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Originally published March 19, 2014 at 12:17 PM | Page modified March 20, 2014 at 6:42 PM

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Schultz pushes Oprah Chai tea, questions $15 wage floor

Oprah Winfrey joined Howard Schultz on stage at the Starbucks shareholder meeting, where the company highlighted its Teavana business and its expanding digital reach.


Seattle Times business reporter

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Starbucks Chief Executive Howard Schultz has been on the record in support of carefully raising the minimum wage, but on Wednesday he said the $15-per-hour figure proposed for Seattle could backfire on workers because small businesses are already struggling to stay afloat.

“I wouldn’t want to see the unintended consequences of job loss as a result of going that high,” Schultz told reporters after Starbucks’ annual shareholder meeting, adding that most small businesses, especially restaurants, are being squeezed by the high cost of food, energy and labor.

“That would not be the case at Starbucks, but I suspect that most companies, especially small and midsized companies, would not be able to afford it.”

The minimum-wage debate is gaining momentum in Seattle, where the city is considering calls to raise the hourly wage floor to $15, and nationally, with President Obama campaigning to reduce income inequality and lift the federal minimum wage.

Starbucks offers its baristas perks that are rare in the restaurant industry, such as health care even for part-timers working more than 20 hours a week, stock options and a retirement plan.

But Schultz said mandating a high minimum wage hampers the “elasticity of any company’s ability to provide broad-based unusual benefits” such as those offered by Starbucks.

Schultz said that Starbucks employees are paid above the minimum wage, and taking into account the health and equity benefits plus the value of the 401(k) retirement plan it offers employees, “we’re paying significantly higher than $10 an hour.”

On stage with Oprah

Also on Wednesday, Schultz unveiled a new ally for the company, both in its efforts to do good and in its quest to become a major purveyor of tea: Oprah Winfrey.

Winfrey joined the Starbucks CEO on stage at McCaw Hall to announce the release of Teavana Oprah Chai Tea — a blend designed in part by the superstar. For each Oprah Chai product sold, the company will make a donation to her youth-education initiatives.

“You get a chai, you get a chai, you get a chai; everybody gets a chai,” Winfrey said, pointing to shareholders in the manner familiar to viewers of her TV show.

She sat in a white chair next to Schultz, who last December was a guest on Winfrey’s TV program but this time played the role of the interviewer. Shareholders, who have been riding high after a blockbuster year for the company, roared with delight.

The tea blend will be available in Starbucks and Teavana stores in the U.S. and Canada starting April 29.

Starbucks’ deal with Winfrey comes as the Seattle coffee giant seeks to reassure investors that it can keep growing. On Wednesday, Schultz said the company can attain a market capitalization of $100 billion, up from about $57 billion now.

But for that, Starbucks needs new markets, and tea represents a $90 billion market where the company can innovate in the same way it transformed the coffee market, company executives say.

In 2012 Starbucks acquired Teavana, a fine-teas retailer with hundreds of stores in malls; recently Starbucks opened Teavana-branded tea bars in New York and Seattle, and the company intends to open similar venues this year in Chicago, Los Angeles and other parts of New York City.

Winfrey’s presence at the shareholder meeting, a highly produced affair that always features energetic speeches and live performances, helped drive the point home to shareholders. Schultz told reporters afterward that the partnership with Winfrey was a “significant catalyst for Teavana and the tea category in Starbucks.”

Shares rose 1.8 percent to $75.91 Wednesday, a day when the Dow Jones industrial average fell 0.7 percent.

“Oprah and Howard, how can they lose?” said Lynn Gracey, a longtime Starbucks shareholder from Lakewood, adding that he and his wife had gotten “their money’s worth” from the meeting.

There were nearly 3,000 shareholders in attendance on Wednesday, and along with company staffers they filled McCaw Hall at Seattle Center. There Starbucks stressed its optimistic growth outlook.

“We’ve only begun to scratch the surface — the opportunity is truly massive,” Chief Operating Officer Troy Alstead said.

Alstead restated the company’s long-term target of growing revenue by 10 percent annually.

Digital moves

The company also unveiled new data highlighting the rapid growth of its mobile payments platform, a key element in the company’s strategy to capitalize on what Schultz described as a “seismic shift” in consumer behavior toward online shopping.

Chief digital officer Adam Brotman said 14 percent of payments in U.S. stores are now made with mobile devices.

He added that before the end of the year the company plans to test letting mobile users order ahead, using the app. Mobile devices are key for Starbucks because they let coffee drinkers tie together the use of Starbucks gift cards and the company’s growing loyalty program.

Schultz told reporters that the company’s growing expertise in mobile payments — with 5 million mobile transactions weekly — was being looked at with interest by technology companies and other retailers, and could at some point provide new opportunities for Starbucks.

“A combination of blue chip tech companies as well as leading retailers have come to us” to talk about how Starbucks’ adoption of mobile payments and the leading position it occupies in the space can be integrated into those companies’ mobile payment initiatives, he said.

“We have a long way to go,” he said, adding that “there clearly is an opportunity over the long term to significantly create some form of monetization beyond what we’re doing today.”

Ángel González: 206-464-2250 or agonzalez@seattletimes.com. On Twitter: @gonzalezseattle



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