Op-Ed

I have counted more white, plastic hot beverage stir-sticks than you can possibly imagine. Count ‘em in and count ‘em out, goes the saying around The McDonalds Corporation’s management training school - affectionally and officially known as the Hamburger University. I am a graduate. My diploma is a plastic wall clock bearing the perma-grinned Ronald McDonald, waving joyously to me, his latest inductee into the retail catering industry. The clock is now safely boxed up in the attic because, like my many other teenage jobs, it is no longer required to make my resume look more impressive than it really is. I now have a whole range of more adult orientated burger flippin’ jobs to fill the white void.

Ronald’s obvious delight with my years of service rarely comes to mind these days. Until, that is, last weekend. Whilst enjoying my first Starbucks beverage in 11 months, I caught myself staring at the brown cardboard sleeve that was selflessly protecting my hand from the effects of thermal conduction induced by the innermost scalding beverage. Its small and perfect details amazed me: from the little brown furrows to the pantone corporate color scheme delicately adjusted for use on less color absorbent recycled material. Even the glue holding the thing together garnered my attention as I imagined the chemical scientist at Dow Corning wrestling with the ageless adhesion paradox of strong but supple. And then, quite unexpectedly, into my head popped a vision in plastic I had not seen in 18 years: those little golden arches injection molded into the thousands and thousands of semi-synthetic polymerized stir-sticks I had once, by hand, so proudly counted. How could so many small things, items of such little consequence provide the financial backbone of such giant conglomerates? Did my java jacketed cafè lattès and the branding of the seemingly innocent stir-sticks build global capitalistic empires?

At this point I must declare a conflict of interest. As mentioned, I am a former employee of a certain fast food chain but I must also declare my interests in the Green Goddess. My home, although currently many miles away, is Seattle, WA - also the home of this great lattè empire. I have walked by, but never entered, Starbucks No.1 on many occasions. When I am home I proudly and devoutly avoid all of their outlets but when I travel and finally tire of the spit-sized espressos, I run to the goddess, supplicate myself beneath her now covered breasts and suckle my 16oz of pure columbian caffeine.

Ray Kroc and Howard Schultz are the two protagonists (some may say antagonists) of the story about to unfold. Kroc was born in 1902 and spent his formative years driving the length of the US selling anything that people would buy. In 1954 he visited a restaurant in Los Angeles owned by the McDonald brothers. With one beady eye on a potential new business venture and one squarely on selling more of his multi-mix shake machines into their seven other locations, he proposed a business partnership. They agreed and within four years McDonalds Corp. proudly served its 100 millionth hamburger. In 1961, after a much protracted negotiation, the brothers sold out to Kroc for $2.7 million ($21 million by today’s rates) – an amount Kroc thought was extortionate. Had they continued with their original deal of 0.5% of total revenues, their estate would be banking over $100 million a year today. The new agreement allowed them to keep their original restaurant but without the original name. They renamed their first McDonalds ‘The Big M’ but by the end of the year it had been intentionally forced out of business by Kroc when he opened a new McDonalds just one block north. Expansion was aggressive and rapid and the highways, byways and shopping malls of the world would now and forever glow with gold.

Howard Schultz was just two when Ray Kroc made his deal with the McDonald boys. And just like Kroc he didn’t actually invent the brand he is now synonymous with. Starbucks was founded by three friends in Seattle in 1971 not to sell beverages but to sell high quality beans and coffee roasting equipment. When a young Howard Schultz joined the company in 1982, he tried unsuccessfully to convince the owners to add espresso drinks to the product line. They declined so he left to start his own business. By 1984 they had reconsidered and bought a small chain of coffee houses from the Bay Area called Peets. The potential success of this type of business was now obvious to the friends but the brand they should concentrate on was not. In 1987, in what may have been the most misguided business move since, well, the McDonalds brothers sold out to Ray Kroc, the three founders of Starbucks sold the Starbucks name and company to Schultz to concentrate on Peets. Peets is still in business and in 2006 had a respectable market cap of $393 million. However, that same year, Starbucks was worth a cool $28 billion.

The secret of success in both operations could well be the system. The McDonald boys had conjured up a style of serving they called the ‘Speedee Service System’. This space age, Jetsons inspired process dispensed with china plates, metal cutlery and the need to wait for your hamburger, replacing it with the clean, efficient paper and plastic instant gratification we know and vilify today. They even coined a new noun (of sorts): ‘fast food’.

