Starbucks joins with Alibaba for China coffee deliveries

SHANGHAI --Starbucks on Thursday announced a partnership with e-commerce giant Alibaba that will give the US coffee giant greater access to China's growing food-delivery market as it faces increased competition from local firms.

The move comes as Seattle-based Starbucks faces a challenge from upstart Chinese company Luckin Coffee, which has expanded aggressively on a strategy based largely on satisfying delivery orders placed by mobile app users.

"We truly believe that this enduring partnership will elevate the coffee culture in China," Starbucks president and CEO Kevin Johnson said at news conference in Shanghai.

Johnson called the tie-up "rocket fuel" for the US company's emerging digital strategy.

Under the arrangement, Starbucks products will be dropped off to customers would be handled by Alibaba's food-delivery unit, Ele.me.

Long a traditionally tea-drinking nation, China is seeing an explosion in coffee consumption and Starbucks has targeted the country as its key market after the United States, and its main source of new growth.

It already has more than 3,400 cafes in more than 140 Chinese cities and has said a new outlet opens every 15 hours in the country.

China's overall market for food and beverage delivery has skyrocketed in recent years, fueled by eager adoption of digital commerce and the rise of delivery start-ups employing vast fleets of low-wage, scooter-mounted couriers.

Chinese restaurants now fill huge volumes of delivery orders, and many new food-and-beverage outlets are being established solely for deliveries.

Until now, however, Starbucks had yet to announce a comprehensive strategy for tapping the mobile market.

But the pressure has been rising since Beijing-based Luckin launched about a year ago.

It has quickly expanded to hundreds of delivery-focused stores, is targeting more than 2,000 outlets by the end of this year, and vows to disrupt what it has called Starbucks' "monopolistic" presence in China.

Johnson declined to specifically address the Luckin challenge when asked, saying the Alibaba partnership was part of broader global retail evolution and that Starbucks "has always had a lot of competition."

Alibaba, founded by entrepreneur Jack Ma, has been a key driver in the Chinese retail sector's transformation toward digitally placed orders and delivery for a range of consumer goods.

Earlier this year, the Hangzhou-based company acquired full ownership of Ele.me, China's leading food-delivery start-up, to improve its positioning in the meal-delivery sector.

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Starbucks shuts 8,000 US stores for racial bias training

NEW YORK, United States - Starbucks closed more than 8,000 stores on Tuesday to train around 175,000 employees against racial bias, an unprecedented public operation that highlights America's ongoing struggle with discrimination.

The move follows the April 12 arrest of two black men in a Philadelphia Starbucks, which sparked outrage, protests and soul-searching about racial tensions that have deteriorated under President Donald Trump.

For many, the training was overshadowed by ABC's decision to cancel hit sitcom "Roseanne" after its star Roseanne Barr, a Trump supporter, made a remark decried as racist against former White House aide Valerie Jarrett.

"We realize that four hours of training is not going to solve racial inequity in America or anyone coming into our stores who may have a problem," Starbucks executive chairman Howard Schultz admitted on CNN.

"But we have to start the conversation."

While store managers declined to talk to media and the press was not invited to the training sessions, staff were to watch taped messages from Schultz and CEO Kevin Johnson, as well as a message from Common, the rapper and activist.

Employees will watch a film from documentary maker Stanley Nelson on African American history and the civil rights struggle, before discussing in groups their own experience of racial discrimination.

The curriculum, to be made available at a later date, was drawn up in consultation with US president Barack Obama's former attorney general Eric Holder and civil rights lawyer Bryan Stevenson, among others.

As a result, frappuccino lovers had to shop elsewhere. The coffee giant said it was designed to make Starbucks "a place where all people feel welcome."

The company pledged to integrate further trainings in the United States and around the world. Starbucks has 25,000 coffee shops in 70 countries.

Estimated to cost Starbucks $12-14 million in lost sales, the exercise was criticized by some as virtue signaling, but has been cautiously welcomed by black officials and activists.

Sherrilyn Ifill, president of the NAACP Legal Defense and Educational Fund and one of those consulted on the curriculum, said it "created an important window" for retail corporations "to honestly and forthrightly tackle racial inequality."

'IF IT IS GENUINE'

In New York and Washington, Starbucks customers who dashed out for a sandwich or a caffeine fix before it was too late welcomed the move.

"Smart idea. It should have been done a while ago," sales rep Chad Mittleman, 31, told AFP in Midtown Manhattan.

