Defining the Mermaid: Letter to Howard Schultz, Chairman of Starbucks Coffee Company

Defining the Mermaid: Letter to
Howard Schultz, Chairman of
Starbucks Coffee Company
AL BARRENTINE

D   ear Mr. Schultz,

     When our customers see that mermaid encircled by the two fish tails,
something incredible happens. They associate our logo with something that
all the branding experts and test market segments in the world couldn’t pos-
sibly define. As you and other company officials have mentioned so frequent-
ly, Starbucks is not simply a brand of high-end coffee: it is an experience. The
mermaid has historically been the symbol of something both natural and
beautiful, living in harmony with all the elements of the Earth. Our defining
factor, what keeps our stores bohemian and trendy and our coffee in high
demand is our tradition of corporate social responsibility. Customers feel that
when they buy our product, they are in some way contributing to a better
world, one where business is conducted in a way that benefits both customers
and firms alike, and does not create harmful effects for any other group in the
process.
     Now I want you to “zoom out” from the initial image of the mermaid,
and see the same logo on our newest product: a liquor bottle. Most urban
dwellers are by now familiar with our poster advertisement for the “Starbucks
Coffee Liqueur”: the brown cylindrical glass bottle with our logo plastered
on the side, a martini glass, and a paintbrush all lying on a marble table with
a stylized Starbucks café wall in the background. This particular advertise-
ment, however, is posted at a liquor store in Austin, TX, one of our initial test
markets for the product, and contains some additional text inscribed at the
bottom: that our new beverage is targeted for “ages 18-49.”
     Keep that image in your mind as we proceed…

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The advent of the Starbucks Coffee Liqueur beverage came as quite a
shock even to rabid supporters of our previous products. They all ask: is it
socially responsible to make revenues from liquor sales? It has always been
our philosophy at Starbucks that social and fiscal responsibility can exist in
harmony. If we provide a good experience for our customers and employees
while helping local communities, revenues will naturally increase. With near-
ly 10,000 stores worldwide and millions of loyal customers, we’ve been fairly
successful so far. As the market becomes more and more saturated with our
product, Starbucks has decided that ‘a man cannot live on double latte alone’.
In order to maintain our incredible growth rates, we have had to continually
find new and innovative expansions to our stores: our new customized CD
stations, Wi-Fi access, and countless new products developed in partnership
with other companies, so that customers can see the Starbucks’ mermaid
wherever they go.
     But do they really want to see us at the liquor store?
     Rather than equipping our own retail outlets with liquor licenses and
instituting a good ID policy, we are outsourcing our liqueur to restaurants,
bars and other spirits providers, effectively forfeiting our ability to regulate
underage consumption. I am 18 years old sir, and last week I was able to walk
into a liquor store and purchase a bottle of the Starbucks liqueur without
question. Knowing that our brand is extremely popular among high school
and college students, and that we have no controls in place, fervent brand loy-
alty among minors could very easily be transformed into a massive drinking
problem. We have also partnered in this endeavor with Jim Beam, the mak-
ers of perhaps the single most popular get-drunk-quick college party liquor.
The combination of our two brands is almost a formula for underage drink-
ing and extremely bad press. Starbucks has made the argument that because
the objective of most teen drinking is extreme intoxication, an expensive $23
bottle of 40 proof cocktail liqueur is probably not going to be appealing to
that market. But remember also that the objective of most teen coffee drink-
ing is to take in caffeine in order to stay awake longer…and they are consis-
tently willing to pay $5 for a half milk Venti Frappuccino when a regular cup
of pure coffee, which will accomplish the same job, is $1 anywhere else.
Customers of our company have always said that they buy our products
because of the innate promises of that mermaid logo on the cup: high quali-
ty, innovation, and social responsibility. By allowing the sale of an alcoholic
product over which we have no control, we are degrading our brand, a brand
you personally spent years of your life creating. The only possible objective

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of this move is higher profit at the expense of our consumers’ health, possibly
even their lives.
     Before we can make any intelligent judgment about this product line’s
true implications, we must discuss social responsibility, which Starbucks has
advocated since its inception. We have always subscribed to Evan and
Freeman’s Stakeholder Theory, that the stockholders are not the only party
to which management is responsible, and while stockholders’ support is nec-
essary to run a business, their needs cannot dominate those of the other stake-
holders. Consumers, employees, owners, local communities, suppliers, and
others are all claimants on the firm’s resources, and a leader’s duty is to take
all these needs into account and try to balance them, not letting one group
gain control at the expense of the others. At Starbucks, we have taken some
great strides to implement particularly the part of stakeholder theory which
says, “By paying attention to the customers’ needs, management automatical-
ly addresses the needs of suppliers and owners” (303). Enhancing the cus-
tomer experience has always yielded high profits which allow us to help com-
munities and coffee growers throughout the world. But what stakeholder
group does our liqueur benefit? Our research department would say that we
are benefiting consumers by providing a product they demand. If pressed,
they could also tell us that customers demand lower priced coffee made under
horrible working conditions, but we make a conscious effort not to purchase
such coffee when possible. Essentially, we are facing the same dilemma as the
liquor companies: harming consumers with a product that they want...only
you won’t see a mermaid on a liquor firm’s logo. You made Starbucks a social-
ly responsible company from day one, and that reputation is paramount in
preserving our world-renowned brand. Liquor companies make astronomical
revenues, but they do so at the expense of horrible reputations with the press,
advocacy groups, and the general public. Why? Their products destroy lives.
A company cannot possibly benefit all stakeholders when its product is dead-
ly to consumers, so the liquor producers have tacitly accepted the fact that
they’re just out to make a buck. We have not.
     Let us now examine our Stakeholder Theory under a new light. It is clear
that every day Management must make decisions which benefit either one
stakeholder group or another. The key to such decisions is that they should be
made provided that their outcomes comply with the economic policy concept
of a Potential Pareto Improvement (PPI): where the gains to the gainers are
greater than the losses to the losers. Of course, the other essential property of
a PPI is that it can always be transformed into a win-win scenario with some
kind of appropriate side payment. Now let us look in detail at the specific

