of a coffee chain leaves some workers feeling colder than a Frappuccino. And weeks later, MSNBC reports that a vote on unionization is held in Buffalo.
- [03:59]
Howard Schultz
As is often the case, almost always the case, the company put up a huge campaign against the union which included the company's former CEO Howard Schultz showing up and using an ill fated Holocaust analogy to describe the company's mission to help convince workers not to unionize. Today, the vote was counted as workers watched on a live stream and they saw their store become the first company owned Starbucks to unionize in its 50 year history.
- [04:28]
David Brown
Starbucks has lost the first round to organized labor and more losses are on the way. Soon sales will slide and competitors will rise and many will start asking, will the king of coffee be dethroned? You know, managing your workforce can be exhausting. Are you tired of a costly and lengthy hiring process? Well, you can simplify and speed up your recruitment with one connection the experts at Express Employment Professionals reduce time to hire, cut down on interviews and lower your recruitment costs. Just visit expresspros.com today. Express is more efficient than hiring on your own. Check out ExpressPros.com to see how Express employment professionals can take care of your hiring.
- [05:26]
Jim Cramer
When you're with Amex Business Platinum, you have the card that helps businesses dream bigger, get a flexible spending limit that adapts with your business, and earn 1.5 times Membership Rewards points on select business purchases so you can stock up on what you need to take your business further and get rewarded for growing bigger. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more@americanexpress.com Amexbim Business.
- [05:57]
David Brown
From Wondery I'm David Brown and this is Business Wars. Hey, anyone in the mood for a cup of coffee? What's your drink? Double espresso perhaps? Maybe a latte? Iced coffee? I take mine black, large, three Sweet and lows, Pink stuff only please. These days we've all got our Java preferences, thanks at least in part to Starbucks. The company was founded way back in 1971 as a coffee bean wholesaler and since then it's transformed the way people all over the world get their morning, afternoon, or even evening caffeine fix. Howard Schultz bought Starbucks in 1987. That year, the company made $1.3 million. In 2024, Starbucks made $36 billion. But lately, Starbucks has been brewing up some bitterness, too. Since 2021, Starbucks has been tussling with baristas and others who have unionized. For Schultz, who built this brand with promises to put employees first, well, that's been a gut punch. And that's just one of the problems Starbucks now faces. Its complex menu with endless customization has led to longer wait times. And that's led some customers to go elsewhere. After all, today you can find coffee concoctions at big chains like Dunkin, Tim, Hortons, Pete's and the fast growing Dutch Bros. As well as at independent shops across the country. Many chains like Intelligentsia, Blue Bottle and Stumptown come to mind that external competition is troubling for Starbucks. But internal strife has hit the company too, and not just in the unionized stores. Activist investors have rattled the gates of the company, calling for a new strategy. Meanwhile, four different CEOs have led Starbucks since 2017. Yes, Starbucks still commands 40% of the coffee chain market. But the question is, can it remain dominant? Or has Starbucks permanently lost its buzz? This is episode one, the Founder's Curse. It's March 2022. On Wall Street. Perched above the trading floor, CNBC's Jim Cramer frowns. He's trying to figure out the breaking news coming out of Seattle. Starbucks CEO Kevin Johnson, who succeeded Howard Schultz as CEO in 2017, has decided to retire. But Starbucks has no successor waiting in the wings. Instead, and to Jim Cramer's surprise, the company says it's bringing back Howard Schultz on an interim basis.
- [09:13]
Howard Schultz
I find it extraordinarily quizzical and can draw no conclusions other than the fact that the idea of Howard Schultz coming back is extraordinary.
