Pure Profit : For Small Companies That Stress Social Values as Much as the Bottom Line, Growing Up Hasn’t Been an Easy Task. Just Ask Ben & Jerry’s, Patagonia and Starbucks.
One of the dividends of owning stock in the Ben & Jerry’s Homemade ice cream company is being invited to the annual stockholder’s meeting. This gives you an excuse to eat lots of ice cream, check out Ben & Jerry’s 40-foot solarized stage bus and then spend two days listening to the Band, Bo Diddley, Michelle Shocked and the Kwanzaa Music Workshop Performance, among many other acts, play at the Ben & Jerry’s One World One Heart festival. You also get to attend the financial meeting. Here, one company co-founder might lead the investors in a hymn while the other makes a point about product standards by splitting open a pint of ice cream with a samurai sword.
As the minutes of its official meeting would indicate, Ben & Jerry’s still hews closely to a guiding principle co-founder Jerry Greenfield uttered in 1978, soon after he and Ben Cohen cranked their first gallon of ice cream in a converted Burlington, Vt., garage: “If it’s not fun, why do it?” And that corporate philosophy, along with a social conscience and a line of uncommonly wicked ice cream products, attracts a unique kind of investor to these meetings. Like Ben Cohen and Jerry Greenfield, Ben & Jerry’s investors are prone to message T-shirts, beards and glasses. They are educated, middle- to upper-middle-class professionals who load the kids into the Volvo and drive to the Ben & Jerry’s gathering at the Sugarbush Ski Resort in Warren, Vt., confident that the shouts of playing children and even a crying infant will not be frowned upon during the chairman’s big speech.
And when it’s their turn to address questions to the board of directors, Ben & Jerry’s investors are less likely to raise financial details than to suggest a new flavor their daughter thought up. Or wonder if the company might develop sugar-free ice cream for diabetics. Or request that a funny story about the company’s past be repeated for everyone’s benefit. Even in a year marked by stalled market growth, flattened profits and a dizzying 50% drop in share price, the only investor to mention the declining value of her Ben & Jerry’s stock at the annual meeting last June was the New York City school teacher who haltingly expressed her gratitude for “the privilege of supporting this company.”
As the stockholders made clear, their investment in this ice cream company has less to do with its profitability than how it goes about making its profits. What Ben & Jerry’s offers its investors is the chance to buy into a company that reminds them of themselves. A company that is innovative and impassioned about its product, but also values-driven. A company with a free-wheeling sense of humor, but also a serious commitment to its community. Business on a human scale, in other words. But how long can this go on?
Now a $150-million corporation that produces the leading super-premium brand of ice cream in the United States, Ben & Jerry’s has long since edged into the realm of big business. So far, the company has maintained its human connection, thanks in large part to the warm, community-friendly vision of its co-founders. But now Cohen and Greenfield are stepping back from their company’s daily operations, making room for a new chief executive whose background in traditional business will, they hope, help streamline the company’s often troubled internal management and allow it to adjust to shrinking domestic demand by pursuing previously untapped markets in Europe and Asia.
Wall Street analysts applaud Ben & Jerry’s new willingness to professionalize their operation. What’s less clear is how the new company will feel to its original and most loyal constituency--the customers who value its high-touch funkiness. Will the pressures wrought by success force the company to sacrifice the non-corporate values that made it so appealing?
Ben & Jerry’s isn’t the only formerly small socially responsible company whose mainstream success threatens to hoist it upon its own ethical petard. The Patagonia outdoor equipment company defines itself by a rigid commitment to environmentalism, yet many of its most popular, innovative garments start life as heavily processed raw materials. Acknowledging this paradox in 1991, Patagonia founder Yvon Chouinard decided to put the brakes on his company’s growth. “Most of the evils in this world,” he warns, “are caused by unlimited growth.” However, this is not an opinion shared by Seattle coffee baron Howard Schultz, who believes his expanding chain of Starbucks coffee bars can push a vision of corporate responsibility and worker empowerment across the nation.
