How Starbucks got its buzz back
Roz Brewer, chief operating officer of Starbucks, is not by nature a coffee person. In fact, when she joined the company two years ago, her caffeination vehicle of choice was tea (green and iced, thank you).
Some might think that her apathy toward java could pose a problem for the newly appointed No. 2 of the world’s largest purveyor of the brew—a company where the slurps of tastings regularly echo through its Seattle headquarters and the executive team decamps to its very own coffee farm in Costa Rica for leadership meetings.
But since taking the job, Brewer has methodically worked toward earning her barista bona fides. She threw out all of her Keurig coffeemakers—the nemesis of coffee snobs everywhere—and restocked her kitchen with hard-core coffee paraphernalia. She’s put on the Starbucks green apron and practiced her flat whites behind the coffee bar—getting that layer of microfoam just right. Her latest challenge: perfecting the pour-over, a task that requires a painful amount of patience and swirling as water drips slowly through a cone-shaped filter. “While I’m doing it, I’m so focused I can barely breathe,” Brewer says.
While Starbucks waits for Brewer to master the technique, it helps that the company didn’t hire her for her espresso expertise. The Seattle giant already has plenty of coffee nerds on staff. What Brewer, a former Walmart executive, has brought to Starbucks is that uncompromising, pour-over-level focus—and at a time when the company desperately needed it.
Brewer took on the job of COO and head of the Americas business—the company’s biggest and most profitable—in October 2017, just as the company entered what J.P. Morgan analyst John Ivankoe has described as a “terrible few months in the company’s history.” After an unprecedented run of sales and store growth lasting more than half a decade, store traffic flatlined as the company found itself in operational chaos. Then, in April 2018, the company faced accusations of racial bias after a manager called the police on two black men in one of its Philadelphia stores. But the icing on the cake—or frothed milk on the macchiato, as it were—was the announcement just months later that Starbucks executive chairman Howard Schultz, one of the business world’s most storied leaders and the embodiment of the Starbucks brand for more than three decades, would leave the company.
It was during this critical period that Brewer entered the fold, tasked with translating her retail expertise into cleaning up the company’s stores and imposing a level of discipline that has become her calling card. “Roz is a tough cookie,” says Indra Nooyi, the former CEO of PepsiCo who did business with Brewer when she was at Walmart and now serves with her on the Amazon board. “She’s into the details. She’s not a fluffy person. She gets things done.”
But the structure and focus that Brewer is attempting to bring to the company goes beyond just getting store operations right. It’s an essential part of CEO Kevin Johnson’s vision as he lays the groundwork for Starbucks in the post-Schultz era, a Starbucks that is less of a growth company and more of what he describes as an “enduring” one. That means bringing rigor and consistency to the company’s culture, as well as guaranteeing that its more than 330,000 store employees—the company’s public face—have the tools to properly handle any situation. The 10 years Brewer spent at not only the world’s largest retailer but also the world’s largest company taught her a little something about what it takes for a global operation to move in lockstep. “Some leaders have difficulty scaling their ideas or an opportunity,” Brewer says. “I learned that at Walmart.”
Brewer’s appointment has not come without its critics in the investment community, who initially could not see how her big-box experience at Walmart translated into an experiential, high-touch brand. But as the business has started to turn a crucial corner, the questions have waned. Says Baird analyst David Tarantino: “To the extent there were skeptics, they’ve been proven wrong.”
When Brewer got the call from Johnson about the COO job, she was in no mood to think about reentering corporate America. Actually, she was in no mood to talk business at all. She was on vacation in Napa, trying to unwind while she took some time off before her next move.
Brewer had just wrapped up her decade at Walmart, her most recent role there a five-year stint as CEO of the company’s warehouse membership business, Sam’s Club. She had become a star at the retailer, skyrocketing up the ranks from running Georgia, to the Southeast business, and then to all of Walmart’s Eastern region before being tapped to lead Sam’s.
But after Walmart acquired online retailer Jet.com for $3.3 billion in 2016, Brewer says she could see the writing on the wall: She expected Sam’s to become less of a priority. Walmart may very well have been looking for a change too. Brewer was Sam’s longest-serving CEO, and the division had seen only modest growth on her watch as it tried and failed to catch bigger rival Costco. “Sam’s did okay,” says Edward Jones analyst Brian Yarbrough, “but it wasn’t lighting the world on fire.”
Walmart was where Brewer first met Schultz, who was visiting the company’s HQ for an interview with CEO Doug McMillon in front of an audience of employees. McMillon had to cancel at the last minute, so Brewer stepped in, and the two hit it off. Schultz broached the possibility of a director role soon after, but Brewer—already a director at Lockheed Martin—initially put him off. After leaving Walmart, she reconsidered; Starbucks announced Brewer was joining its board in early 2017.
