Coffee break

When Starbucks opened its first store in Japan in Ginza in the summer of 1996, it redefined the coffee-drinking culture in Japan. The Seattle-based company now has 920 stores in Japan and is on track to open another 50 by the end of this year.

In Japan, Starbucks (which is named after the first mate in Herman Melville’s “Moby Dick”) operates as a joint venture between Sazaby League and Starbucks Coffee International. Japan was the company’s first overseas market and remains its most profitable outside North America. Stores are located in all sorts of locations, ranging from shopping centers, office building and hotel lobbies, to universities, hospitals, airports, and train stations and drive-through sites, employing more than 21,000 partners (as the company calls its employees).

Chief Retail Officer for Starbucks Japan is Barbara LeMarrec who joined the company in 1994. Originally from Newport Beach, California, LeMarrec came to Japan in April 2009 and oversees the day-to-day operations and support of the stores, as well as looking for new site locations, maintaining and enhancing the brand’s existing store portfolio. Prior to her Japan assignment, LeMarrec successfully launched Starbucks in France and was senior vice president of operations back in Seattle.

Japan Today editor Chris Betros visits LeMarrec at the Starbucks Japan headquarters to hear more.

How did the March 11 earthquake and tsunami affect Starbucks?

It had a big impact. A lot of stores were closed because of physical damage or because of disruption to power and transportation. We ended up having about 240 stores with physical damage that needed repairs and were out of service for a day or more. However, I’m happy to say that all our stores are now open.

I was amazed at the response of our partners, as we call our employees. Right away, they went into action, first of all helping people, giving away free coffee, without any prompting from us. Then they also started turning off lights.

How do you intend to cope with projected power shortages?

The latest figure we have is a projected 15% cut in power. Because we have stores in all sorts of locations, such as shopping centers, hospitals, universities, train stations, hotels, lobbies of office buildings, how we handle the power shortage will be largely determined by where we are and what the landlord will do.

Our stores are like little production plants. We are reliant on power because we are making our product fresh for every customer. We want to be able to make sure the store environment is comfortable and safe from a food quality perspective. So we simulated a worst case scenario – power out for three hours every day with no power for refrigeration. Hopefully, we won’t get to that point.

Besides that, we’re looking at simple things that can make a big difference, like making sure all our filters are clean, pastry cases. We are preparing materials for stores to give them guidance on reducing energy consumption. Many of our stores have two espresso machines but they don’t actually need two operating all day long. They can turn down the second one when it is not needed.

Did the quake impact your earnings for fiscal 2010?

It did. We had a strong performance for fiscal 2010 but we did not get the record-breaking result we were on track to achieve. Immediately after the earthquake, we saw a 10% decline in our sales. Almost half of our stores were closed at one point. Transportation and power were our biggest challenges, followed by supply chain disruptions, as well as getting partners into the stores. It was difficult getting information. Rolling blackouts were announced and we would close stores; then the blackouts would be cancelled.

Is Japan a big market for Starbucks?

Japan is the 2nd biggest international market outside North America and the oldest international market. We have 920 stores currently operating in Japan. We opened 46 stores last year and are on track to open 50 this year, although that may be impacted by the earthquake.

How do you decide where to open stores?

The most common question we get is: “Why isn’t there a store in my area?” When we are looking for new locations, we examine the demographics, but basically we are looking for our customers and for available real estate. A store needs to be in a convenient location, and it needs to be profitable. Traffic flow and accessibility are important, especially if it is a drive-through. What I see as an opportunity is to make our business model leaner, invest less into construction, have fewer partners working in the store and simplify our lineup. That would allow us to go into smaller locations.

Different stores cater to different types of customers, don’t they?

Yes. The Ebisu Garden Place is an interesting example of what our consumers want from us. What I have learned since coming to Japan, is that in an office tower, people want to hide from their boss. So that store is turned around. The production faces toward the elevators while the seating is tucked behind the store.

Hospitals are another interesting area. In Japan, there is a significant amount of retail activity in hospital lobbies, much more than overseas. Patients come down to eat at Starbucks. We sell a lot more food such as sandwiches in our hospital locations. I think the atmosphere makes people feel good.

How much autonomy do you get from head office in terms of menu items and store design?

With Japan being such a profitable market for the company, we are given a lot of latitude because we have a track record of elevating the brand. Although R&D is done in Seattle, they are very interested in the Japanese market and consumer trends here and whether they will flow into other markets. We do have a marketing and product category team here to come up with products for the Japanese market. Some items developed here, such as Sakura Tea Latte, are only sold in Japan, but other products developed here find their way into other markets. Coffee Jelly Frappucino is one example. Another is Green Tea Frappucino, which is served in other parts of Asia and also the U.S.