Schultz’s worker-friendly notions would seem to make Starbucks’ kudzu-like growth a source of happiness for those who consider themselves patrons of ethics-driven industries. But on the wings of its success, Starbucks has taken on the features of a particularly vicious bird of prey. Humane businesses do not flourish at the expense of their competitors, some observers insist: The higher you go, the lower you are. But if free-market competition is unethical, does that mean every successful company is by definition socially irresponsible? Is it possible for any company built on small-business ideals to grow into a big business without sacrificing its integrity?
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A few days before the stockholder meeting last year, Ben & Jerry’s held a press conference at its Waterbury, Vt., headquarters to announce Ben Cohen’s resignation as chief executive officer. As he acknowledged, the daily machinations of a $150 million company had grown too complex for any “multi-college dropout and failed pottery teacher” to run. But before the mood could become too dour, Cohen’s partner, Jerry Greenfield, appeared, holding a poster that showed the two ice cream moguls scowling under top hats and pointing their fingers like chubby Uncle Sams. “Yo!” read the tag line. “We want you to be our CEO!” In order to find a new boss, Cohen explained, the company was holding an essay contest. Whoever wrote the best 100-word essay describing why he or she would make a good Ben & Jerry’s CEO, he swore, would win the job.
Everyone got a good chuckle out of that one, but behind the frivolity lurked a much more traditional business story. Confronting internal management problems, a shrinking domestic market and aggressive plans for international expansion, the Ben & Jerry’s board of directors (of which Cohen and Greenfield are, respectively, chair and vice-chair) had hired a corporate headhunter to find an experienced chief executive. And when the time came to extend a salary offer, the board intended to break B&J; tradition by proffering a package worth more, maybe much more, than the $150,000 salary of President and Chief Operating Officer Chuck Lacy, which sum adheres to the company salary cap of seven times the $8 an hour paid to entry-level workers. To some members of Ben & Jerry’s extended family, this shift toward traditional corporate behavior was nothing less than an outrage. And when the media finished chortling over the essay contest, some reporters cast a dark eye on the dismantled 7-to-1 ratio, asserting angrily that the once-lovable ice cream kings had not only broken a promise to their own people but also betrayed a kind of public trust.
Which, on one level, seems ludicrous. As long as Ben & Jerry’s continues pumping out New York Super Fudge Chunk and Wavy Gravy, why should an ice cream lover ponder the ethics of internal corporate machinations? Maybe because Cohen and Greenfield have spent the past 17 years pondering ethics. And as they are discovering, it’s not always easy to be the real-life subject of a folk tale.
The Legend of Ben & Jerry is recorded in a promotional film shown on tours of the company’s hilltop factory (the 250,000 annual visitors make Ben & Jerry’s Waterbury plant the most popular destination in Vermont). Combining still photos, clumsy home videos and giggling dialogue by the founders themselves, the film tells an inspirational story of alternative entrepreneurial triumph: In 1978, two boyhood chums from Long Island, N.Y., send away for a $5 correspondence course to learn how to make ice cream, then open shop in a converted gas station in collegiate Burlington, Vt. Success comes quickly, thanks to the boys’ commitment to quality and their ability to mix wild flavors with wacky promotions and giveaways. By 1981, Ben & Jerry’s is honored by Time magazine as “the best ice cream in the world,” and Cohen and Greenfield expand their horizons, hand-packing pints for sale all around New England. Evil Big Business threatens when corporate behemoth Pillsbury, owners of the leading super-premium ice cream, Haagen-Dazs, tries to do in the aspiring hippies by forcing grocery distributors to choose between the leading brand and the upstarts from Vermont. But the puckish Cohen and Greenfield take their case for fair play directly to the people with the war cry, “What’s the Doughboy Afraid of?” Pillsbury backs down, and the barrage of favorable publicity rockets Ben & Jerry’s into every market in the nation.
