Applause and protest at Starbucks annual meeting

Inside Benaroya Hall in downtown Seattle yesterday, Starbucks investors mingled, giggled and were entertained by company executives during the annual shareholders meeting.

The crowd was already in a celebratory mood when Chairman Howard Schultz cranked up their exuberance by announcing a 2-for-1 stock split.

It was as if Starbucks could do no wrong.

Marilyn Bode of Kingston, right, and members of the Kitsap Citizen Action Network march with about 30 others outside Starbucks' annual meeting, which provides a spotlight for the area's socially conscious and environmental groups.
Meryl Schenker / Seattle Post-Intelligencer
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Outside the hall, it was as if Starbucks could do no right. Two dozen protesters pacing the sidewalk handed out fliers complaining about a myriad of company sins including serving milk containing bovine growth hormone and serving pastries with genetically altered ingredients.

Company executives seemed to take the protesters seriously, one stepping outside and offering to schedule a meeting. But most shareholders simply walked past the protesters, accustomed, by now, to the annual meeting providing a spotlight for social and environmental groups.

If the shareholders were expecting good news, they got it.

It was the fourth time the Starbucks stock has split since the company went public in 1992. Starbucks stock has climbed 2000 percent in less than a decade.

"There is nothing more gratifying than sharing the company's success with our shareholders while we continue to provide the Starbucks experience to customers around the world," said Schultz.

Over the next two hours, the more than 2,400 shareholders applauded as Starbucks executives reviewed successes of the past year, and revealed plans for coming years, including thousands of new stores, global growth, new technology, and chatted about the good works the Seattle-based coffee retailer is doing around the world.

The upbeat meeting, included a jazz trio, a camp-style skit, big-screen videos and a guest appearance by retired basketball star Earvin "Magic" Johnson.

Shareholders were even treated to a video clip of the much-whispered-about performance of Schultz, Chief Executive Orin Smith and other Starbucks VIPs as the heavy-metal band Kiss during a recent leadership meeting. In the clip, executives pounded the stage in full makeup, shaggy hair and glitzy costumes.

Starbucks executives didn't shirk from discussing genetically modified organisms and stressed that they are working to find products free of engineered or altered ingredients.

"It will take time," Smith said.

Starbucks' main products, coffee and teas, are free of genetically modified organisms. Organic soy milk is available in its stores for customers who request it.

Sue Mecklenburg, Starbucks director of environmental and community affairs, offered to meet with protesters to discuss the company's efforts to eliminate genetically modified organisms from its products.

We are willing to talk about our common interest on this issues," Mecklenburg told the group's director.

"We have plans to address this issue, and a great deal of work to do."

Protesters, including representatives of Friends of the Earth and Organic Consumers Association, refused the invitation.

"We won't meet with them until they agree to meet our demands," said Ronnie Cummins, national director of the organic consumers group.

They are also demanding that Starbucks brew and serve fair trade coffee in its stores.

Fair-trade coffee assures small farmers in coffee-growing nations a fair price for their coffee. While some farmers are earning 30 cents a pound for their beans, fair-trade farmers organized in cooperatives are guaranteed $1.26 per pound.

Starbucks Chairman Howard Schultz, right, and Chief Executive Orin Smith enjoy a light moment at yesterday's shareholders meeting.
Renee C. Byer / Seattle Post-Intelligencer
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Starbucks has said in the past it rarely pays less than $1.26, anyway, and buys much of its coffee from small growers rather than large plantations.

The protesters were joined by a small group of unionized workers from Starbucks' roasting plant in Kent, who complained about a lack of progress in negotiating a contract with the company.

Paul Rice, director of TransFair USA, a group that certifies fair-trade coffee, has been working with Starbucks for more than a year. He applauded the company's efforts.

"We are very proud to be working with Starbucks and very, very happy with the initial results," Rice said.

Starbucks officials and shareholders alike were happy about the company's results on almost every other level, too.

Smith, the chief executive, reported annual revenue in 2000 was $2.2 billion. Annual revenue is expected to climb to $6.6 billion in five years. The company opened 1,035 stores last year and now has more than 4,000 stores around the world. Outside North America, Starbucks has 700 stores in 21 foreign markets. The company captures 3 million new customers each year.

Smith said Starbucks has a firm grasp on its position as the world's leading retailer of specialty coffee in the world.

"There is no close second; there is no Burger King," he said.

Starbucks opened its first store in continental Europe this month in Zurich, Switzerland. Some predict that breaking into Europe's rich coffee culture is going to be one of Starbucks' biggest challenges. The company estimates a potential for 5,000 stores in Europe.

"Cynics in Europe are saying Starbucks won't succeed there, but we clearly see that we will be as relevant in Europe as we have been in Asia and in the United States," Schultz said.

P-I reporter Kathy Mulady can be reached at 206-448-8131 or kathymulady@seattle-pi.com