- [09:23]
David Brown
He's confused why, after Starbucks had a year notice of Johnson's departure, it doesn't have a better succession plan already in place. It's just three months after Starbucks executives shuffled off from Buffalo, having lost in a union shutdown. For the first time since then, four more Starbucks stores, all in the Buffalo area, voted to unionize. And while that has Starbucks brass rattled, there is some good news for the company's bottom line. In the first quarter of 2022, Starbucks posts a 13% increase in same store sales year over year, and first quarter revenues top $8 billion. It's not all good news, though. Sales are slumping in China but in the US customers are spending about 3% more per visit. That might be thanks to the growing popularity of a particular drink, Starbucks iced brown sugar, oat milk, shaken espresso. A grande version of that drink will set you back six bucks. That's good for Starbucks bottom line. But how long can consumers stomach those high prices? Well, that's Another question. It's April 2022 in Seattle. Howard Schultz boards a company jet. It's just days after his return as CEO, and he's told the board he'll serve just 12 months. The clock is ticking. Shultz flies into action on the corporate jet. He hopscotches across the country to meet with baristas and other workers. He's hoping to talk them out of unionizing. That won't be easy. Starbucks store workers have been ground down by the pandemic. Declared essential workers, they wore masks while making macchiatos for the masses. But neither the company nor its customers seemed to fully appreciate how difficult that would be. Remember how poorly some flight attendants were treated by travelers during the pandemic? Some passengers got aggressive. Punches were thrown. Well, the same kind of thing happened at Starbucks in North Carolina after the store instituted a mandatory mask policy for all workers and customers. In July 2020, customers became so irate that a barista called the cops. In New York, a customer threw hand sanitizer at a store manager. In Louisiana, a customer dumped a cappuccino on a barista's head. Schulz hears all about those tense moments as he touches down in places like Nashville, Phoenix, Chicago. He also gets an earful about the supply chain shortages that have left many Starbucks stores without basic ingredients and with broken equipment that's not getting repaired. In return, Schultz offers an apology. Starbucks, he says, didn't do enough to care for workers during the pandemic. He promises change, and he asks his employees to give him a chance to deliver. It's April 2022 in Long Beach, California. Starbucks corporate jet lands at Daugherty Field. Shultz, a fit and active 68 year old, bounds down the air stairs and heads to an office building near the airport grounds. There he meets with 20 workers from a handful of Starbucks stores where unionization is being considered. The lights are dimmed to begin the meeting. A video plays showing Shultz leading a town hall of Starbucks executives in Seattle. And in that video, Shultz talks about the threat he now sees from unionization.
- [12:56]
Howard Schultz
We can't ignore what is happening in the country as it relates to companies throughout the country being assaulted in many Ways by the threat of unionization.
- [13:12]
David Brown
The lights come up. A group discussion begins. Tensions mount. One of the workers brings up complaints filed against Starbucks by the United States National Labor Relations Board. The complaints allege that Starbucks harassed and fired pro union workers. Schultz, sitting at the back of the room, then recounts his personal story, the same one he told back in Buffalo about growing up poor and vowing to create an empathetic company. But one pro union barista interrupts with a long list of complaints. Among those complaints, that Starbucks benefits aren't as good as Schultz often makes them out to be. That the company isn't being transparent about how it has pushed back against unions, and that federal officials are looking into allegations the company has illegally harassed and fired pro union workers. Shultz loses his patience. Look, if you're not happy at Starbucks, you can go work for another company. The barista takes that as a threat. And although Schultz doesn't know it yet, Shultz's outburst may have just violated federal law. It's late April 2022 in Seattle. @ Starbucks headquarters, a group of top executives gathers in front of cameras. They're about to broadcast live to Starbucks store managers across the country. The executives take seats in front of the cameras. Howard Schultz sits down and smooths out his black sweater. There are four white stripes on one shoulder, a nautical look that might have been a fashion faux pas. Schultz and his executive team are here to talk about the danger they see from unions. And Shultz, as many Starbucks workers know, happens to be a billionaire who just so happens to own a 252 foot long, $130 million superyacht with a crew of 18 and enough bedrooms to sleep 12. Schultz's yacht is the kind of thing a James Bond villain might sail around in. But Schultz says the unions are the villain in Starbucks story.
- [15:22]
Howard Schultz
There is an outside force that is trying to disrupt the future of our company.
- [15:27]
David Brown
The solution, Schultz says, is to reinvent Starbucks, making it strong enough to repel the union invaders.
- [15:34]
Howard Schultz
We are going to co create and together reimagine the future of the company. Now, what does that mean? Well, it means that we have to reimagine the customer experience, the partner experience, the third place experience. We have to reimagine mobile order and pay the drive thru. We have a lot of work to do.