Already successful beyond their wildest imaginings, Cohen and Greenfield become capitalist Robin Hoods, bestowing generous salaries and benefits on their lower-rung employees, setting up a foundation to donate 7.5% of their pretax profits ($808,000 in 1993) to groups supporting AIDS victims, homeless people and environmental causes, buying blueberries from Native American tribes and brownies from a bakery that hires homeless workers. Community spirit and a stubborn insistence on Doing the Right Thing add depth to the company’s alternative-business persona, but as the movie makes clear, the real source of Ben & Jerry’s triumph--and last April, Ben & Jerry’s surpassed Haagen-Dazs to become the nation’s top-selling super-premium ice cream--is the company’s human scale. And it is this very thought that concludes the Ben & Jerry’s movie, cast into a catchy Andrews Sisters-style jingle:
There ain’t no Haagen, there ain’t no Dazs, There ain’t no Frusen, there ain’t no Gladje, There ain’t no one at Steve’s named Steve, But there are two real guys named Ben and Jerry!
When I shake hands with the two real guys, they look like they have just rolled out of bed. It is 8:30 on a Tuesday morning, and the founders of Ben & Jerry’s are back from a weeklong business trip, their shirts untucked, hair standing at eccentric angles, eyelids heavy with sleep or the lack of it. But even as jet-lagged, middle-aged founders of a company that employs 600 workers, Cohen (the bearded, balding one) and Greenfield (the baby-faced one) project a laid-back boyishness. This morning they come wielding Native American ceremonial rattles, just-discovered gifts that will join the amiable clutter of toys, books, newspapers and CD’s crowding their small enclave. Joined by a sliding glass door, walls papered with posters, the connected offices feel like a clubhouse. A small freezer packed with ice cream samples hums in the corner, and a sweet, milky aroma thickens the air.
This clubhouse, however, has been a busy place lately. Putting aside their rattles, Cohen and Greenfield talk about expanding their grasp on the American market, of ramping up new product lines and following Haagen-Dazs into untapped overseas markets. Known as the more introspective of the two, Cohen once equated corporate growth with spiritual death, but he has a new perspective. “I think growth is exciting,” he says. “It’s somewhat, uh--”
“Exhilarating!” cries the more outgoing Greenfield. “Intoxicating!”
And sometimes difficult, given the company’s social ageda. When increased demand forced the company to lease temporary production space at a Dreyer’s factory in Iowa, for instance, they chose to ship Vermont dairy products to the Midwest production line rather than violate their pledge to use only local milk and cream. And while Ben & Jerry’s is proud of the fact that the brownies in their treats come from a New York bakery that employs homeless people, they rarely discuss the herculean efforts they took to help the Greyston Bakery’s management ship brownies that didn’t have to be separated with a hammer and chisel.
The occasional tangling of social and business goals is only one of the problems souring life within the ice cream empire. As those happy-go-lucky “Yo! I’m Your CEO!” posters proclaimed, none of the executives at Ben & Jerry’s has ever worked in a company as large as Ben & Jerry’s. And if that observation sounds funny on a poster, it seems much less amusing to the company’s staff when materials don’t arrive at the factories on time, production lines get backed up and no one can describe exactly why things keep turning out that way. This creates the sort of pressure that no company-sponsored back rubs can relieve. “There’s a lot of responsibility going head-to-head with Haagen-Dazs,” says Fletcher Dean, who works in the public relations department. “You’ll see people in the hallway ready to tear their hair out.”
By the end of 1994, the internal mood had become so dark, says Liz Bankowski, who directs the company’s social mission, that the company asked author Milton Moskowitz to remove them from the most recent edition of “The 100 Best Companies to Work for in America.” Why? “Because we’re not!” Bankowski grieves. “We’re going through tough times and people are not feeling happy about the way we’ve managed the company in the last year.” Ever sensitive to its own failings, Ben & Jerry’s now employs a full-time conflict resolution counselor.