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decision to produce an alcoholic beverage. We will leave out the benefits to
Jim Beam for simplicity’s sake because those benefits are basically going to
the same group in both firms: the shareholders. The alcoholic product is an
effort to increase revenue and profit, and there is nothing wrong with that,
provided that the cost to society is smaller than the profits made, and we can
find a way to compensate society for its losses. While we have not had the
liqueur on the market for long enough to have exact revenue figures, I can
give you one unambiguous answer nonetheless: the cost to society must
always be greater than derived profit in any situation which forces us to put a
price on human life.
     Assuming that Starbucks Liqueur accounts for even a small portion of
the roughly 17,000 alcohol-related fatalities in the nation each year, at what
profit level could that be considered an acceptable loss? What side payment
could we possibly make? The alcohol awareness program we’ve started in
middle schools is just not enough. No win-win situation can exist here, and
there is no payment in the world that can bring the dead back to life, and
make their families as well or better off.
     Martin Luther King Jr. wrote in his “Letter from Birmingham Jail” that
silence is the ultimate failure of leadership, that where there is injustice, it is
a leader’s duty to follow morality and not merely the law. Our company has
been silent, even in the midst of widespread concerns over our new product.
I’m sure you’ve read in the headlines that Pax World Funds, the first socially
responsible mutual fund, has recently divested $23.4 million of our stock
because we now sell alcohol. Granted, this is part of the fund’s strict protocol,
and Pax said that Starbucks had done sufficient research into the potential
impact of the liqueur to warrant the move. Even on the research front
though, remember that the two largest protests against our product came
from our two initial test locations, Austin and Denver…and we did nothing.
If the Pax World Funds affair was not enough of a warning, know that 1 out
of every 8 investment dollars in this country goes to socially responsible
funds, and that if we do not pull out of the alcohol business, other funds may
decide to divest as well, or prospective investors may decide not to invest.
Either way, not only are we hurting the value of our company as perceived by
consumers and the world, but we are actually hurting the value of our com-
pany financially. The additions to our implicit costs will far outweigh any
profit we may derive from this liqueur endeavor. So let us return to our mis-
sion. We have always said that at Starbucks, fiduciary and social responsibili-
ty can coexist in harmony, and in both of those interests, we must take our
liqueur product off the market immediately. Even moving the liquor into our

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stores would still degrade the Starbucks experience by turning our cafés into
bars, and exposing customers to a brand that is socially irresponsible because
it does not enhance their lives.
     Too long we have sat in silence over this issue; it is time for you Mr.
Schultz, the leader and voice of the company, to take a stand for what is right
and not just what is profitable. Let us take after King and engage in some
direct action…because there is injustice here…injustice to our consumers,
injustice to our brand. Starbucks can do better. Don’t let our company, the
inspiration for hope and a new wave in the business world, sign its name on
the growing register of corporate scandal. Don’t sell out our good product to
liquor-licensed venues over which we have no control. Don’t destroy the
magic that people feel when they see our mermaid logo on their cup and
think “Wow! This product is good, and so is the company who makes it.” Let
us find another way to grow our business. Let us keep the character of those
creative innovations that make our cafes unique among all others. Let us con-
tinue to enhance the Starbucks experience through socially responsible
actions concerning all our stakeholders, actions which do not sacrifice human
wellbeing.

    Sincerely,

    Al Barrentine

WORKS CITED

2003 Drunk Driving Statistics. Kero Corporation. 15 Apr. 2005.
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Evan, William M. and Edward R Freeman. “A Stakeholder Theory of The
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    Natalie Kapetanios Meir. New York: McGraw-Hill, 2004. 297-306.
Gillespie, Elizabeth M. “‘Socially responsible’ fund drops Starbucks, citing
    whiskey drink.” Associated Press & Local Wire, Business News Section. 24
    Mar. 2005.
King Jr., Martin Luther. “Letter from Birmingham Jail.” Advanced College
    Essay: Business and Its Publics. 3rd ed. Ed. Denice Martone, Pat C. Hoy
    II and Natalie Kapetanios Meir. New York: McGraw-Hill, 2004. 335-
    348.

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Montgomery, Amanda. “Two UT Students File Complaint Against
    Starbucks.” The Daily Texan. 10 Nov. 2004. .
Paravaz, D. “‘Stardrunks’ Ends Fight To Keep Logo Off Liqueur.” The
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Reverend Dr. Butts III, Calvin O. “Business and Society.” NYU Stern
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