"If it is actually genuine and not a PR move, it will be a good thing," said Devon Smith, a 31-year-old African American on L Street near the White House.

"At the end of the day, it is all in the attitude and belief of the individual employee," he said. "It's good but I don't know whether it will bring definitive change."

Starbucks announced the training on April 17 as it battled to contain outrage over the arrest of Rashon Nelson and Donte Robinson, apologizing and adopting an open bathroom policy to non-paying customers.

After Nelson and Robinson stepped into the cafe, one of them asked to use the restroom while waiting for a third person to arrive for a business meeting. 

Staff refused, on the grounds that he was not a customer. After the pair sat down to wait, the manager called the police.

A video that went viral showed uniformed officers questioning then handcuffing the two men, who put up no resistance, while a white client repeatedly asks an officer, "What'd they do? What'd they do?"

But US social networks have been rocked by a slew of other recent examples of racial discrimination going viral. A student called the police in May when a black graduate student at Yale University fell asleep in a common room.

Earlier this month, a 22-year-old black man was choked by police at a Waffle House in North Carolina after taking his sister to prom, the fourth incident at outlets of the restaurant to attract national attention in less than two weeks.

Other large companies have also adopted racial bias training, albeit with less fanfare. Target introduced its first unconscious bias sessions in 2017, which it says are being rolled out across the company.

American Airlines announced last year that it would train 120,000 employees after the civil rights group NAACP warned against "a pattern of disturbing incidents" reported by African-American passengers specific to the company.

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Starbucks CEO apologizes for 'reprehensible' arrest of two black men

The CEO of Starbucks has apologized for an incident at one of the mammoth chain's Philadelphia cafes where two black men were arrested while waiting for a friend.

A video of the incident, posted Thursday on Twitter, was viewed millions of times and drew widespread condemnation on social media.

CEO Kevin Johnson, in a statement, expressed the company's "deepest apologies" to the men for what he said was the "reprehensible outcome" of the incident.


Johnson said the company would investigate and "make any necessary changes" to avoid a recurrence. "Starbucks stands firmly against discrimination or racial profiling," he said.

The video posted by a Starbucks client shows several uniformed police officers questioning and then handcuffing the two men, who offer no resistance.

In the foreground, a white client objects to the scene, repeatedly asking an officer, "What'd they do? What'd they do?"

The woman who posted the video, Melissa DePino, tweeted: "The police were called because these men hadn't ordered anything. They were waiting for a friend to show up, who did as they were taken out in handcuffs ... All the other white (people) are wondering why it's never happened to us when we do the same thing."

She said it was a Starbucks employee who called police.

The two men's pro-bono lawyer Lauren Wimmer, interviewed by a CBS affiliate in Philadelphia, said they were waiting for a third man to arrive for a business meeting.

Philadelphia police commissioner Richard Ross, who is black, said police had received a 911 call from a Starbucks worker who said the men were trespassing, after sitting down and refusing to buy anything. Ross said his men had "politely" asked the two to leave before finally arresting them.

The men were released after Starbucks declined to prosecute them.

Johnson, in his statement, said the store manager never intended for the men to be arrested, adding that he hoped to meet them personally "to offer a face-to-face apology."

The video drew widespread attention. Drummer Questlove of the group Roots tweeted a question: "Waiting in a Starbucks while black is a crime?"

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Starbucks sales and profit forecast disappoint, shares drop

Starbucks Corp cut its profit forecast and posted disappointing quarterly results on Thursday, amid a bitter battle with competitors ranging from boutique coffee seller Intelligentsia to lower-price rivals like McDonald's.

Investors, long used to Starbucks exceeding investor expectations, sent shares down 7.3 percent to $50.85 in after-hours trade.

The Seattle-based coffee chain said it now sees long-term earnings per share growth of 12 percent or greater, versus its prior call for growth of 15 percent to 20 percent.

Fourth-quarter revenue missed Wall Street's target after sales at established global cafes gained 2 percent, less than analysts' average target of 3.2 percent, according to Consensus Metrix.

Hurricanes Harvey and Irma battered same-store sales at more than 1,100 US cafes. Sales at mainstay US cafes were down 2 percent for the quarter that ended October 1, excluding the hurricane impacts, they would have been up 3 percent - still just short of analysts' estimate.

Analysts have warned that the Seattle-based company is being "middled" by rising competition on the value and quality fronts and that it must bolster sales of higher-priced specialty drinks and breakfast sandwiches.