Perhaps that counselor should take a road trip to Wall Street. As a plummeting stock price (down to 15 from a high of 30) might indicate, the financial district is not happy with Ben & Jerry’s management. It’s time, says Jean-Michel Valette, a stock analyst for San Francisco’s Hambrecht and Quist, for Ben & Jerry’s to admit they’re a mainstream business. “They’ve already built a strong brand image with real appeal to the consumer,” Valette says. “That’s magic. Now they have to fix the easy part. They need to embrace people who can help the company navigate the traditional issues: Distribution, production, management.”
But whoever emerges from the field of 20 CEO finalists culled by the headhunter, (which included two or three candidates from the “Yo!” essay contest) will still be running a company that weighs the bottom line of its social mission just as seriously as its economic bottom line. “At Ben & Jerry’s,” Cohen explains, “we see ourselves as somewhat a social service agency and somewhat an ice cream company. We seek to hire people who support the goals of the company--to produce the highest-possible quality ice cream, to make a reasonable profit and to institute a concern for the social benefit of the community.”
Cohen knows that Ben & Jerry’s finely tuned sense of morality is crucial to its financial performance. When he talks about the company’s commitment to the Greyston Bakery, for instance, a dreamy look passes over his ruddy features. He muses about how we’re all part of the same spirit energy, so the positive energy that goes into supporting Greyston comes back to the company through increased ice cream sales. “You could never prove that,” he acknowledges. “But just because it’s intangible doesn’t mean it’s not true and not valid. And we’re saying it is.”
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Yvon Chouinard has made millions in business, but that doesn’t mean he has to call himself a businessman. The founder, owner and chief executive of Patagonia outdoor clothing prefers to be called a blacksmith--he started out by making steel mountaineering tools--or perhaps a professional surfer, climber, kayaker and all-around adventurer. Chouinard has worn a lot of hats in his 55 years, and the one name that seems to draw it all together for him, the one description Chouinard uses to capture the essence of his life, is Dirt Bag.
Dirt Bag?
“I used to camp out 250 days a year,” Chouinard explains with a shrug. “Just sleeping on the ground, no tent. I rarely stay in hotels, to this day. I just sleep on people’s floors.” That’s the sort of personal economy Chouinard finds most admirable in a person. “In reality, there’s only a few Dirt Bags here,” Chouinard says, gesturing around Patagonia’s sunny headquarters in Ventura. Even so, all his employees are issued an official Dirt Bag camping mug, which describes their existence as a linked circle: Live, Take Risks, Die, Compost. “Closing the Loop,” it explains across the bottom.
Reflections of that Dirt Bag ideal, the sinewy, good-humored, ready-for-anything-including-compost adventurer, glimmer all over Patagonia’s central offices. The modern wooden complex is in the industrial corner of the city, close to the beach and even closer to the the tin shack where Chouinard hammered out his first pitons in the ‘60s. Walking beneath the leafy trellis to the front door, I see tow-headed children playing in the fenced-in day-care center. A golden-tressed, T-shirt-wearing surfer guy hails me from the receptionist’s desk. The message board above his head, I notice, details the morning’s surf report. Upstairs, a faxed version of the same report sits squared on Yvon Chouinard’s tidy desk. Chouinard, however, is nowhere in sight. There’s an 8-foot swell at Rincon, I was told. A scheduled interview would have to wait. “Yvon is surfing.”
When he appears, Chouinard extends a hand and a small, reserved smile. He’s wearing a short-sleeved turquoise button-up, faded denim jams and flip-flops. His thinning silver hair is brushed casually across his forehead and his sharp Gallic features are deeply tanned. Compact and muscular, Chouinard might have made a good jockey or an astronaut, except he doesn’t like sitting still. He yearns for the days when humans were hunter-gatherers. Working in an office, Chouinard says, is “an unnatural situation.”
