Sun, Aug 29, 2004 page9

• The Starbucks syndrome

  When branding builds a business, even compassion can make a buck

  • By John Simmons / THE GUARDIAN
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  Branding forces companies to ask the question: "What's the purpose of our business?" The answer used to be simple: To make money.

  We used to accept that as the natural response. Now, however, we expect a bit more, and branding is integral to the way businesses give their answers. So, as well as the commercial purpose -- making money keeps you in business -- companies now say they have wider social and ethical roles.

  

  Wj Lee

  The way they make these roles as distinctive as possible gives definition to a brand, because branding is all about making a company seem special and different. There is an increasing acceptance, inside and outside business circles, that companies can have more than just a commercial reason for being. This means accepting that some brands can also have a conscience.

  Starbucks is certainly a brand with a conscience. This has made it particularly sensitive to attack because, coming from liberal roots in Seattle and admiring the European tradition of coffee houses, it is as far as it is possible for a brand to be from the myopic idea "we're just here to make money."

  Starbucks has always had a commitment to exist for the well-being of all the communities it relies on, particularly its own people in retail outlets, the farmers in developing countries and the communities around its shops.

  The Real Product

  The cynical will say it does this for a reason. And indeed it does, because Starbucks believes in its brand. In many ways it is the quintessential brand of the modern age, creating and fulfilling a demand for a product that we could all do without -- except that the real product is not a drink made from roast beans but a place to go, meet friends, talk, daydream, have meetings, relax, hang out.

  Where Starbucks has been less than quintessentially modern is in that it has been hopeless at spin. It has always had a good story to tell but has rarely managed to tell it. Despite this, Starbucks has continued to grow because people continue to enjoy the the product and the brand experience, and to tell others about it.

  Starbucks began in Seattle in the early 1970s. Three college friends formed a business because they loved coffee and wanted to educate other people about it. If Howard Schultz had not come across them at the end of that decade, Starbucks might never have spread beyond the US Pacific coast. Within a few years, the New Yorker had taken control of Starbucks and started to develop it outside the Seattle area.

  But he based his ideas on what he had seen and loved in Italian coffee bars.

  In particular he saw Starbucks as "the third place" -- not work, not home, but containing elements of both, and a refuge at times from both. Starbucks was about "rewarding everyday moments," a place to go for a small treat on a regular basis. This model succeeded and Starbucks grew at a phenomenal rate across the US from 1987. Now it operates in 32 countries, although it was only in 1996 that Starbucks opened its first shop outside North America.

  A Braoder Purpose

  The speed of this development took everyone by surprise. In the UK the first Starbucks opened in 1998 and suddenly it seemed they were everywhere, an impression given by the swift acquisition and rebranding of the Seattle Coffee Company. This enabled Starbucks to enter a market just finding a new taste for coffee, with Costa, Coffee Republic and Caffe Nero as competitors.

  The UK has become a coffee nation at breathtaking speed. Ten years ago you would struggle to find real coffee served in British towns. Starbucks and others have created an entirely new market for coffee-drinking. There are now 400 UK outlets, but also independent cafes. Research by Allegra Strategies shows that the independent coffee bar market has been growing by 3 percent a year since 1999.

  In this market Starbucks is the major brand. And it has become that by having a purpose that is much broader than the single-mindedly commercial.

  Its staff are known as partners, not a cosmetic term but a reflection of the unusual degree of employee involvement in the growth of the company through stock options and other benefits. But responsibility comes with that, and partners are encouraged to take active roles in local communities and good causes.

  Fair Trade

  This year, for example, Starbucks is supporting the Coffee House Challenge, a scheme to celebrate the 250th anniversary of the UK's Royal Society of Arts, which was originally founded in a London coffee house. The Coffee House Challenge has seen people all around the UK coming together to hold debates about fostering local communities and improving the environment.

  Starbucks also has outstripped other coffee companies in its support for farming communities where its coffee is grown. The four big coffee companies (Nestle, Procter & Gamble, Kraft and Sara Lee) control the price of commodity coffee, generally to the detriment of farmers in the developing world. Starbucks buys only 1 percent of the world's coffee but, as Oxfam acknowledges, its record on fair trade is good and improving, and Starbucks buys its coffee at around double the open-market price.

  Self-interest and altruism are not necessarily incompatible. Good deeds help a brand because they build commitment with its stakeholders. And that makes money, as well as stronger communities.

  John Simmons wrote My Sister's a Barista: How They Made Starbucks a Home from Home.

  For your information

  Six messages for other brands from the Starbucks story

  1. Exceed the expectations of your own people. 2. Have strong values, stick to them and use them to guide decisions. 3. Ensure there's no gap between your brand values and your actions. 4. Keep reinventing, but never tamper with the core of what you do. 5. Reach out to communities through your people. 6. Remember that every detail matters.
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