- [15:53]
David Brown
Now, listeners, did you catch that bit near the end, the part where Schultz talked about the third place experience? It's worth taking a second to explain that the third place is a concept first designed by a sociology professor in 1989. According to the theory, third places are public gathering spots where people of all sorts of occupations, viewpoints and socioeconomic statuses can come together. Shultz cribbed that theory and applied it to Starbucks in the 1990s, and it's been central to his vision ever since. Initially, Schulz's third place was infused with the smell of brewing beans, the whirring sounds of burr grinders, the kinds of caffeinated drinks that had long been popular in Italy but were new to many Americans. You remember those early days. Well, now that there's a Starbucks on every corner, it's pretty easy to forget just how unusual it was to have a place in town that specialized in coffee. I mean, how many still remember what it was like the first time entering a Starbucks? It wasn't just about the java, right? It was the vibe, the sense of something special, maybe a bit uptown. A place that somehow transcended the everyday, right? Even the sizes. Medium, large. Oh, don't you mean grande or venti? That whole idea took off in the 1990s. In 1992, Starbucks began a string of 190 consecutive months where same store sales went up. The company had just 165 locations, all in the US that year. It's got 15,000 nowadays all over the world. Starbucks took off. At the same time, another Seattle cultural movement, grunge music was on the rise. But where grunge could be navel gazing and angry, Starbucks was considered communal and welcoming. The stores were designed to encourage lingering and chatting with friends. Oh, right, friends. That TV show debuted in 1994. And you probably know where much of the action took place, right? New York coffee shop called Central Perk. There, Monica, Phoebe, Ross, Joey and Chandler all drank coffee from big mugs. Their pal Rachel was their waitress, though she wasn't always happy about that.
- [18:07]
Howard Schultz
Everyone I know is either getting married or getting pregnant or getting promoted and.
- [18:11]
David Brown
I'm getting coffee and it's not even for me. Starbucks stores weren't quite as cozy as Central Perk. Schultz had them designed with dark woods and packed them with chairs and couches. The stores targeted a customer who was a little swankier than someone who'd buy their cup of joe at the local diner. Then as now, Starbucks pricing was premium level. But baristas got to know customers by name, even if they might have spelled those names wrong when scribbling them on the side of a to go cup. But culture should be more than a feel good brand statement. It's a business asset. If you build a company on values. Well, people expect you to live by them. If you don't, your customers and employees will hold you accountable. And that's exactly what was happening at Starbucks when Schultz returned to lead his company for the third time. We've all been there sitting through another mind numbing presentation. You know the kind, tiny text you can barely read, templates and slide transitions straight out of the 90s. But here's the thing. Your presentations don't have to put people to sleep. With Canva presentations, you can create something that actually keeps your audience engaged. We're talking stunning templates you can customize in minutes, not hours. Just drag and drop from their massive library of professional images and graphics, add some smooth animations and even throw in interactive polls to keep everyone on their toes. Need to collaborate with your team? Just share your presentation instantly and edit together in real time. And here's something I love. Their AI tools can help summarize your text or even generate entire slides from a prompt. No wonder 95% of Fortune 500 companies use Canva. We just put together a very professional looking presentation for our team using Canva and the first thing everyone said was this is great. Why haven't we done this before? Well, maybe they didn't know about Canva. You'll love the presentations you can easily design with Canva. And let me tell you something, your audience will too. Love your work with Canva presentations. We are in the thick of basketball playoffs and if you've got any thoughts on it, well, prizepix is the best place to turn your sports knowledge into cash and a whole lot of fun. With millions of members, prizepix has made daily fantasy sports accessible to everyone. The app's really easy to use. Popping into Prize picks on my phone has made sports a whole lot more exciting. You can keep it simple or dig in. Predict how many points Luka Doncic is going to get in the next game. Or maybe it's assists. By Jaylen Brown Prize Picks makes any season a bit more fun. When you got skin in the game, share with your friends and add to that fun. To create a lineup, all you have to do is pick more or less on a few player stats like points, rebounds or assists. You'll get a shot to win up to 2,000 times your money. Don't miss your last chance to add your favorite players from the court to your Prize Picks lineup. Download the app today and use code BW to get $50 instantly after you play your first $5 lineup. That's code BW to get $50 instantly AFTER you play your first $5 lineup lineup. Prize picks run your game. It's June 2022 decades after Starbucks 1990 boom era. Critics say many of its stores are now look alikes with little charm. Those cozy leather armchairs that were once a given. They've been taken out in many places and the seating options have grown less plentiful. That's in part because more customers have been grabbing and going from Starbucks, including the drive thru lane rather than lingering. And the pandemic only accelerated those changes back in 2021 when health officials and lawmakers decided that third places like Starbucks were great places to spread. COVID 19 Starbucks started removing couches and chairs entirely. They also 86 the self serve coffee bar where patrons could add their own milk and sugars. Months after the worst of the pandemic is over, many Starbucks stores still seem cold and uninviting. But that's not the case for the store that Howard Schultz has just walked into in Washington D.C. and that's because he's entered a so called community store. Starbucks created community stores in 2011. That was during Schulz's second go round as CEO. These community stores were first rolled out in Harlem, New York and Crenshaw, Los Angeles. They're designed to, as Starbucks puts it, reflect and embrace the individual culture, character and needs of each of these neighborhoods. Like with Harlem And Crenshaw, the D.C. neighborhood that Shultz is in today called Anacostia, has a population that is mostly black. Shultz takes a moment to pose in front of a massive mural that depicts Frederick Douglass, who was born into slavery in nearby Maryland. Community stores to Shultz are a sign of the positive impact his company can have on communities and on workers lives. He's always seen himself as one of the good guys of capitalism. Shultz believes he's on a mission to prove that making money doesn't have to come at the cost of doing good. Or at least that's what Schultz says later that day when he attends a live onstage interview in downtown dc. Eventually, Shultz digs into the union issue.
