Do You Hear What Starbucks Hears?

FC: What are your goals for the Hear Music coffeehouses, like the one in Santa Monica?

Schultz: Santa Monica is the first manifestation of a much larger, much more aggressive, more intricate strategy in terms of how music is going to play a significant role in Starbucks, both in our existing stores and in the future of the Hear Music stores like the one you saw in Santa Monica. What we've demonstrated in Santa Monica in just -- I think it's been open just five or six weeks at this point -- is that the sense of discovery, the sense of romance, and the seduction of music is a lost art that we are recreating. If we can leverage that along with Hewlett Packard's digital technology, with hundreds of thousands of songs digitally filed and stored, these Hear Music coffeehouses combined with our existing locations can become the largest music store in any city that we have a Starbucks in. And because of the traffic, the frequency, and the trust that our customers have in the experience and the brand, we believe strongly that we can transform the retail record industry.

FC: How so?

Schultz: Starbucks has the opportunity to break new artists in ways that no other retailer can today because of the footprint, the breadth, and the loyalty we have. If we found, with a record label, the next Norah Jones, we could have more impact and provide more visibility. We would take one album and put artist on a pedestal. In addition to that, there are hundreds of heritage artists -- James Taylor, Carly Simon, Billy Joel, the Eagles, even Elton John -- wonderful heritage artists that do not sell records anymore because their music can't get heard.

Our audience is so hungry for that music that it's very possible that we could provide a much better relationship with that customer and that artist, in ways that don't have all of the barriers that prevent these artists from getting heard and getting a record label.

Starbucks can in many ways go direct.

FC: As the global strategic officer, how do you consider new business opportunities? How do you spot what is transformational, what is consistent with your brand and your goals? And how do you separate that out from all the opportunities that would really just be distractions?

Schultz: First of all, you'd be amazed at the number of opportunities, most of which are not only are inconsistent with our values, but are just absolutely not right for Starbucks that come in the door.

FC: How many are you talking about?

Schultz: Thousands every year. And those are just the ones that make it to me. Some of them would shock you.

FC: What's the craziest thing you've ever been asked to consider?

Schultz: The craziest? Starbucks Coffee tanning oil. So you can get a... I don't know. There have been so many strange ones.

FC: When you're vetting new opportunities, is there a series of questions you ask yourself, or things that you walk through to ask, "How do we figure out what fits?"

Schultz: Well, first of all, this is not a one-person band here. There're a number of people in this mix, and we're all trying to examine these opportunities through the screen of the guardrails, the equity of the brand, and the customer experience. In addition to that, we're talking to our board and outside resources. We've done a lot of work within the music industry, talking to Wall Street analysts and to technology companies -- not only HP -- and really trying to get push-back and answer questions about changes in technology and the retail experience.

At the same time, our asset base is so strong that we can do things that others can't do -- not only because of the number of stores we have, but because they're all company owned; we're not in a situation where we've got franchisees. We're also examining these opportunities globally for the first time, which is very different. Any opportunity or any path that we're going down, we want to link that up, we want to thread that globally. Like the Starbucks card: We're getting that ready for the Olympics in Athens this fall.

FC: Where in the lifecycle of a business do you think companies should start looking at expanding into complementary services or extending their brands? Are there particular turning points in the life of a business when you start to think about that?