As we embark on Espresso Excellence Training

Aged Sumatra … that’s what I’m drinking as I write you this note. Hands down, it’s my favorite coffee. Aged for three to five years in a warehouse in Singapore, then shipped as green coffee to our plant in Kent, Washington, and roasted to perfection. The result is a stunning cup of coffee. The velvety mouthful, the full-body of one of our classic Indonesian coffees, and the subtle but ever-present earthiness and spiciness brought to life by our proprietary aging process. It’s rare, it’s exotic, and it’s ours. What a gift … and we get to share it with one another and with our customers.

Tomorrow evening, we will come together in an unprecedented event in our company’s storied history. We will close all of our U.S. company-operated stores to teach, educate and share our love of coffee, and the art of espresso. And in doing so, we will begin to elevate the Starbucks Experience for our customers. We are passionate about our coffee. And we will revisit our standards of quality that are the foundation for the trust that our customers have in our coffee and in all of us.

But, as I think about it, there is another perhaps equally important reason why we have scheduled this training. It’s to celebrate who we are.

We are Starbucks. We should be incredibly proud of what we have built. We are the worldwide leader of specialty coffee. And, believe me when I tell you, we are just getting started. We will overcome the difficult and humbling challenges we face, and will be stronger for it. You have my word on that.

We are Bean Stock, we are Healthcare, and we are also the Cup Fund.

We are at our best when we are entrepreneurial and courageous, push for innovation and reject the status quo. We are leaders not followers–we leave that for others.

We are the third place in the lives of millions of our customers. We are the coffee that brings people together every day around the world to foster conversation and community.

As Starbucks partners, we are bound together by the passion we have for our coffee and the customer experience. More than 170,000 of us stand for quality and an uncompromising ethical standard. We uphold our guiding principles by demonstrating respect and dignity for one another, and for our customers.

Thank you in advance for embracing tomorrow night in the spirit in which it is intended. Have fun, but also make it matter. Learn, teach, and share with your fellow partners.

Celebrate our coffee, one another, and the respect we have for our customers.

Onward,

Howard

Transformation Agenda Communication #7

Since I returned as ceo six weeks ago, we have experienced a lot of change in a very short period…with our renewed focus on the customer experience and the return to our core—all things coffee–as evidenced by our decision to discontinue warmed breakfast sandwiches in U.S. stores by the end of Fiscal ’08; unprecedented Art of Espresso three-hour training for U.S. store partners on February 26; free Wi-Fi for partners and customers beginning in the Spring, and more to come. I hope you view these changes as positively as I do. Together, we have created a blueprint to transform the company, and I sincerely appreciate all that you have done and will continue to do every day on behalf of Starbucks.

I pledged to communicate with you about our efforts to improve the current state of our U.S. Business, reignite the emotional attachment with our customers and make foundational changes to our business; and I have done so in six previous emails. However, this is my most difficult communication to date.

As I have mentioned in previous communications, in order to reinvigorate our company we must continually analyze and review every part of our company operations. This rigorous look at our business will ensure that we are managing and optimizing our resources as effectively as we can in order to improve the Starbucks Experience.

We realize that we are operating in an intensely challenging environment, one in which our customers and partners have extremely high expectations of Starbucks. And we have to step up to the challenge of being strategic as well as nimble as our business evolves. Unfortunately, we have not been organized in a manner that allows us to have a laser focus on the customer.

Over the last several weeks, we conducted a thorough organizational analysis, which was, at times, very emotional and extremely stressful. But as I sit at my desk and think about my responsibility to over 170,000 partners and their families who rely on me and others to preserve and enhance our company, I know that I am responsible for ensuring the success of the company for the long term, which means that difficult decisions must be made. Personally, I continue to struggle with the outcome, because I realize how painful it will be for some partners.

As the result of our review, which was done with great thoughtfulness and respect for everyone concerned, organizational changes have been made. These changes will restructure the company, but they will also result in a decrease of both the number of positions and partners by approximately 600. This total includes the elimination of existing positions and open headcount, as well as the reduction of our current workforce. Within this context, approximately 220 partners have separated from the company. Nearly all were U.S. partners serving in non-retail support roles. We are thankful and proud of the contributions our departing partners have made, and we are committed to treating them with respect and dignity.