- [23:58]
Howard Schultz
Now I've said publicly I'm not anti union, but the history of unions, and we have to talk about this, the history of unions is, is based on the fact that Companies in the 40s, 50s and 60s abused their people. The sweeping issue in the country is that businesses are not doing enough and the business is the enemy. And so our vision for our people and our company is we have a different vision. We don't believe that a third party should Lead our people. And so we are in a battle for the hearts and minds of our people.
- [24:32]
David Brown
Maybe we should take a little coffee break here to mull over what's going on at this moment in 2022 with Starbucks and Schultz. You know, there's something in business called the founder's curse. And at Starbucks, Howard Schultz returned not once, not twice, but three times to save the company. But on each of those three returns, Schultz has struggled to adapt to a changing landscape, particularly when it comes to workers rights. The final round saw him make big strategic missteps, like dismissing union concerns with an if you don't like it, leave attitude, which only fueled the opposition. Here's the thing. Founders often see their companies as their personal legacies. But that attachment can cloud decision making. There's a time to step away and let new leadership take over. Trusting fresh perspectives can be the key to long term success. But what does it take to let go? Well, in the case of Howard Schultz, we are about to find out. It's July 2022 in Seattle. 200 Starbucks executives have gathered in an auditorium on Starbucks corporate campus. Howard Schultz is here to address the group. But first, he has the lights dimmed. An audio track plays. It's the voices of Starbucks workers from around the country.
- [26:00]
Jim Cramer
My last three shifts, I've cried.
- [26:02]
David Brown
We're stressed out at work, we're stressed out at home.
- [26:05]
Jim Cramer
I was told by a customer that I was a disgrace to my heritage.
- [26:10]
David Brown
Schultz walks on stage and sits in a plush chair as the lights come up. He's usually got the gift of gab, but now Schultz finds himself struggling to speak. He's emotional about what's happening in Starbucks stores. Unions have gotten a foothold in his company, Schultz believes, because Starbucks hasn't been good enough to its workers. It's partners. Schultz puts his arms on his knees and slumps his shoulders. He bends his head and stares at the ground. Finally, he chokes out some words. I know what it has taken to build this place. I know what's at stake right now. Let me be honest with you. Time is not on our side. As time marches forward, Starbucks and a union called Starbucks Workers United, an offshoot of the 80,000 Member Service employees International Union, dig into opposite trenches as more than 200 Starbucks stores unionize. The union accuses Starbucks of firing 120 pro union workers all across the country. The company fires back, accusing the union of hiring paid activists to rabble rouse in its stores. The conflict, though, is set against a mostly rosy picture for Starbucks. To be sure, the picture remains Bleak In China, where COVID 19 lockdowns cratered Starbucks business. But elsewhere, Starbucks is soaring. The company's quarterly revenues hit a record high of $8.2 billion, even as Starbucks opens 318 new stores. In fact, in North America, customers are spending 8% more on an average visit. Shultz may be in a hurry to battle back against the union forces, but he's certainly got plenty of financial ammunition to sustain the fight. And he's also just landed a new recruit who may be able to help. It's September 2022 in Seattle, live on CNBC's morning show Squawk Box. Howard Schultz is ready to make some news. He's hired an executive to replace him as CEO. Eventually, Schultz pulls up a bar stool in front of CNBC's cameras. He smooths out his navy blue jacket as he takes a seat in what may be the nicest Starbucks anywhere in the world. The store is a Starbucks reserve shop, a gleaming ideal of Schulz's third place concept. Here, coffee is brewed in copper fixtures. There's also a bar serving Italian style cocktails in infused with bittersweet liqueurs. Above Schulz's head is a soaring, undulating wood ceiling that's supposed to evoke the mountainous landscapes where coffee's grown. There's also freshly baked pastries, breads and pizzas. And behind Schultz, a gas fire flickers inside a conical fireplace. Sitting next to Schultz is Laxman Nera Simon, an Indian born executive who's worked at Pepsico, among other places. Narasimh ticks some of the right boxes for Scholz. Chiefly, he understands the global markets that Starbucks is rapidly expanding into. That includes China, where Starbucks is hoping to open one new store every nine