By the time Howard Schultz came up with his system, the game had changed. Cleanliness and repeatability were a given, not even to be contemplated. If the customer noticed the system then the system was broken. The new challenge was how to get those caffeine addicts their drink, not just quickly, but absolutely anywhere they may crave it. Unlike hamburgers, coffee isn’t just for mealtimes, it’s for all the time. In the late 1980’s and early 90’s, America’s under-appreciation of espresso based coffee and therefore its unrefined palette meant there was no taste loyalty. Nobody argued the coffee equivalent of ‘Does the Big Mac taste better than the Double Whopper?’ because nobody was prepared to appreciate any difference in a staple. Coffee was coffee wherever it came from. Schultz had to solve a basic problem of how to make a luxury item out of a staple. How do you reinvent something that everybody thinks they know yet never thinks about. His answer was to de-emphasize the product and re-emphasize the location. Our physiological addiction to caffeine would ensure we would crave the product, so Schultz built on that by ensuring we would also become psychologically addicted to the smell of roasting beans, the hues of green and mocha and that cozy feeling of your living room on every street corner. He developed the ‘Synergistic Rollout Program’, a system that, instead of building custom retail spaces, could quickly and efficiently absorb retail spaces already in existence. McDonalds requires space for parking, space for the drive through, space for the kitchen, expensive grills, filters, vats and freezers. Starbucks requires an espresso machine, a counter and a half dozen comfy chairs. During the 1990’s Starbucks was opening a new store every workday in the US and today opens seven new stores every workday worldwide. And, unlike the fate that befell the original McDonalds, Starbucks is quite happy to open a new store just a block away from an existing one.

So are Kroc and Schultz cut from the same cloth? At first bite/sip it would appear so. They both owned or own major sports franchises (Seattle Supersonics and San Diego Padres), they both decided their first international stores would be in British Columbia, Canada and then Tokyo, Japan (1971 and 1996) and they both understood the power of brand association and the wealth of corporate imperialism. Kroc once famously and disturbingly said: “We have found out… that we cannot trust some people who are nonconformists… We will make conformists out of them… The organization cannot trust the individual; the individual must trust the organization.” Eerily, after a dispute with newly unionized Starbucks employees Schultz channeled the late Ray Kroc by saying: “If they had faith in me and my motives, they wouldn’t need a union.”

However, I believe there’s a fundamental difference between the two behemoths. McDonalds is America whereas Starbucks is American. There’s nothing wrong with being American in another country, it’s the jingoistic nature of McDonalds being America in another country that understandably offends. Most countries have an vibrant cafe culture so the locals can choose where to buy their daily fix and Schultz’s aggressive ‘Synergistic Rollout Program’ defines the use of existing space so giving the beauty of old cities at a least fighting chance of not being completely usurped by the giant glowing green sign-age. Starbucks would love you to think of them as global. McDonalds, despite local variations in menu (Royale with Cheese anyone?), leaves no global citizen in any doubt that America and McDonalds are first cousins. McDonalds’ business practices also mirror America’s ambivalent views on well documented concerns such environmental sustainability, animal welfare and even human welfare. Conversely, Starbucks builds its reputation on organic, fair-trade and ecologically sound business practices but not because they choose to but because their customers demand it.

Starbucks may have to think carefully though if they are to avoid McDonalds pitfalls. Menu diversity remains an issue. Just how many variants on the humble coffee bean can there be or, more importantly, how many can the public stand or understand? Of the thirty or so items emblazoned on the menu board, it is becoming increasingly tricky to actually find the coffee. Perhaps the global coffee palette has not been as well developed as the allure of Starbucks promised. The great irony of their introduction of quality coffee to the unwashed masses is that they may very well turn them away from it again in the pursuit of the mighty profit margins inherent in those ‘premium’ beverages. Once double whipped cream, mocha and flavored sticky syrups are lovingly added to your espresso it doesn’t taste like coffee anymore and, from the health perspective, you might as well have just enjoyed a quarter-pounder with cheese. Interestingly the two corporations appear to be switching places. In the search for more lucrative locations Starbucks are starting to purpose build their stores, echoing the McDonalds expansions from earlier years. McDonalds are experimenting with healthier options such as salads and, unashamedly, the McCafe. They have also seen the success of Schulz’s ‘Synergistic Rollout Program’ and can be seen in the smallest and unlikeliest of locations.

Both the hambuger and the cafè lattè are now firmly ensconced in our cultures and although there are no 99 cent lattè wars yet, it can only be a matter of time before the coffee producers of the world endanger their livelihoods and environments to meet the price the retailers demand to pay. Our own ethics should be the standard these companies measure themselves against, not the reverse. And so, back to my stir-sticks and java jackets. Practicalities aside, these minutiae of the massive machine serve to remind us that we, ourselves, balance the good and evil of those global corporations. Like those accouterments, we are small but we are vitally important to the success of their business.

David Browne is David once wrote for his school newspaper. He has spent the subsequent years earning money from writing, playing, singing and typing for other people. As of 2008, his net worth from such pursuits is estimated to be around $1.27. In January 2007 he left his home in the United States to travel the world in the hope that non-native English speakers would enjoy his company. He has not returned home since (although their enjoyment is currently unproven). He was born in England, resides in Amsterdam but is domiciled in Seattle.
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