A lifelong outdoorsman, Chouinard finds it difficult to recall exactly how he ended up putting so many other people in an office. Starting as a small-time climbing gear manufacturer in the mid-’60s, he eventually branched into his own line of outdoor wear--rugby shirts, parkas--combining strict quality standards, an eye for innovation and a natural flair for style into a brand that soon gathered a devoted following among outdoorsy, if well-moneyed, young Americans. Racking up a solid $3 million in annual sales by 1979, Chouinard’s penance for business success was to make his company a kind of natural refuge for Dirt Bags, complete with on-site day care, company-subsidized fish tacos and carrot soup in the cafeteria and a work ethic that understands that when the surf is up, a Dirt Bag must go surfing.
During the ‘80s, Chouinard expanded his staff and ratcheted annual sales past the $100-million mark. Much of the company’s growth came from non-Dirt Bag products like volleyball shorts and super-stylized ski pants. Sales leaped, but Chouinard’s unchecked ambitions conspired with an undisciplined management style to invite financial disaster. By early 1991, Patagonia’s sales had flattened, warehouses clotted with merchandise, and expenses rocketed into the ozone. Something had to change.
During the Patagonia gold rush days of the late ‘80s, massive corporate growth seemed to play right into Chouinard’s political scheme. Give middle Americans the clothes they want, he reasoned, and use their money to fund the Dirt Bag environmental agenda. Chouinard set up an environmental grants program and hired a staff to give 1% of the company’s annual revenue to activist groups ranging from the Sierra Club to Planned Parenthood to enviro-radicals Earth First! “We thought the bigger we were, the more good we could do,” he says now. “But that was bulls- - - thinking.” Certainly the horrors of the early-’90s economic crunch had something to do with that revelation. Even more influential, Chouinard says, was an internal assessment that laid bare the environmental damage Patagonia’s own products were causing, often in direct defiance of the organizations the company was so proud to support. For instance, the $5,000 that Patagonia has given to the Pesticide Action Network to help curb the use of chemical pesticides did little to compensate for the fact that a significant percentage of its garments are made with pesticide-drenched cotton. Declaring himself a convert to Deep Ecology, an analysis that tracks the true farm-to-landfill impact behind every action, Chouinard vowed to frame his entire company within strict environmental constraints.
“Reality Check,” an essay in Patagonia’s Spring 1991 catalogue, served as a manifesto for a new era of unparalleled corporate asceticism. “Everything we make pollutes,” it began. From now on there would be no more whimsical niche products; Patagonia would provide only for its customers’ essential needs. The company’s popular polyester fleece jackets, their reigning innovation, would be produced from a fabric cobbled from recycled soda bottles, while the cotton it used for T-shirts would be purchased only from organic farms. Yes, prices would go up, and Patagonia products would be more difficult to find. But as “Reality Check” lectured, it was the consumer’s responsibility to “demand less and to demand better.”
Patagonia’s mea culpa struck to the heart of the alternative business paradox: How can a company that defines itself by a particular cause participate in an industry that defies its own philosophical vision? By maintaining a rate of slow, steady growth, Chouinard hopes Patagonia will prove that a business can earn reasonable profits for an extended period without saturating the market or denuding the environment, something he calls sustainable industry. When he sees his employees’ kids playing in the child-care center, Chouinard reckons he’s looking at Patagonia’s staff of the 21st Century. “We’re trying to run this company,” he says, “like it’s going to be here in 100 years.”
They just might be around that long, if popular demand is any indication. Patagonia’s sales grew to $125 million in 1994, (up from $103 million in 1991) and although much of the recent growth has been fueled by a growing international market, Bob Woodward, editor of Specialty News, a Bend, Ore., newsletter that tracks the outdoor industry, says Patagonia is still known as the most innovative brand in the United States. “They’ve been out front with the ecological thing,” Woodward says. “A lot of people talk a big green game, but Patagonia has put their money where their mouth is.” The Patagonia logo reveals something more about a person than his ability to afford a $185 Pneumatic jacket. As Ernie Rischar, the company’s director of operations, observes, Patagonia’s rigid environmental policies have turned the company into “something between a cult movement and a producer of functional products that protect you in the wilderness.”