Chief Executive Kevin Johnson told Reuters in an interview that there was no evidence Starbucks was being hit by competition. "We are not going to be squeezed in the middle," he said.

Johnson noted that US restaurants in general are seeing declining traffic and said that the one area where the company has seen softness is in the afternoons, particularly with regard to sales of its blended beverages such as frappuccinos.

Still, US convenience stores and fast-food chains are improving quality and pricing aggressively.

McDonald's Corp recently expanded its McCafe menu with new macchiatos and lattes and is selling small McCafe espresso drinks for $2. Elsewhere, Dunkin' Brands Group Inc is offering special deals on breakfast sandwiches in its bid to win breakfast.

At the same time, upscale craft coffee rivals like Nestle SA's Blue Bottle and Intelligentsia are opening more shops.

The number of competing coffee shops within one mile of Starbucks shops in several large US markets has increased in recent years, BMO Capital Markets analyst Andrew Strelzik said in a note before the earnings.

Adding to the pressure, Strelzik said, Starbucks continues to build its own US stores at the risk of cannibalizing sales.

Johnson, who succeeded Starbucks co-founder Howard Schultz as chief executive in April, is under pressure to continue serving up the kind of growth that Wall Street has come to expect from the world's biggest coffee chain.

In the last 12 months, Starbucks shares are up about 4 percent, while the S&P 500 index is up more 20 percent.

Starbucks' stock has been trading at a price-to-earnings ratio of 27.8, slightly above McDonald's and Dunkin' Brands, but well below the 52.74 ratio for Chipotle Mexican Grill Inc , according to Thomson Reuters data.

Total net revenue decreased 0.2 percent to $5.70 billion, compared with analysts' revenue target of $5.80 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to the company fell to $788.5 million, or 54 cents per share, in the latest quarter, from $801 million, or 54 cents per share, a year earlier.

Excluding items, it earned 55 cents per share, in line with Wall Street targets.

Starbucks in the third quarter of 2016 changed the basis of its loyalty program to dollars spent from number of orders because customers were buying items individually to get more points. Traffic statistics fell when customers resumed ordering items together.

Labor pressure is also heating up.

Starbucks has been adding working hours at some US stores to ease backups caused by a flood of mobile orders. Meanwhile, cities and states are boosting the minimum wage and a tightening labor market is forcing some chains to increase pay and benefits to recruit and retain workers.

Same-store sales from China were up 8 percent, but the broader China and Asia Pacific region posted a rise of 2 percent, versus expectations of 3.2 percent.

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Starbucks takes full control of China stores in $1.3-B deal

US coffee chain Starbucks has announced it will take full control of its mainland China outlets in a $1.3 billion deal, the largest single acquisition in the company's history.

It will buy the remaining 50 percent of its East China joint venture from Taiwan's food and beverage giant Uni-President, according to a company statement issued Thursday.

Starbucks will gain full control of 1,300 stores in 25 cities, including commercial hub Shanghai, from Uni-President Enterprises and a subsidiary, the statement said.

Starbucks has seen rapid expansion in China, where it opened its first cafe 17 years ago. By 2011, the company had 400 outlets while today it has nearly 600 in Shanghai alone.

Kevin Johnson, Starbucks chief executive, described the move as "a critical next step" that can help fulfill its goal of almost doubling the number of its mainland outlets to 5,000 from the current 2,800.

"Unifying the Starbucks business under a full company-operated structure in China reinforces our commitment to the market," Johnson said in the statement.

Chairman Howard Schultz, who stepped aside as Starbucks chief executive earlier this year, has said that China could one day become the chain's largest market, overtaking the US where it has some 7,500 stores.

The move comes as the US coffee giant saw a 8.3 percent drop in net earnings on the year, to $691.6 million, for the third quarter ended on July 2, according to its earnings report.

The company plans to close 379 Teavana tea shops due to poor performance, it said.

The Seattle-based firm also said it will fully license its Taiwan market operations, selling 50 percent of its Taiwan joint venture President Starbucks Coffee for $175 million to Uni-President.

Starbucks fully licensed its Macau and Hong Kong stores in 2011.

The new deals are expected to be closed by early 2018 and are subject to regulatory approvals.

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Starbucks CEO Schultz plans to hire 10,000 refugees after Trump ban

NEW YORK - Starbucks Corp. Chief Executive Officer Howard Schultz said on Sunday that the company planned to hire 10,000 refugees over five years in 75 countries, two days after U.S. President Donald Trump's executive order banning refugees from certain countries.

