BY JOHN MASKO, Unherd.com | archive
JUNE 10, 2024
For an American company to build and maintain a customer base, it must choose one of two courses: either be apolitical and serve all Americans, or be political in a single consistent direction and serve only some (like Ben & Jerry’s). It cannot be political in all directions at once, or in different directions at different times as fashions or the caprices of company leadership dictate. If it does, it halfway alienates all its customers which, in a competitive market, is as good as alienating them entirely.
This is what is gradually happening with Starbucks, where it has been reported that “trouble is brewing” at the company over a price hike on its drinks as well as fights over unionisation and protests against the company’s Israel stance. For years, Starbucks tried to be all things to all people, which served it well in its product and experience portfolio. The corporation offers olive oil-laced “oleato” coffees and Starbucks Reserve stores for the connoisseur, pink drinks for the young and hip, and then just plain old coffee for the ordinary folks. But in the political realm, this same approach has caused Starbucks a major — and mounting — headache.
Like so many companies, the coffee giant was swept up in the political maelstrom of 2020 and 2021. It pledged $100 million for businesses focused on “advancing racial equity”. It allowed employees to wear activist clothing and accessories to work, provided that the clothing supported the Black Lives Matter movement. In many Starbucks stores, June Pride Month celebrations went from discreet lapel pins to wall-covering shrines.
But when America’s political pendulum began to swing back the other way, these efforts proved far more problematic for Starbucks — which serves American cities as diverse as Seattle in Washington and Sheridan in Wyoming — than they have for Ben & Jerry’s. In 2023, when Starbucks managers began pulling back on Pride displays in stores, workers at 150 outlets went on strike.
Around the same time, the company found itself the target of activist lawsuits from shareholders over its DEI policies. Labour groups began to question the contrast between Starbucks’ political progressivism and its anti-union employment policies. And late last year, most troubling so far for the company’s bottom line, Starbucks found itself squarely in the crosshairs of public passions over the war in Gaza.
The controversy began last October following the Hamas attack on Israel, when a social media account operated by a Starbucks employee union posted the message “Solidarity with Palestine”. Starbucks’ corporate arm, reasonably worried about offending customers, denounced the message and filed a lawsuit against the union for using Starbucks insignia as part of the message. Angered by the suit, Left-leaning pro-Palestinian customers began to boycott the company.
Boycotts tend to be inflated in the media, but evidence is mounting that this one should be taken seriously. Following underwhelming earnings results in January of this year, Starbucks CEO Laxman Narasimhan cited “misperceptions about [Starbucks’] position” relating to “events in the Middle East”. He tried to play both sides, refraining even from mentioning “Israel” or “Gaza” by name on the call. But the numbers have continued trending downward. Starbucks has now lost 3% of its US sales since last year and, most distressingly, 4% of its highly loyal Rewards members.
Top financial analysts have rejected explanations such as the company’s high prices, and point squarely to the boycotts as the reason. As one commented: “When you look back and you see the magnitude of the shift […] that occurred in such a short time, that doesn’t usually point to something that’s macro in nature or price point-related in nature.” As for the boycott, the analyst added: “You’d really be putting your head in the sand not to think that it has had an effect.”
Would Starbucks have been better off just supporting the union and pledging its support for Palestine? After its centrist retrenchment of the last year, hardly. After all, Israeli partisans are just as capable of boycotts as Palestinian ones. The two lessons Starbucks and other companies should learn from this ongoing debacle are far deeper: first, if you become a political company, you have to pick a side and stick with it. Second, if you already are a political company, if an issue is important to your customers, you cannot claim neutrality, as apolitical companies can. Far better to leave politics to the citizens of our free society, and focus on selling coffee.
JUNE 10, 2024
For an American company to build and maintain a customer base, it must choose one of two courses: either be apolitical and serve all Americans, or be political in a single consistent direction and serve only some (like Ben & Jerry’s). It cannot be political in all directions at once, or in different directions at different times as fashions or the caprices of company leadership dictate. If it does, it halfway alienates all its customers which, in a competitive market, is as good as alienating them entirely.
This is what is gradually happening with Starbucks, where it has been reported that “trouble is brewing” at the company over a price hike on its drinks as well as fights over unionisation and protests against the company’s Israel stance. For years, Starbucks tried to be all things to all people, which served it well in its product and experience portfolio. The corporation offers olive oil-laced “oleato” coffees and Starbucks Reserve stores for the connoisseur, pink drinks for the young and hip, and then just plain old coffee for the ordinary folks. But in the political realm, this same approach has caused Starbucks a major — and mounting — headache.
Like so many companies, the coffee giant was swept up in the political maelstrom of 2020 and 2021. It pledged $100 million for businesses focused on “advancing racial equity”. It allowed employees to wear activist clothing and accessories to work, provided that the clothing supported the Black Lives Matter movement. In many Starbucks stores, June Pride Month celebrations went from discreet lapel pins to wall-covering shrines.
But when America’s political pendulum began to swing back the other way, these efforts proved far more problematic for Starbucks — which serves American cities as diverse as Seattle in Washington and Sheridan in Wyoming — than they have for Ben & Jerry’s. In 2023, when Starbucks managers began pulling back on Pride displays in stores, workers at 150 outlets went on strike.
Around the same time, the company found itself the target of activist lawsuits from shareholders over its DEI policies. Labour groups began to question the contrast between Starbucks’ political progressivism and its anti-union employment policies. And late last year, most troubling so far for the company’s bottom line, Starbucks found itself squarely in the crosshairs of public passions over the war in Gaza.
The controversy began last October following the Hamas attack on Israel, when a social media account operated by a Starbucks employee union posted the message “Solidarity with Palestine”. Starbucks’ corporate arm, reasonably worried about offending customers, denounced the message and filed a lawsuit against the union for using Starbucks insignia as part of the message. Angered by the suit, Left-leaning pro-Palestinian customers began to boycott the company.
Boycotts tend to be inflated in the media, but evidence is mounting that this one should be taken seriously. Following underwhelming earnings results in January of this year, Starbucks CEO Laxman Narasimhan cited “misperceptions about [Starbucks’] position” relating to “events in the Middle East”. He tried to play both sides, refraining even from mentioning “Israel” or “Gaza” by name on the call. But the numbers have continued trending downward. Starbucks has now lost 3% of its US sales since last year and, most distressingly, 4% of its highly loyal Rewards members.
Top financial analysts have rejected explanations such as the company’s high prices, and point squarely to the boycotts as the reason. As one commented: “When you look back and you see the magnitude of the shift […] that occurred in such a short time, that doesn’t usually point to something that’s macro in nature or price point-related in nature.” As for the boycott, the analyst added: “You’d really be putting your head in the sand not to think that it has had an effect.”
Would Starbucks have been better off just supporting the union and pledging its support for Palestine? After its centrist retrenchment of the last year, hardly. After all, Israeli partisans are just as capable of boycotts as Palestinian ones. The two lessons Starbucks and other companies should learn from this ongoing debacle are far deeper: first, if you become a political company, you have to pick a side and stick with it. Second, if you already are a political company, if an issue is important to your customers, you cannot claim neutrality, as apolitical companies can. Far better to leave politics to the citizens of our free society, and focus on selling coffee.