hours. But Nera Simmon won't oversee the work in China or anything else at Starbucks for months. As he explains to cnbc, Schultz will still be the boss and Nara Simon will be his trainee. Essentially, I'm a sitting CEO, but as of October 1st, I have no PNL, I have no budget, I have no people reporting to me. It's actually very liberating experience in so many ways. And it's a unique opportunity for me to apprentice very close to an iconic founder in an iconic company with an iconic brand. Sounds like a great gig, doesn't it? No responsibilities, CEO in waiting. Not exactly typical in corporate America. But Schultz wants his number one draft pick to bulk up on Starbucks culture before he hands off the company. Which really makes you wonder, is Schultz truly ready to retire from Starbucks for good? Or will he make another comeback like he did in 2022? And in 2008, Schultz has what seems like a definitive answer to that I.
- [30:40]
Howard Schultz
Am never coming back again because we found the right person. But the ambition of Starbucks is much grander than ever before. Also in 2008, when I did come back, Starbucks was in a much different position. We did not have demand in our stores. We have record demand today. Blacksmith's coming in with the wind that is back.
- [31:00]
David Brown
And so the growth trouble is that wind won't stay at Nara Simmons back for long. And when it starts to die down, Narasimmon will find that instead of the wind being at his back, he's got Schultz on his back. For leading Starbucks astray, we get Support from Acorns Acorns is a financial wellness app that makes it easy to start saving and investing for your future. You don't need to be rich. Acorns let you get started with the spare money you've got right now, even if all you got is spare change. And you don't need to be an expert. Acorns recommends a diversified portfolio that can help you weather all of the market's ups and downs. See, I started using Acorns myself about three years ago and it's given me the confidence to manage market turbulence and leverage it to my advantage. The best thing Like I was saying, you don't need to be rich to build wealth. You need a solid strategy. Sign up now and join the over 14 million all time customers who've already saved and invested over $25 billion with Acorns. Head over to Acorns.com BW or download the Acorns app to get started. Paid non client endorsement compensation provides incentive to positively promote Acorns Tier 2 compensation provided investing involves risk. Acorns Advisors LLC, an SEC registered investment advisor. View important disclosures@acorns.com BW Are you ready to rock?
- [32:24]
Jim Cramer
Big savings Rakuten's big give week is a festival of savings with 15% cash back at hundreds of stores. We're talking 15% cash back at Expedia, Ray Ban, Stanley and more. Shoppers in the know get the best savings when they use Rakuten. They shop the brands they love and earn cash back on top of deals. BigGive Week is only once a year but and the cash back rates are through the roof. I'll be shopping for some new beauty products and home essentials while getting 15% cash back on it all. I get my cash back sent directly to my PayPal and it feels so good whenever I see it, hit my account. Join for free today and get a $20 welcome bonus. Hurry. Big give week ends May 12th and there won't be an encore. Go to rakuten.com or download the Rakuten app that's R A K U t.
- [33:13]
David Brown
E n rakuten.com It's September 2022 in Seattle. Starbucks has invited its biggest investors to its headquarters to hear about the company's plans for self improvement and to meet the soon to be needed CEO Laxman Narasimhon. But it's Howard Schultz who takes the stage first. Schultz talks about the company's failure to adapt to a changing marketplace during the financial crisis of 2008. He says hubris on the part of an executive team who were convinced they could do no wrong was part of the big problem in 2008. He also says there are parallels between 2008 and the current moment. But during the height of the pandemic and now, Schulz says that Starbucks has lost its way and suffered from self induced mistakes. Schulz doesn't elaborate on what those mistakes were, but outside of the event, striking Starbucks workers have formed a picket line to protest for better working conditions and pay and to protest what they see as an aggressive union busting campaign. Workers are complaining about the complexity of Starbucks menu With so many drinks and food options, wait times for customers have spiked. And customers endless customizations aren't helping, especially on the cold drinks that now make up as much as 75% of Starbucks orders. And those cold drinks are getting ever more popular as TikTok users spread the word about their favorite orders.