How does the coffee-drinking culture differ in Japan?

One of the biggest differences is when Japanese drink coffee. In the U.S., the busiest day part is in the morning. For us, our biggest day part is from noon to 5 p.m. Size is another difference. The Short has been taken off the menu in most markets. Japan is the only market that continues to offer a Frappucino in a short size. We tend to sell more food such as sandwiches here than in the U.S. The U.S. is more focused on morning items such as muffins and Danishes.

Consumers stay longer in stores in Japan, so stores are larger as a result. It is all about seats. We have also found that it is really important to have flexible seating arrangements. During the day, a lot of customers come alone, much less than in the U.S. Single seats are important during weekdays. Then on weekends, group seating is more in demand.

Is there a demand for new products with greater frequency?

Yes. Our consumers want new products. When we launch new beverages, we always see a spike in our business. It’s not just about new products, though. Our consumers are looking for innovation in our marketing and store design.

What about Internet access?

Internet access is definitely important but it depends on the location, such as in business areas. Store design is important for Internet access because users want more distance between themselves and someone else.

How is Starbucks doing in convenience stores?

Good. In 2005, we started a relationship with Suntory for Discoveries, a chilled cup coffee. It’s in most convenience stores and is doing very well. Since last fall, we have had distribution in supermarkets of roasted coffee and ground coffee that you can brew at home, VIA, which is our premium stick coffee, and Origami (single-use drip coffee) in limited areas.

How has the new logo been received in Japan?

We haven’t heard a lot about the new logo because that transition happened during the earthquake. The brand is so mature here and people probably don’t realize that the logo has changed. The reason we changed it was to give us more flexibility. We are about coffee but also creating experiences and connecting with customers, and the product they are consuming may not always be coffee. In some other countries, we will be increasing our focus on consumer goods.

How eco-friendly is Starbucks?

The company has a “Starbucks Shared Planet” program based on three principles – ethical sourcing of coffee beans, environmental stewardship and community involvement. Starbucks does a lot of humanitarian efforts in coffee-growing regions, whether it is building medical centers, schools, or teaching farmers to grow more sustainable beans. Stores have been using LED lighting since 2005 and we will continue to migrate further to LED lighting as part of our green store program. We’ve actually built our first LEED-certified (Leadership in Energy and Environmental Design) store in Fukuoka in Ohori Park.

Is Starbucks involved in local community activities?

We do a lot of CSR (corporate social responsibility) activities. We encourage our partners on a grass-roots level. For example, some stores have a storytelling event for children, while others support local charities. One store is near a school for the blind and the store manager made a Braille menu. We participate in walkathons and other many other community events.

After the quake, everyone donated supplies. The company made a 100 million yen donation within days to the Red Cross. In each store, there are cups with slits in top for donations for quake survivors. They are collecting about 10 million yen per month. Also, this year we will hold 12 concerts across Japan for quake relief.

Is Starbucks a popular company to work for?

We hired 24 graduates this year from several thousand applicants. Each year, thousands apply for part-time positions. We have a very low turnover because many see us as a career opportunity.

How much training do you give baristas?

About 80 hours, although we have modified their training over time. What we are finding is that how they learn is different from how you or I might learn. A lot of our training is now done online.

Do you sometimes visit competitors?

Yes, I do and it is really important. There are always things to learn and I like to see how they are different.

How often do you visit your own stores?

Every day. I’m out of the office quite a lot, doing real estate visits with the store development team, looking at empty pieces of land, walking through malls.

Do the staff recognize you when you go into a Starbucks store?

Sometimes, I’ll go into a store and order a beverage and I am sure the counter staff notice I have some unusual consumer behavior. The store managers know me from our annual conference for store managers.

Do you think Japan’s traditional “kissaten” will disappear?

I don’t think so. I hope not. But I do think that Starbucks and other foreign companies elevate the quality of the coffee experience overall. The number of “kissaten” has decreased but the actual number of cups of coffee being served in Japan overall has increased because there are a lot of specialty coffee houses.

When I have visitors from Seattle, I always take them to “kissaten.” Our visitors from the U.S. think of Japan as being a tea-drinking culture and are surprised to hear there are over 80,000 “kissaten.” They are wonderful, with an individual owner who is passionate about coffee. When I go, I never hide the fact that I am from Starbucks. We can have a great chat.

How many cups of coffee do you drink a day?