This interest in corporate social responsibility may foreshadow a shift in the nation’s social construct. In earlier times, people depended on their church to provide moral leadership and sustenance for the downtrodden. During the 20th Century, the government administered the social safety net, but with a new millennium looming--and a conservative majority bent on shuttering most of Washington’s social programs--responsibility for the net seems to be headed for the private sector. Businesses for Social Responsibility, a 3-year-old Washington-based organization of companies set up by Ben Cohen and others, already counts 850 dues-paying members. Bob Dunn, the group’s president and a former executive with innovative Levi-Strauss, says the pressure for other businesses to take on socially responsible policies will only increase. “It stands to reason,” he says, “that if you want to be in business over time, you depend on the support of investors, customers, suppliers and communities. Treating them respectfully builds relationships that enhance the bottom line.”
Even so, not everyone in business accepts the notion that the community’s best interests are served by companies who take pains to do good. As conservative economist Milton Friedman once asserted, a business’ real social responsibility is to make lots of money for its shareholders, create jobs for the community and pay taxes to the government. Thus, opulent employee benefits, self-imposed Earth taxes and the like only compromise the business’s actual purpose. Another risk of being so outwardly pious is in setting a standard, even a perceived standard, that you’ll never be able to meet.
When Patagonia’s 1991 downsizing expelled some workers from Dirt Bag Eden, Chouinard faced charges that he had put his profits before his people. And the fact that Ben & Jerry’s takes such pains to maintain its products’ purity only made it more delicious for the media to report last summer that the company had discovered artificial flavors in some of their mix-in products and that the cherries in Cherry Garcia were preserved with sulfur dioxide. So much for “all-natural,” sniggered a chorus of wise-guy reporters, although most neglected to mention that the primary ingredient of their own product--the revelations about the artificial ingredients--came straight from the social audit section of Ben & Jerry’s 1993 annual report.
Ben Cohen accepts this criticism with a shrug. “The purpose of aspirations,” he says, “is to have something to work toward. If you achieve all of your aspirations, well, you didn’t set your aspirations high enough.”
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The first thing you need to know about Starbucks is that this company, like the American coffee shop, wasn’t always what it is now. Years before the swank coffee bars became synonymous with yuppie consumerism, years before so many hard-working Americans would decide it acceptable, even reasonable, to drop several dollars on an esoteric espresso concoction, years before there were more than 500 Starbucks outlets encrusting the nation and no fewer than four new ones popping up every week--way before any of that, there were only two Starbucks stores, and they were both in Seattle.
The more successful of the two opened its doors in a shopping center across from the University of Washington in 1972. It was a small storefront, thick with the aromas of fresh-roasted coffee beans, imported teas and bulk spices. Unvarnished barrels and burlap sacks made for a rustic, vaguely nautical motif. You couldn’t buy coffee drinks, but if the wispy hippie behind the counter felt like brewing a pot, he would put out Dixie cups for free samples. The atmosphere was casual, but the appeal was distinctly sophisticated. In those days, most middle-class people were content with their daily Folger’s. Starbucks customers, by contrast, were as passionate about starting their day over a well-roasted Sumatran blend as they were about ending it over a vintage French merlot.
All of which made Starbucks’ early customers a lot like the company’s founders. When they first decided to go into the coffee business in 1971, Jerry Baldwin, Zev Siegl and Gordon Bowker were erudite longhairs in their late 20s whose entire enterprise was based on a shared passion for gourmet coffee and one semester of college accounting. The trio opened their first store across the street from Pike Place Market in 1971, and by the end of the ‘70s they had four stores, a wholesale company and a mail-order outlet selling $2 million of product a year. “We didn’t know squat about business,” recalls Baldwin. “But we found it difficult to say no to opportunity.”
They shared this attitude with the much more business-savvy Howard Schultz. Ambitious and fast-talking, Schultz had started his career in the marketing department of Xerox, then took the helm (at 26) of the American division of Hammerplast, a Swedish housewares firm. There Schultz became acquainted with the Starbucks crew, and after the bright young exec impressed Baldwin and Bowker (Siegl had sold out in 1980) with his New York-fired intensity, they asked Schultz if he’d be interested in running Starbucks’ marketing and retail operations. When they threw a small stake in the company into the bargain, Schultz signed on in 1982. “It was the first time I’d ever owned anything,” he recalls.