It was after one of her early board meetings that she hopped that flight to Napa for some much-needed R&R. So when her wine country respite was interrupted by a call from Starbucks, Brewer cringed, worried that she had just signed herself up for a high-maintenance board. Instead, it was Johnson asking her to come back to Seattle so they could discuss the COO job.
Brewer wasn’t an obvious choice. “If I were to interview raw, it would have been a leap of faith,” she says. But her fellow directors had already seen how she was willing to get into the nitty-gritty during board meetings. “She’s an operator,” says Mellody Hobson, co-CEO of Ariel Investments and Starbucks vice chair. “She’s not just a person with a point of view and vision. She can execute.” It’s just what Johnson needed. One of his first big moves as CEO was narrowing Starbucks’ focus. He had rid the portfolio of noncore businesses—selling Tazo tea and closing its Teavana retail stores. He was simplifying the company from the top and needed someone to do the same across the entire store base. “She knows how to operate with discipline at scale,” he explains. At one point at Walmart, Brewer, as head of the Eastern division, was running a business with more than $100 billion in sales, about four times the size of all of Starbucks.
Brewer agreed to spend a weekend in Seattle talking it over with Johnson, but the timing of the offer was all wrong. She and her family had just finished building a house in Atlanta, where they had relocated from Walmart headquarters in Bentonville, Ark. She had recently been offered the CEO job at a private equity firm—a role, she says, that would have been easy. But Brewer, who has never hidden her ambition, couldn’t say no to a company as iconic as Starbucks. In the end, she turned down the CEO gig to become Johnson’s No. 2.
If easy was what Brewer was looking for in her post-Walmart life, Starbucks wasn’t it. Her welcome present was flat store traffic and slowing same-store sales growth, an important industry metric. For the first 90 days Brewer did nothing but study the business. “I knew right away that this was problem mode, so I said, ‘No decisions because this thing is fragile,’ ” she says. She quickly diagnosed the issue: The company was melting down behind the coffee bar. Starbucks had seen massive growth in its mobile order and pay business, enabling customers to order via their app before arriving in the store, but the company didn’t know how to handle the resulting deluge of orders. The ensuing scene became a familiar one in Starbucks stores: Customers clamoring over one another as they waited to pick up their drinks at what Starbucks calls the “hand-off plane,” and panicked baristas trying to keep up with the onslaught of lattes and frappuccinos.
Under Schultz, Starbucks had often been a place led by intuition and instinct. But Johnson, with his background in tech, and Brewer, who trained as a chemist, turn more readily to the numbers. So Brewer looked at the research as she set her sights on imposing order on the stores. She discovered that 40% of employees’ time was spent on tasks away from the customer—counting milk jugs three times a day or unnecessarily restocking the floor to create what Rossann Williams, head of Starbucks U.S. retail, jokingly calls “the Leaning Tower of Pisa” of cups.
Brewer and her team moved to eliminate, simplify, or automate tasks so those hours could instead be spent with customers. Stores with the most mobile orders got a barista exclusively dedicated to making those drinks. Cleaning was moved from daytime to after close.
It wasn’t just store employees who had too many balls in the air. Brewer says she ended up killing two-thirds of the projects in progress at corporate. She set three priorities: beverage innovation, store experience, and the digital business. “We just lined everybody up and said if it doesn’t fit in these three lanes, we’re stopping the work,” she says. She gained a reputation for making tough decisions and sticking to them. One of those was to end Mercato, the company’s fresh-food efforts, rolled out with great fanfare in 2017 and ultimately introduced in 1,500 stores across six markets. Brewer had her team put together a six-page white paper breaking down Mercato’s pros and cons—an exercise she undertakes with all of the company’s biggest problems and opportunities. The results were clear: It doesn’t fit with the company’s priorities—kill it.
Starbucks also cut back on limited-time offers, which had produced rare one-off hits like the Instagram-famous Unicorn Frappuccino. They created buzz but not the routine purchases that drive a coffee business. The R&D team switched its efforts to products that could be made in different flavors and versions—like nitro coffee or cold foam—rather than stand-alone items like the Unicorn. Developers worked with ingredients already in the stores to make sure they didn’t overcomplicate the baristas’ work. Protein cold-brew shakes were great in theory, but putting together the more than five ingredients they required was too complex to execute.
One of the biggest drags on the company’s store traffic was its afternoon business, and Brewer again turned to the data to understand why. Starbucks had been getting all of its sales growth from customers in its membership program, Starbucks Rewards. The 17.2 million loyalists who are now part of the program are extremely valuable to the company, accounting for more than 40% of sales but only about a quarter of the customers who come into the store every month. Occasional visitors, who frequent a store on average one to five times per month, made up a disproportionate amount of the afternoon traffic. The post-2 p.m. crowd and these occasional customers also prefer cold drinks, which now comprise about 50% of beverage sales.