Trump on Friday put a four-month hold on allowing refugees into the United States and temporarily barred travelers from Syria and six other Muslim-majority countries, saying the moves would help protect Americans from terrorist attacks.

The order sparked widespread international criticism, outrage from civil rights activists and legal challenges.

Starbucks in a letter from Schultz told employees it would do everything possible to support affected workers.

The hiring efforts announced on Sunday would start in the United States by initially focusing on individuals who have served with U.S. troops as interpreters and support personnel in the various countries where the military has asked for such support, Schultz said.

Schultz has been outspoken on various issues and has put Starbucks in the national spotlight, asking customers not to bring guns into stores and urging conversations on race relations.

Schultz said on Sunday that if the Affordable Care Act is repealed and employees lose healthcare coverage, they would be able to return to health insurance through Starbucks.

Trump and a Republican-controlled legislature are seeking to undo much of the Affordable Care Act, better known as Obamacare.

Schultz will step down as CEO in a few months to focus on new high-end coffee shops, handing the top job to Chief Operating Officer Kevin Johnson, a long-time technology executive. He will become executive chairman in April.

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Starbucks CEO Schultz to step aside, stay as chairman

NEW YORK - Howard Schultz, the charismatic head of Starbucks, will step aside as CEO next year, turning a major page in the history of a company he built into an iconic global brand.

Having led the company's rise from a sleepy Seattle chain into the world's biggest coffee business, Schultz will stay on as executive chairman and chairman of the board, the coffee giant said Thursday in a surprise announcement that sent the share price down after hours.

The change will take effect April 3.

Schultz will hand the reins to president and chief operating officer Kevin Johnson, a close friend who was tapped as number two at the company in 2015 and has been a Starbucks board member since 2009.

The move comes as the firm faces an increasingly crowded market for higher-quality retail coffee shops and seeks to bolster foot traffic.

Schultz will devote his time to developing high-end superpremium coffee shops around the world known as Starbucks Reserve Roasteries, the company said in a statement.

It plans to open 20 to 30 outlets in the coming years.

"I will be here full-time," Schultz told a conference call with analysts. "I am not leaving the company, I am here day to day."

NEW INITIATIVE

Schultz, who joined Starbucks in 1982 as a sales manager, is considered the driving force behind the worldwide success of the coffee chain begun in 1971.

He briefly left in 1986 following a dispute with the then-owners to set up his own company, Il Giornale, before buying out their shares in 1987 with support from local small investors.

Starbucks now operates more than 25,000 stores in more than 75 countries, with a turnover of around $20 billion in fiscal year 2015.

Schultz, 63, told The Wall Street Journal on Thursday that the company's new initiative would help maintain in-person sales as consumers increasingly move to online shopping rather than visiting malls, where many Starbucks outlets are located.

"I don't have any time horizon that would limit my engagement in the company," he said. "This gives me the entrepreneurial freedom to do what I think I do best."

Incoming CEO Johnson is a tech industry veteran, having spent 16 years at Microsoft and five as CEO of the networking equipment company Juniper Networks.

Prior to the announcement, the company's share price closed up 0.9 percent in New York but fell 3.35 percent in after-hours trading to $56.55 at 2250 GMT.

SOCIALLY RESPONSIBLE
Schultz is outspoken about social issues such as gay rights and gun violence and has worked to make Starbucks socially responsible.

The company increased the base salaries of its US employees by 5 percent in July after they expressed concerns about the effect new software enabling customers to place orders on their smartphones would have on jobs.

The company has also opened outlets in poor areas and supported initiatives against racism.

Schultz is close to the Democratic former presidential candidate Hillary Clinton, whom he supported during the election campaign. But he has dismissed persistent rumors he would run for office himself. Many, including some of his friends, have said he may run for president in four years.

He steps down as Starbucks goes ahead with plans to double the number of its stores in China over five years.

But it has run afoul of European regulators, one of several major US companies the European Commission accused of having received illegal tax benefits from Ireland.

In October 2015, the commission also ordered Starbucks to repay up to 30 million euros ($33 million) in the Netherlands, saying tax breaks there amounted to unlawful state aid.

The Dutch authorities are fighting the decision.

Schultz has sought to step away from running Starbucks before.

The Wall Street darling became the company's chairman in 2000 before returning as chief executive in 2008 with the onset of the global financial crisis.

Shares worth $10 at that time climbed to a record high of more than $60 by the end of last year.

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