- [35:00]
Jim Cramer
I got a Venti cold brew with vanilla sweet cream, cold foam, four pumps or no, five pumps of toffee nut syrup and sweet cream on the top. Vanilla sweet cream to be exact. And then I got light ice and it is so good.
- [35:16]
David Brown
It is like that kind of order. Lead standup comedian Bill Engvall to avoid Starbucks as he tells an audience and.
- [35:24]
Bernie Sanders
The other reason I don't want to go anymore is because my wife will.
- [35:26]
Jim Cramer
Not just order a coffee.
- [35:27]
Bernie Sanders
Oh my God.
- [35:29]
Jim Cramer
It's like this chemistry lab experiment.
- [35:32]
David Brown
But Schultz has an experiment of his own to take pressure off workers and to break the bottlenecks that are slowing down service. Schultz asks Starbucks engineers, that's their literal title engineers to revamp Starbucks kitchens. This revamp is called the Siren system. It includes millions of dollars worth of new gadgets that are supposed to transform kitchens originally designed for mostly hot drinks into kitchens made for cold coffees. The company promises the siren system will mean less work for baristas and will put a mocha frappuccino in your hands 50 seconds faster than with the old system. The only problem is the new kitchens won't be installed nationwide for two, maybe three more years. And that's a recipe for trouble with Starbucks. Unionizing baristas It's November 2022 in Houston, Texas. In a Starbucks store, Laxman Nerasimon high fives a barista. While Starbucks service issues are spreading and the union movement growing, Nerisimon has been taking a four week training course to become a barista. To fellow co workers, the incoming CEO says, call me lax. Hopping from Houston to New York to Seattle for his training, Nera Simmons takes drive through orders for tall white mochas. He explains to a customer he can't make a specific kind of drink because the stores run out of cinnamon dolce syrup. He shakes pumpkin spice onto the top of a latte and he learns how to pull perfect shots at the espresso bar. Narasimmon makes a few mistakes too. He nearly burns himself while toasting a sausage biscuit spills ice on the floor and he hands a drive thru customer a ceramic mug, the kind reserved for sit down guests. At the end of his first four weeks at Starbucks, Nera Simmons is presented with his very own green apron. He's now a certified barista. But can he be a better CEO than Howard Schultz? The answer to that question may lie in a new kind of Starbucks concoction. It's a 450 million dollar transformation that, days after Nera Simmons gets his green apron, is outlined for investors in New York. The transformation is called the Triple Shot reinvention with two pumps. What no Half Cafe the siren system is part of the triple shot reinvention. Its two pumps stand for becoming more efficient and for improving relations with Starbucks partner employees. That's why the plan includes big investments in new equipment that is supposed to boost efficiency in stores. It's March 2023 in Washington, D.C. just days into Laxman Nera Simmons tenure as Starbucks CEO and just days after workers at 100 Starbucks stores go on strike, Howard Schultz is called to testify before a U.S. senate committee. The title of the hearing examining the need to end illegal union busting at Starbucks. Schultz isn't on the company's payroll anymore. And yet he's the face of Starbucks before a partly hostile committee that's led by Vermont Senator Bernie Sanders. Sanders peppers Schultz with a combative line of questioning.
- [39:00]
Bernie Sanders
Are you aware that NLRB judges have.
- [39:03]
David Brown
Ruled that Starbucks violated federal labor law over 100 times during the past 18 months, far more than any other corporation in America.
- [39:14]
Howard Schultz
Sir. Starbucks Coffee Company, unequivocally, and let me set the tone for this very early on, has not broken the law.
- [39:21]
Bernie Sanders
Okay.
- [39:24]
David Brown
Are you aware that on March 1, 2023, an administrative law judge found Starbucks guilty of, quote, egregious and widespread misconduct, end quote, widespread coercive behavior, and showed, quote, a general disregard for the employees fundamental rights, end quote, in a union organizing campaign that started in Buffalo, New York in 2021. Are you aware of that?