The team attacked the afternoon problem at all levels: R&D lasered in on cold beverages; more experienced baristas, who normally work in the morning, were redeployed to the afternoon. And perhaps most significantly, the digital crew focused on converting midday customers into rewards members, asking Wi-Fi users for their email addresses and then targeting them with promotions to entice them to sign up for the program. Last quarter, business after 2 p.m. grew for the first time in three years, and the company reported its best sales growth over the same period.
Brewer may be a data fiend, but she’s also a high-touch executive; she spends a good chunk of her time visiting various stores. She’s not just counting drive-thru orders or how many food items baristas move. What she wants to see is whether employees who recognize her will look her in the eye. “If they look down at their feet, they’re not proud about the store,” Brewer says. “Ninety-nine percent of the time I’m right about that.”
In April 2018, two black men were arrested in a Philadelphia Starbucks. They hadn’t made a purchase while they waited for a friend to arrive, and the manager called the police when they declined to leave the store. The video that onlookers posted on social media of the exchange and ensuing arrest set off a national firestorm about racial profiling, with some calling for a Starbucks boycott.
The “Philadelphia incident,” as it’s delicately called around Starbucks, hit Brewer hard. Her son is about the same age as the two men who were removed from the store, and it evoked in her what she describes as the “motherly fear” she’s always had raising an African-American male. “I was mad to have fought so hard for so long, mad to have to defend my company that I deeply admire, and I had to defend it to the African-American community that I profoundly love,” she explained while delivering the 2018 commencement address at Spelman College, her alma mater. Brewer and Johnson flew to Philadelphia to apologize to the two men in person, and she became instrumental in putting together racial bias training for 175,000 of the company’s employees.
Brewer does not shy away from talking about race, and especially about being one of the few double minorities—both black and female—to reach her level in business. Sometimes she does it with humor and sometimes with pain. She laughs recalling the look of dawning recognition on the face of the executive who had pinned her as a marketer or merchandiser—anything but the CEO of Sam’s Club—when she stood to give the keynote at a CEO confab. She choked up during the Spelman commencement, recalling the demands for her resignation and the death threats she and her family received when she talked about the business case for corporate diversity during a CNN interview.
As a kid growing up in Detroit, Brewer never imagined this path for herself. The black professionals in her neighborhood were doctors and lawyers, and she thought she had a similar future. Her parents, both of whom worked for General Motors and had not graduated from high school, insisted that all five kids go to college. At one point, Brewer’s father was working three jobs to put all the kids through school. “I just knew I couldn’t fail,” she says.
Ten days after graduating from Spelman, Brewer started as a bench chemist at Kimberly-Clark. It was lonely work. “It was not where things were happening, not even a conversation,” says Brewer, who describes herself as “a talker.” After being brought on by the M&A due-diligence team to assess patents, Brewer switched over to the business side, at first running a $100 million soap operation. Fifteen years later all of manufacturing fell under her purview as a global president. When Walmart came calling, she decided to make the move; she couldn’t bear the thought of working at one company her entire life.
The barrier-breaking headlines that Brewer would go on to garner—the first woman and first African-American CEO of Sam’s Club, the first woman and first African-American to hold such a senior position at Starbucks—make her proud more than annoy her, but they also confine her. “It makes me feel like I can’t screw up,” she says. “I can’t always let my hair down the way I want to.”
In the wake of the Philadelphia incident, it’s clear that the idea of success—and what it means to run a thriving company—has been on Brewer’s mind. “We were busy. We were in the middle of a turnaround,” she says. “But probably the most important thing we can do is face the reality and say, ‘Not only are we going to fix what happens in the store, we’ve got to fix what’s happening outside the doors because it’s coming inside.’ You can’t separate those two things.”
Earlier this year, she posed a challenge to Williams, head of U.S. retail: If the company were to create the best jobs in the industry, what would that look like? The answer will always be a work in progress, but that query led Starbucks to announce a new round of employee perks in September, including enhanced mental-health benefits. “We’re really in this mode of, if we’re going to thrive in the future, not just survive, we’ve got to figure out a way to make the jobs in our stores so meaningful,” says Williams. “It’s really that personal to her.” It’s not just a feel-good philosophy. Happier employees lead to happier customers and higher sales.
What happened in Philadelphia has also led the company to double down on what it means to be a Starbucks. The reality of retail right now, Brewer says, is that stores are essentially a public space like libraries and must serve the needs of their employees and community. In some locations, that’s even meant letting managers install needle boxes to dispose of drug users’ syringes in restrooms if they think it will increase safety. Brewer wants baristas to make the perfect flat white or pour-over. But she also wants them trained in how to deal with the hardest social situations they could possibly encounter so everyone feels like they belong in a Starbucks.
It has nothing and everything to do with a cup of coffee. And to Brewer, it’s perhaps the single biggest opportunity the company still has.
This article originally appeared in the October 2019 issue of Fortune.
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