I start more cups of coffee than I finish. I’ll have a few sips, walk away, and then it’s cold. If you were to put it all together, it would be 2-3 cups a day.

Editor’s Note

The following questions were submitted to Starbucks by readers of the Facebook page of Inter FM radio personality Kamasami Kong.

Please make wifi available in all stores.

I don’t know if we can do so in all stores but we are expanding.

Is it possible to make all stores smoker friendly?

That is something that has been part of our uniqueness. What we want to do is protect the flavor and aroma of coffee, and unfortunately, cigarette smoke gets in the way of that. Have a cigarette somewhere else and then come and have a great cup of coffee.

Why is it that in Japan I cannot get my balance from my Starbucks card which I registered and then lost transferred to another card like I can in the U.S.? Without that transfer ability, a Starbucks card has no value in Japan.

Unfortunately, it’s quite a complicated process creating a truly global Starbucks card because it is somewhat like establishing a mini-bank. But we do have a Starbucks card here in Japan and I hope he buys one of those.

Since I like cream with my coffee, I wish you would serve half and half like they do in the U.S.

I would encourage all consumers to ask the barista. If what they want is not on the condiment bar, all they need to do is ask the barista and they would be more than happy to put half and half. It’s just not common with the Japanese consumers. Also, if you love a certain drink and it is no longer on the menu, let your barista know that you miss it. With beverages, often the ingredients to create your favorite beverage are still in the store and if you ask, they will make it for you.

Maybe this is a pet peeve of mine, but why are the staff intimidated to ask customers to take bags off the other tables so people can sit down?

From my perspective, I think that is part of Japanese courtesy. They don’t want to offend anyone. There are some stores, particularly near universities, where our baristas have become particularly skilled in doing that in a very respectful way. I’ve seen it done.

Why are you not selling chamomile tea anymore? A serious loss to those of us not hooked on caffeine.

We actually do have chamomile tea. It might be related to a supply chain disruption.

Is it possible to provide updated sweeteners like Splendor or Stevia?

What we do is look at what our consumers want and if there is enough of a demand, that’s something we’ll bring in. But we have to balance that with the size of our back rooms. Every sweetener comes from a box and we have to limit the number of boxes.

Who is allowed to sell their CDs at Starbucks?

The actual music is coordinated through the global organization. It is not locally controlled.

Is it possible to make some kind of a drink where a portion of the proceeds would go to help those in need in Japan?

We are looking at all sorts of ideas. In the past, we have done that with our coffee. For example, when the earthquake happened in Sumatra, if you bought Indonesian coffee, a portion of that coffee purchase went to Indonesia. Right now, we are focusing on the collection cup and the charity concerts.

Java is the best. When will it come to Starbucks?

We have 50 special reserve stores that may get java coffee. Really good quality java coffee is not distributed in large quantities.

If Starbucks really is an environmentally friendly company, why don't they ask all customers if they would like their coffee in a mug? So many times they have automatically put my coffee in a paper cup with a PLASTIC lid.

That’s a great recommendation and is something we should be doing. I would encourage the consumer to ask for a mug. You actually get a discount if you bring in your own tumbler.

I hope a Starbucks will open at Yamato Yagi station near my home in Kashihara-city, Nara.

I agree with that customer. And that is the most common type of request we get.

I see Starbucks this spring is promoting its Frappucino series to be customized (I saw they collaborated with a fashion magazine to make a special edition of customized Frappucino). However, I think Frappucino is good as it is, and I wonder if people who work at Starbucks get too busy promoting customization (more customized orders = more work).

I think we are having a strong response to the customization. What’s nice about it is you can change your milk. You can go from milk to soy if you have an allergy, or if you want less fat, you can put in nonfat milk.

How about Starbucks selling some good black tea?

We do sell black tea.

I also want to know if there are interesting flavors of Frappucino/latte in Starbucks worldwide.

One that I think would be interesting to Japanese consumers is black sesame, that I don’t see here.

Why did they change the logo? Was their purpose less color ink = eco friendly maybe?

I don’t think that was the driving factor. It was to give us a logo that was scalable and that can be put on different products and allow more flexibility in our concept?

What are you targeting next? Will we be able get Starbucks on shinkansen or airlines?

I would love to be able to have Starbucks on shinkansen. I travel on them quite a bit and I miss having Starbucks coffee. We are currently on one airline, ANA.

Are you working with any companies to produce an energy drink?

Not in Japan. The whole aspect of probiotics is being studied by the R&D team.

Are you open to new product ideas from your customers?

Absolutely. Some of our best product ideas come from our partners and customers. You can contact us on Facebook or Twitter.

© Japan Today