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September 6th, 2008
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10 Questions

with Jakub Střeštík
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February 20th, 2008 issue

VLADIMÍR WEISS/THE PRAGUE POST
Střeštík says that, while 60 percent of customers at the first store are tourists, Starbucks is trying to lure in more locals.
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THE STŘEŠTÍK FILE

Job title: Starbucks operations director, Central Europe
Age: 31
Nationality: Czech
Previous position: Brand president, Rodeo Drive
Family: Married, one daughter

Fresh from launching its first shop on Malostranské náměstí, Starbucks just opened two more stores in the Palladium shopping center Feb. 19. Starbucks’ arrival in Prague — through a joint venture with AmRest — comes at a time when the firm is embattled in the United States, its plummeting stock prices prompting the return of the chain’s founder, Howard Schultz, as CEO. Much of the company’s future rests on its plans for international expansion. Jakub Střeštík, Starbucks’ operations director, talks to The Prague Post about the firm’s ubiquity and how it plans to revolutionize local standards of customer service.
➊ Why did Starbucks decide to enter the country now?
We’ve been looking at the Czech and Central European market for a long time. About a year and a half ago, we decided it was right. The economics have improved over the past few years and the whole coffee culture has grown as well.
In the past, most Czech coffee drinkers would drink the traditional Turkish-style coffee, where they would just pour hot water over what they thought was good coffee. Recently they have stepped up and started developing a proper coffee-drinking culture. Now it’s a good time for Starbucks to come in and help with the coffee education — and bring great, quality coffee. We offer 15 types of whole bean coffee in the market, which nobody else does. On top of that, we provide a whole education, seminars for our customers where we tell them about the countries of origin of our coffees.
➋ So what constitutes a proper cup of coffee?
It’s always quality. Taste is a personal thing. We only buy the most expensive and sought-after coffee around the world. We purchase in three different regions: Latin America, the African-Arabian peninsula and Indonesia. Seventy-five percent of our coffee comes from Latin America.
We have tremendous cooperation with the farmers in the coffee-growing regions. We support them and their projects. In return, they give us top coffee. We only purchase Arabica, which is the highest-quality coffee.
➌ Coffee growers often operate under notoriously grueling conditions. What does Starbucks do to ensure farmers are treated equitably?
We purchase coffee through Fair Trade and we also purchase coffee directly from farmers, which is our preferred approach. Fair Trade is a great organization and we cooperate with them closely, but sometimes it’s better for the farmers if we purchase the coffee directly. Then we can pay a higher price.
No matter whom we purchase the coffee from, we always demand transparency in the process. If we can’t buy from the farmers — some countries don’t allow farmers to export coffee directly abroad — then we go through a local organization. And we demand transparency in the contract, so we know the sums guaranteed to the farmers. We don’t want middlemen taking the money that should go to the farmers.
➍ Your expansion into Prague comes as Starbucks has announced the closing of 100 stores in the United States, slowing its expansion rate. Is the U.S. saturated?
The United States has more than 10,000 Starbucks stores. So, obviously in the future, our biggest growth potential is international. And Central Europe is one of the most important strategic markets for Starbucks. We’ll be launching in Poland this year and we’re looking at Hungary.
Starbucks generally enters markets in three different ways. First, on its own. Second, through licensing, which it uses for hotels, casinos, grocery stores or airports. Or it does a joint-venture partnership, which is exactly what happened in Central Europe with AmRest, which is the biggest independent restaurant operator in this part of the world. AmRest dominates the fast-food industry here and they’re beginning to grow in casual dining.
➎ You opened your first shop on Malostranské náměstí, close to Charles Bridge. Was it the heavy flow of tourists that drew you to that location?
We have a number of locations on our radar. When this specific location came up, we were thrilled. The building has been used as a coffeehouse since 1874. There’s an amazing tradition of coffee drinking on these premises. For the past four years, it was an Italian restaurant, and I think the local community is thrilled with the return of the premises to their original purpose. We worked closely with architects and the preservation office during the renovation on points like original flooring, color of the walls and external signage. It’s never easy to reconstruct a building of this importance and age.
We try to be there for the locals as well. Right now, the split is about 60 percent tourists and 40 percent locals, which is great. There are lots of local offices, Parliament, the government and embassies employing Czechs. As for the tourists — we don’t consider them tourists. Back home, they are Starbucks customers, and we are only providing them with their favorite cup of coffee while they’re traveling.
➏ When Starbucks prices its coffee, is it a simple matter of exchanging a set rate into the local currency or do you adjust the price up and down depending on the market?
It’s a bit of both. We obviously look at the economic situation in specific markets. But we also communicate to our customers and our potential customers that we are a premium brand. And the Czech market is ready to understand that. Whether they’re buying a piece of clothing or coffee, they understand the difference between quality and value. For the price they pay, they get a tremendous cup of coffee.
➐ You mention the perception as a premium brand. One problem Schultz mentioned when he returned as CEO was that Starbucks was becoming too ubiquitous in the U.S., with stores cannibalizing customers from one another — as if you were another McDonald’s. How do you expand and retain that premium image?
We would not open a location in a place where customers weren’t asking us to open. That is the strategy of Starbucks. Our coffeehouses are the engine behind our marketing. We traditionally do not use above-the-line marketing. You will not see us on television or radio or in the press. Our service, product and the look and feel of our coffeehouses is our marketing. That’s where we create our word of mouth. We have opened loads of locations next to each other, on the same street in the U.S. — but they wouldn’t have been opened if the customers weren’t asking for it. What is important for our customers is the quality of the product and the speed of service. If they want to sit down and drink a cup of coffee, they can, but if they’re running from their office or home, our baristas can quickly get their coffee.
➑ Prague has never been an exemplar of customer service — an area Starbucks recently said it was going to re-emphasize across the company. What steps are you taking to improve your customer service?
It’s great that you say that. I have never thought highly of customer service in Central and Eastern Europe. We are going to revolutionize customer service here. We only hire people who are naturals in customer service. Our service is all about the connection between our customers and partners [employees]. They get to know the customers’ drinks, their names, their stories. We will not compromise on that whether we’re in New York, Seattle or Prague. It has to be the same. And that is purely because people travel a lot. One day they walk into a Starbucks in New York and the next they’ll be in Prague. And they should have a beverage of the same quality and the same customer service.
➒ The arrival of Starbucks can serve as a bellwether to other coffee chains that the market is ready for expansion. How will you compete with these other chains, which may sell cheaper coffee?  
We welcome competition. In no market where Starbucks has a strong presence is our strategy to dominate the market. That’s not who we are. We support the coffee-drinking culture. We provide education. We hope and believe that we will have loyal customers, but if a customer decides to go elsewhere, it’s his or her choice. We’re not here to close the competition. There is plenty of space for two or three chains to grow simultaneously in these markets.
We’ve just opened two more stores in the Palladium. And we’re obviously looking at a number of possible locations. At this moment, I can’t comment on other openings.
Right now Prague has such potential for us that we’re not planning to expand outside of Prague in the near future. The city can accommodate so many Starbucks coffeehouses that we’re comfortable putting our human and financial resources behind Prague.
➓ What’s your favorite cup of coffee?
I prefer French-press coffee. Depending on the time of day, I will drink a different type of coffee. I’ll generally start the day with a light, crispy Latin American coffee. They have a slightly higher acidity. It gives you the right kick in the morning. It gets you started.
Want your manager to answer our 10 Questions? Contact Paul Voosen at pvoosen@praguepost.com


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