- [39:53]
Howard Schultz
I'm aware that those are allegations. And Congress has created a process that we are following and we're confident that those allegations will be proven false.
- [40:03]
David Brown
Tensions mount from there. When Massachusetts Democrat Senator Ed Markey gets his turn to question Shultz, he talks about Shultz's father. Marky is telling the same story Schultz told to Starbucks workers in Buffalo back in late 2021, about how Schultz's father was fired after getting hurt on a job leading the Schultz family into poverty. Schultz had told those Buffalo workers that experience was a big reason why he's tried to treat Starbucks workers ethically and with empathy. But Markie thinks the workers deserve something else. Legal protections.
- [40:38]
Bernie Sanders
These people are afraid that your company will lose its way again and that they need rights that don't just come from you, but come from the company. That's what they're looking for. Workers should not be dependent upon you, Mr. Schultz, and your sense of right and wrong. They should be able to have laws, protections, unions that stand up for them every single day of the the year. And that is something, I think, Mr. Schultz, that you just fundamentally don't understand. These workers are just like your father and they have no rights.
- [41:15]
David Brown
The room is silent. Schultz scowls and shakes his head. He agitatedly fidgets with his fingers. Finally, he angrily addresses Marky.
- [41:27]
Howard Schultz
Bring up my father. You don't understand, sir. My father was a World War II veteran, fought for this country in the South Pacific. You don't understand.
- [41:36]
Bernie Sanders
I understand completely. Your father was.
- [41:39]
Howard Schultz
Can I finish, sir?
- [41:40]
Bernie Sanders
Yes, sure.
- [41:41]
Howard Schultz
Yeah.
- [41:42]
Bernie Sanders
Your father served our country and then the company he worked for.
- [41:47]
Howard Schultz
Can I respond, Chairman?
- [41:49]
Bernie Sanders
Yes, please.
- [41:49]
Howard Schultz
Okay, I don't understand. Let me ask you a question, since you cited the union as the answer. Is there a union contract that you personally are aware of that provides comprehensive health insurance equity in the form of stock option? Free college tuition is there at $17.50 and an average of $27 with benefits. Are you aware of a union Sir. Answer the question of a union contract that has those benefits. Benefits, sir.
- [42:21]
Bernie Sanders
Mr. Schultz, are you aware. Mr. Schultz, here's your testimony. Looking back. Looking back, it is clear to. Prior to my return last April, the company had lost its way. That it had fallen under the dangerous influence of walls shot termism that I had always tried.
- [42:40]
Howard Schultz
I asked you a question, sir. You don't understand.
- [42:43]
Bernie Sanders
Your testimony says that your own company lost its. Its way. And it will lose its way again unless there's a union there. Senator hassan.
- [42:52]
David Brown
Thank you, Mr. Schultz. Mr. Schultz. The exchange makes headlines. Schultz, who is a lifelong Democrat, is now at odds with the party. But he has a bigger problem. As Schultz steps out of his CEO role and Nara Simmons steps in, Starbucks employees are in revolt. And customers are starting to question whether Starbucks is worth the wait they sometimes must endure. And the steep bill at the end of that wait. Even worse, a new competitor is brewing up a new kind of coffee chain that will challenge Starbucks dominance. And this competitor knows a little something about doing things fast. Ta da. You guessed it, McDonald's. From Wondery. This is episode one of Starbucks Bitter Brew for Business Wars. A quick note about the recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatizations, but they're based on historical research. I'm your host, David Brown. Joseph Guinta wrote this story. Sound designed by Kyle Randall. Fact checking by Gabrielle Jolais. Voice acting by Chloe Elmore. Our managing producer is Desi Blaylock. Produced by Tristan Donovan of Yellow Ann. Our senior managing producer is Callum Plews. Our senior producers are Emily Frost and Dave Schilling. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer, beckman and Marshall Louie. 4:1 laundry. Introducing Instagram Teen accounts. A new way to keep your teen safer as they grow. Like making sure they always have their seat belt on.
- [44:49]
Jim Cramer
All right, sweetie pie, buckle up. Good job.
- [44:52]
David Brown
Or ring the bell on their bike.
- [44:54]
Jim Cramer
Okay, kid, give it a try.
- [44:56]
David Brown
Nice. Or remember their elbow pads. Knees too. Okay?
- [45:01]
Jim Cramer
Yep. There you go.
- [45:03]
David Brown
New Instagram teen accounts. Automatic protections for who can contact your teen and the content they can see.