Today, we are announcing the following modifications to our organizational structure that are designed to strengthen our focus on the customer in our U.S. field operations, and centralize and/or consolidate many of our support functions to drive functional excellence and reduce redundancies:

U.S. Field Operations
Effective Monday, February 25, the U.S. field organization will begin transitioning from two divisions to four, with full implementation completed by March 24. The new divisions are: Western/Pacific, Northwest/Mountain, Southeast/Plains and Northeast/Atlantic.

Not only will this organizational structure create more capacity for our field teams, it will enable the company to align our leaders closer to our customers and partners. This will ensure a stronger level of support in partner development, coaching and accountability in the field. Establishing a customer-centric field support structure in the U.S. Business enables our field teams to focus on our partners, customers and our coffee.

Each division will be led by a senior vice president, reporting directly to the U.S. president. Within each division, partners supporting Store Development, Marketing, Partner Resources and Finance will report directly to their respective functions while still being accountable for results at the divisional level. These teams are being centralized to create an infrastructure with global span, capability and effectiveness. Senior leaders in the U.S. Business will provide specifics in their individual team Town Hall meetings that will be held later today.

Support Functions
The reorganizations of Starbucks support functions are designed to consolidate functional activities into teams that have a shared vision and goals to support the business.

The following support functions are being reorganized and/or consolidated:

• U.S. Store Development
• U.S. Licensed Stores
• U.S. Finance
• Partner Resources
• Marketing
• In-Store Experience
• Global Supply Chain
• Global Communications
• Partner & Asset Protection

As a result of these organizational changes, some partners may have new roles or new managers. Senior leaders in these areas will provide specifics to partners in their individual team Town Hall meetings that will be held later today.

Partner Care and Support
As I said earlier in this communication, while these decisions were necessary to move our business forward, I fully recognize the personal and professional impacts these actions have on individual partners, and we are committed to making the transitions as smooth as possible.

Once again, I would like to thank all of our dedicated and passionate partners for their numerous contributions to the company.

Onward,

Howard

The Commoditization of the Starbucks Experience

This internal memo went to Jim Donald and copied Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs and Sandra Taylor

I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma — perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage? Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can’t get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don’t have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it’s time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it’s proving to be a reality. Let’s be smarter about how we are spending our time, money and resources. Let’s get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.

Onward…

The Starbucks Experience Begins with Training

As part of our ongoing efforts to transform the company and renew our focus on the customer, we have announced an historic in-store education and training event for our more than 135,000 store partners across the United States. We will close each of our nearly 7,100 company-operated stores in the U.S. on Tuesday, February 26 at 5:30 p.m., local time, to conduct a nationwide hands-on espresso training experience, designed to energize partners and transform the customer experience. Stores with evening hours will re-open at 8:30 p.m.

Our unprecedented level of commitment to and investment in our people will provide them with the tools and resources they need to exceed the expectations of our customers. We believe that this is a bold demonstration of our commitment to our core and a reaffirmation of our coffee leadership.

The comprehensive educational curriculum for all U.S. store partners will provide a renewed focus on espresso standards that will help ensure the exceptional quality of every beverage. As a result, baristas will be better prepared to share their passion and knowledge with customers. Customers will be able to truly enjoy the art of espresso as Starbucks baristas demonstrate their passion to pull the perfect shot, steam milk to order, and customize their favorite beverage.

This unique in-store education event signals the company’s focus on transforming the Starbucks Experience for both our customers and our partners. We hope that any customers inconvenienced by the early closures will see this as an investment that will have long term benefits. Starbucks partners will have an opportunity to connect and deepen their passion for coffee with the ultimate goal of transforming the customer experience.

I am really excited about this and the impact it will have on you and our customers. And don’t be surprised if I stop by one of the stores during this time!

