He rescued the coffee chain. It had record financial results this year. Now the CEO is on a campaign to save the country from its politicians. Here's how he blends capitalism and activism.
By David A. Kaplan, contributor
FORTUNE -- The president of the United States wasn't on the phone to talk about Pumpkin Spice Latte.
Back in September, two days before Barack Obama delivered his speech to Congress on jobs, he put in a call to Howard Schultz, the chairman and CEO of coffee king Starbucks. Schultz was on the President's mind because the business icon had suddenly become a political activist, announcing that because he was disgusted with Washington's dysfunction, he would cease making campaign contributions to incumbents in either party. Deploring a system that has "chosen to put partisan and ideological purity over the well-being of the people," Schultz asked fellow corporate executives to join him in a boycott. More than 140 quickly did, including the CEOs at Pepsi (PEP), Disney (DIS), Intuit (INTU), Whole Foods (WFM), J. Crew, AOL (AOL), the New York Stock Exchange (NYX), and Nasdaq. Obama evidently took note. He had no personal relationship with Schultz, a registered Democrat, and the two had met only once, when Obama was the junior U.S. senator from Illinois. "Howard," said the President, "I'd like to talk to you about a number of things, including your campaign initiative, as well as your thoughts on the economy and job creation." Seated at his desk at Starbucks headquarters overlooking Puget Sound, Schultz barely had time to collect his thoughts; the White House had set up the call two minutes in advance. Said Obama: "Let's have an honest and straightforward conversation."
Because they did -- for more than half an hour, Schultz recalls -- he's circumspect about this previously undisclosed discussion. Schultz says he went out of his way to let Obama know that his decision to cut off political cash was not directed at the President specifically, even though Democrats had received almost all his donations in the past. "I'm much more concerned about America than the Democratic Party," he told Obama. Yet if you read between the lines, it's clear that Schultz's campaign moratorium had the shock value he intended. Schultz and the President discussed Schultz's "concerns for the country," the budget predicaments facing 42 states, and "the profound crisis of confidence in America."
There aren't many CEOs who would get such presidential calls, or who would meet a few weeks later at the presidential palace in Paris with Nicolas Sarkozy to discuss eurozone economic issues. (Sarkozy's wife, Carla Bruni, is a big Starbucks customer.) But it's been that kind of year for the 58-year-old Schultz -- out in the realm of political and social activism, as well as inside the caffeinated corporate suite. His dynamic union of the public and the private has made Schultz a signal American CEO -- all the more so when government seems so bereft of effective leadership. That's why Schultz earns the No. 1 spot on Fortune's Businessperson of the Year list for 2011. His company, with 17,000 retail stores, in every state and 56 countries, is becoming a dominant player among global food empires. The ubiquitous brand has transcended mere coffee to become a lifestyle emblem. And Schultz has proved that it wasn't just Steve Jobs who could come home to a company to save it. "It's been quite a year," Schultz told me, just before he officially announced the results of a memorable fiscal 2011 to Wall Street a couple of weeks ago.
Brewing big numbers
With a market capitalization of about $33 billion, Starbucks Corp. (SBUX) itself is soaring: the best financials ever, more stores than ever, rapid expansion abroad, and still more new words for "big" and "sweet." The consumer brand that Schultz has built over a quarter-century -- stepping out of the CEO job in 2000, only to return eight years later -- has never been stronger. Revenue hit nearly $12 billion for the year ended Sept. 30, and profits $1.7 billion. A third of the revenue came from overseas. In the most recent quarter total revenue reached $3 billion for the first time; in the key measure of stores open at least a year, sales were up 10% domestically (and 9% internationally) compared with 2010. And, not least important, Pumpkin Spice Latte was up 44% this autumn!
Starbucks' chief bean counter, CFO Troy Alstead, calls the numbers "phenomenal" in a distressed economy and with coffee prices historically high. The company also just announced the $30 million acquisition of Evolution Fresh, a boutique California provider of super-premium fresh-squeezed juices. Starbucks intends to use Evolution as its entry into the "health and wellness" food category; expect to see a separate menu of juices to go and food next year at some Starbucks, as well as at standalone stores called Evolution By Starbucks. "We're going to make a big bet in health and wellness," Schultz says. More
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