A year later, Schultz went to Italy for a housewares fair, stopped off for an espresso and came away with a revelation. The Italians, Schultz saw, didn’t drink coffee as much as revel in it. They counted on a daily visit to their coffee bar to provide a burst of light against the dull palette of the workday. “It’s a relationship,” Schultz says, “built on the romance and intrigue and the interaction of the beverage.” Sensing the potential for espresso-driven ecstasy in his own country, Schultz returned to Seattle eager to propel Starbucks to the front of a cultural revolution. But Bowker and Baldwin were more interested in selling beans than drinks, and a frustrated Schultz left Starbucks to launch a small string of espresso bars in Seattle. When Bowker and Baldwin decided to sell Starbucks in 1987, Schultz raised $3.8 million and bought the company. “This was my chance to effect total change,” Schultz says. He did not waste time doing this.
To see the change at Starbucks you need travel no further than Seattle’s University Village. The cozy storefront that opened 23 years ago recently reopened as a glimmering java megalopolis. Half a dozen islands display Starbucks’ new line of custom-designed espresso machines, designer mugs, imported biscotti and recipe books. An undulating bar is studded with gleaming espresso machines, glass cases of pastries, croissants and sandwiches on focaccia bread. Behind the counter, a black-aproned army of beaming servers takes intricate orders for double decaf lattes, single no-whip mochas, skinny macchiatos and half-caf Americanos, pulls them up perfectly and then hands them over with an old-fashioned niceness that girds your faith in the future. A Starbucks future. “By the year 2000,” promises Schultz, “Starbucks will be the most recognized, respected coffee company in the world.”
Schultz has already gone a long way toward making it happen. The regional, 11-store outfit he bought in 1987 is now a national chain, with annual sales reaching the $300 million mark. With plans to bottle a coffee-based beverage with Pepsi-Cola and with 200 new stores opening a year, Schultz aims for Starbucks to cross into the next century with annual sales of $1 billion. Pursuing such a grand vision requires a level of hubris that few businessmen can muster, but as he kicks back with a fresh cup of coffee at the intimate conference table in his office, Schultz’s plan to transform the nation’s coffee industry unfolds in gentle, almost humble terms. “I knew early on that I wanted to recreate the paradigm,” he muses. A youthful 41, he slicks his brown hair with mousse and sports a snappy checked shirt, velvety corduroy pants and pointy wing-tips. The braces on his teeth, correcting an old football injury, complete the boyish look, and his deep brown eyes transmit a warmth that is almost immediately disarming. Schultz’s triple-shot of ambition is rooted not in an upper-class sense of entitlement, but a working-man’s quest for transcendence. Raised poor in the tenements of Brooklyn, Schultz grew up watching his blue-collar father struggle to keep his family afloat with bottom-rung jobs that paid little and offered even less in spiritual fulfillment. Schultz scrambled to put himself through college, sometimes selling his own blood for book money. When it was his turn to run his own company, he felt obligated to extend his own employees a little more than his father received from the jobs he worked.
Starbucks employees enjoy what is perhaps the most progressive benefits package in the retail industry. Starbucks espresso jockeys, or “baristas, start their career with a 24-hour course that prepares them for the technical and spiritual demands of the job. Their expertise is rewarded with a starting salary between $5 and $7 an hour, depending on the market, and a company-sponsored health insurance plan that covers all workers who put in more than 20 hours a week. Employees--or “partners,” as Schultz likes to call them--with six months under their smocks can participate in a stock option program. According to Schultz, this gives Starbucks workers a sense of pride and ownership that inevitably translates into higher quality service. “It’s a simple circle,” Schultz says. “Long-term value for our shareholders and customers can only be accomplished if long-term value can be created for the people who do the work.”