Onward,

Howard

Expanded WiFi Services, Free Even

Dear partners (posted on website as “Transformation Agenda Communication #5),

Over the past couple of weeks, I have spoken with you about our plans to transform our company and to be laser focused on our customers. Today, I am pleased to share with you another action that will enrich the Starbucks Experience through innovation.

I am very excited to announce that we have expanded our existing long-term relationship with AT&T by adding Wi-Fi services within our U.S. company-operated stores. This will allow us to evolve our in-store offerings to provide a high-quality Wi-Fi experience that both you and our customers will enjoy.

Beginning this spring, our new Wi-Fi program will offer free and easy internet access on a high-quality network. We will offer two hours of free Wi-Fi service per day for registered and active Starbucks Card holders as a gesture of appreciation to our loyal customers.

We would also like to extend our appreciation to our partners who make the Starbucks Experience happen in our stores every day. Also beginning this spring, all U.S. Starbucks partners will receive complimentary AT&T Wi-Fi accounts and enjoy internet access in company-operated locations offering Wi-Fi access.

We will be rolling out this service market-by-market to more than 7,000 Starbucks stores. We will be sure to communicate the details about your market through our regular store operations communications channels.

This is only the beginning! We will continue to renew our creativity and focus on our customers. I appreciate your ongoing commitment and passion when delivering the Starbucks Experience.

Onward,

Howard

What I Know to Be True

As I sit down to write this note (6:30 a.m. Sunday morning) I am enjoying a spectacular cup of Sumatra, brewed my favorite way – in a French press.

It has been three weeks since I returned to my role as ceo of the company I love. We have made much progress as we begin to transform and innovate and there is much more to come. But this is not a sprint – it is a marathon – it always has been. I assure you that when all is said and done, we will, as we always have, succeed at our highest potential. We will not be deterred from our course – we are and will be a great, enduring company, known for inspiring and nurturing the human spirit.

During this time, I have heard from so many of you; in fact, I have received more than 2,000 emails. I can feel your passion and commitment to the company, to our customers and to one another. I also thank you for all your ideas and suggestions … keep them coming. No one knows our business and our customers better than you. I have visited with you in many of your stores, as well as stopping by to see what our competitors are doing as well.

It’s been just a few days since my last communications to you, but I wanted to share with you

what I know to be true:

• Since 1971, we have been ethically sourcing and roasting the highest quality Arabica coffee in the world, and today there is not a coffee company on earth providing higher quality coffee to their customers than we are. Period!

• We are in the people business and always have been. What does that mean? It means you make the difference. You are the Starbucks brand. We succeed in the marketplace and distinguish ourselves by each and every partner embracing the values, guiding principles and culture of our company and bringing it to life one customer at a time.
  

• Our stores have become the Third Place in our communities – a destination where human connections happen tens of thousands of times a day. We are not in the coffee business serving people. We are in the people business serving coffee. You are the best people serving the best coffee and I am proud to be your partner. There is no other place I would rather be than with you right here, right now!

• We have a renewed clarity of purpose and we are laser-focused on the customer experience. We have returned to our core to reaffirm our coffee authority and we will have some fun doing it. We are not going to embrace the status quo. Instead, we will be curious, bold and innovative in our actions and, in doing so, we will exceed the expectation of our customers.

• There will be cynics and critics along the way, all of whom will have an opinion and a point of view. This is not about them or our competitors, although we must humbly respect the changing landscape and the many choices facing every consumer. We will be steadfast in our approach and in our commitment to the Starbucks Experience – what we know to be true. However, this is about us and our customers. We are in control of our destiny. Trust the coffee and trust one another.

• I will lead us back to the place where we belong, but I need your help and support every step of the way. My expectations of you are high, but higher of myself.

• I want to hear from you. I want to hear about your ideas, your wins, your concerns, and how we can collectively continue to improve. Please feel free to reach out to me. I have been flooded with emails, but believe me, I am reading and responding to all of them.

As I said, I am proud to be your partner. I know this to be true.

Onward …

Howard

P.S. Everything that we do, from this point on (from the most simple and basic), matters.

Master the fundamentals. Experience Starbucks

P.S.S. Continue the conversation in public by posting your thoughts and comments below.