It started as a simple, solitary coffee store in the famous Pike Market Place in Seattle.
Today, however, Starbucks Coffee Co. is one of the world’s most influential and most recognizable brands—a global behemoth with over 18,000 stores in 62 countries.
A couple of hundred of those branches are located in the Philippines, but Starbucks CEO Howard Schultz believes the local market could hold more. A lot more.
“When we came here 15 years ago, I don’t think any of us thought this market could hold 50 stores,” he says, referring to Starbucks’ first outlet at the ground floor of the 6750 building along Ayala Ave. “Now, we have 207 stores in the Philippines.”
Despite this large number of outlets—in a market not previously accustomed to paying over P100 for a single cup of coffee— the world renowned CEO unveiled a plan to continue with the chain’s aggressive expansion.
“We announced today that we’ll open at least 100 over the next four years,” he says. “I would suspect the market would hold more than that.”
Schultz visited the Philippines recently to check on the international coffee chain’s local operations, and he had nothing but praise for what he saw and the people he met.
More smiles
In particular, he expressed great satisfaction with the quality of Starbucks’ “partners” (as they call their store staff) in the country, especially with their unique passion for their work—a trait that he said married well with Filipinos’ cheerfulness and ready smile.
Coming from a meeting with some 600 of Starbucks’ local staffers, Schultz described the emotion they exhibited as “authentic.”
“The unbridled enthusiasm is incredible. It’s unique,” he says. “We have great people all over the world, but what is represented here … I don’t think any of us have experienced anything quite like it. I mean that, very sincerely.”
And it is precisely because Starbucks’ coffee products are priced at a premium that the customers’ pleasant experience with the staff is doubly important. It’s what makes them willing to pay P150 for a beverage that may well cost just a fourth of that to make in one’s kitchen.
“Their reason that people are coming into the stores, in addition to the quality of the coffee, is the service they are receiving and the unique sensibility and the customer relationship that has been built,” Schultz says, adding that Starbucks’ Filipino staffers “smile more,” and as a general rule, stay employed with the coffee chain longer than the global average for partners.
“Turnover is better vis-a-vis other countries. I think that’s a credit to the Lopez family,” he says, referring to the branch of the Tantoco family of Rustan’s that runs the Philippine Starbucks franchise.
To be sure, Schultz isn’t the first CEO of a multinational firm to praise the Filipino work ethic. But more CEOs are sitting up and paying attention nowadays, due to a large degree to the buoyant Philippine economy, aided in no small measure by the international business community’s confidence in the government.
And the Starbucks chief believes things can only get better for the country.
Bullish on PH
“The economic development and the aspirational way in which the middle class is embracing consumer brands and the early success that Starbucks has had over these many years tells us that the size of the market is bigger than what we originally thought,” he says.
His views are so bullish, in fact, that Starbucks has now gone full blast into adopting a business model perfected in California— drive-through stores, for clients who are too busy to even get out of their cars (given the growing number of cars on the country’s streets, itself another measure of growing prosperity).
“We began to open up drive-through stores that were not part of the original business plans,” Schultz said. “We’re creating, we’re filling a need state because people are in their cars more because of the traffic.”
Innovative ideas like this, he said, gives the coffee chain “more runway for the future.”
“Our local business is very successful and our stores are busy. New stores are performing well,” he adds. “There’s a lot of real estate development and areas where we could open up stores. And I think the country can hold more stores and the demand for Starbucks is only gonna grow.”
Unfazed
Of course, Starbucks is not the only coffee chain that has its eye on Filipinos’ growing propensity to spend. Several firms— both local and foreign—are now in the market fighting for a share of the consumers’ wallets with increasingly innovative and unique product offerings.
But Schultz is unfazed.
“We have competition in every market around the world,” he says. “I think we’re in the unique position of being the leader, but we’ve earned that place. Starbucks coffee has never been defined by price. However, we’re priced in a way where people perceive real value for their money.”
Like in other industries, he acknowledges that the growing market is creating space for other players who want to sell their products and services at other price points (with corresponding variances in quality, of course).
“There will always be a bifurcation between other players who will sell for less or franchise their stores,” he says. “But our commitment to the Filipino customer is that we’re going to produce the highest quality coffee in the world. We’re gonna design spectacular looking stores. You’re not gonna get better customer service, not only from any other coffee store, but from any other retail store.”
Indeed, what Starbucks has pulled off in the Philippines is nothing short of a marketing coup.
For a country used to paying less than P10 for a cup of “barako” coffee, the coffee chain succeeded in making the Filipino middle class embrace the concept of paying at least 10 times that amount to satisfy their daily caffeine fix.
Nowadays, paying P150 for a cup of coffee—whether iced or hot—is no longer shocking, it has become the norm, thanks to the stroke of marketing genius that company insiders call “The Starbucks Experience.”
But the company is not about to rest on its laurels.
“Our success in the Philippines is not an entitlement,” Schultz says. “We have to earn it—one cup of coffee, one customer at a time.”