Schultz’s commitment to Starbucks’ work force has earned him a stellar reputation among observers of socially responsible businesses. Matthew Patsky, an analyst who tracks such companies for the Robertson, Stevens brokerage in San Francisco, notes the company’s record as the top corporate donor to CARE and how its stores give their discarded coffee beans to local social service agencies. “They’re models of good corporate citizenship,” he says. Joel Makower, a business writer whose book, “Beyond the Bottom Line” was written in conjunction with Businesses for Social Responsibility, agrees. “They’re progressive in the workplace,” he says, “and in their general philanthropic nature.” So why do so many people say so many nasty things about Starbucks?
It’s got something to do with Starbucks’ competitive drive. More than ambitious, competitors murmur, Schultz’s company is rapacious. It bids up choice real estate to muscle out less well-financed competitors. It purposely locates next to local coffee houses to plunder their clientele. Nothing illustrates these charges more clearly than the turf war in the Bay Area, where Starbucks competes with local institution Peet’s Coffee. The fact that Peet’s is now owned by Starbucks founder Jerry Baldwin gives the battle a particularly gothic twist. Baldwin and Schultz go out of their way to call their rivalry a cordial one, but Baldwin also refers to his old employee’s “search and destroy” methods. For his part, Schultz does not try to mask his drive to make Starbucks the dominant coffee company in the world. “We are here to win,” he says. “And I don’t apologize for it.”
Such unrepentant aggression has darkened Starbucks’ public image. As writer Makower observes, Starbucks’ reputation is now similar to that of another Seattle-based behemoth: Microsoft. “They’re the company you love to hate,” he says.
Personal aesthetics aside, it’s hard to imagine why. Most of the smaller coffee company owners I spoke to said Starbucks is a fair competitor whose high profile ad campaigns create a larger market for everyone. “When you cut through the crap and bad feelings,” says Jim Cary, president of the Peaberry’s chain in Denver, “they’ve made us a better company.” Starbucks could do more, arguably, to encourage organic coffees or help indigenous farmers organize into co-ops, but its CARE donations are already sponsoring water systems in Guatemala, literacy programs in Kenya and immunization programs in Indonesia.
What really seems to set people off is the simple fact that Starbucks has such high corporate aspirations and is so rapidly bringing them to fruition. The raw stuff of ambition, the determination to stand above everyone else, seems to cheapen the company, to reveal a hard, mean edge. But does that imply that widespread success, and the drive required to achieve it, are socially irresponsible? That’s the kind of thought that probably keeps Ben Cohen up at night.
*
Cohen is looking tired as we wrap up our conversation in the cozy little clubhouse he shares with Jerry Greenfield. It’s probably the jet lag weighing down his eyelids, but then again, things are rarely what they seem in the world of big business. The Two Real Guys of ice cream say they’re committed to making business a less artificial experience. Still, industry spins its illusions, even at Ben & Jerry’s. For instance, all of that familiar, childlike Ben & Jerry’s script, once hand-lettered by their friend Lynn Severance, is now a computer-generated font.
“I suppose that is ironic,” Cohen allows. Whatever he’s about to say next is preempted by his partner. “Oh, well,” Greenfield begins. “There was a time when I answered every customer letter individually. That wasn’t an image, that was reality, in the same way having one person do our hand-lettering was reality. But we can’t do that anymore. It’s too much for a single person to do.”
Granted. But like all triumphant alternative entrepreneurs, Cohen and Greenfield must measure the distance between where they started and where they are now and pose a few unsettling questions. Does the pressure of the marketplace inevitably erode your soul? Does every financial success represent a deal with the devil? Will success render Ben & Jerry into corporate icons, as hollow and artificial as the Pillsbury Doughboy? Or can a modicum of humanity filter through the vastness of a multinational corporation? Cohen thinks it can. “The gas station might have been funky in relation to other mom and pop shops,” he says. “Ben & Jerry’s today is funky in relation to other $150-million corporations.”
