Howard Schultz, Chairman of Starbucks

This is a partial transcript from Your World with Neil Cavuto, January 24, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: Starbucks, well that got a java jolt on Friday. But it's not from their vanilla lattes or mocha frappuccinos. The No. 1 specialty coffee retailer on the planet announcing record revenues and earnings for its fiscal first quarter. The company said earnings rose 17 percent due to strong holiday sales. With us now to talk about this caffeine high is Howard Schultz, Howard, of course, the chairman and the chief global strategist over at Starbucks. He joins us from Seattle.

Howard, good to have you, thanks for coming.


CAVUTO: Across the board you are doing fine. What is leading this charge?

SCHULTZ: We had a great quarter. I think demonstrating once again that the brand Starbucks and the experience that we provide in our stores is as close to a recession-proof product and experience as you can find in the consumer sector.

CAVUTO: You know what? I'm amazed, though, Howard, people continue to pay relatively high prices, 4, 5 bucks for a cup of coffee, and they don't mind. What is it?

SCHULTZ: Well, it's not 4 or $5, Neil, come on.

CAVUTO: What is it?

SCHULTZ: Well, I think what it is is that the experience that Starbucks provides is much more than a cup of coffee. Twenty-two million customers a week are coming through our stores. We had 9 percent comps for the quarter. At a time in America where most retailers are just struggling to stay even, we are demonstrating that Starbucks still is an affordable luxury. And I think the ubiquity of the brand and the pleasance of our stores has really become a friend in terms of we are very conveniently located for our customers, and we become a very reliable place to go.

CAVUTO: Let me ask you something though, there are cups coffee there for 4 or 5 bucks? Now what makes people pay the premium for this? Do you juice it up with a lot of caffeine? what is it the deal?

SCHULTZ: No. The company built its reputation on the quality and taste of the coffee. But more than that, the experience that goes on in our stores, I think at a time in America where people are looking for some signal of human connection and a place to go and a comfortable environment, our stores have really become a third place between home and work. I think in addition to that, coffee is an affordable luxury at the time when people perhaps are not buying that suit or that car. And so I think, the value proposition and the equity of the brand is a strength in terms of this downturn in the economy.

CAVUTO: Now let me ask you something, I'd be remiss if I didn't. There was this article in Ad Age, that says that the service at your various stores, you can't control all of those gazillion of them, but he says that it sometimes leaves him wanting. He says the issue is whether one of the most successful companies in the world has lost sight of what its brand stands for, whether in its rapid and rabid expansion, the chain has lost the ability to maintain its standards. And a lot of your people, he says, are rude. Are they?

SCHULTZ: I saw that article and I was surprised to see that, because we have a snapshot survey, which is kind of a mystery shopping program that our people know about. We have been doing this for years. And our snapshots are higher this year than they have been in a number of years. So that might have been an isolated case. This is a human-service business. At times we don't exceed the expectations of our customers. But when you ask about why people are coming to Starbucks, one of the reasons is the quality of the service and the execution. So that might have been an isolated case. But by and large I think we do a very, very good job.

CAVUTO: Well, obviously at this point the numbers are showing it. Howard Schultz, thank you very much, good having you on.

SCHULTZ: Thanks, Neil.

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