The 'secret' and the memo
The news that the former Beatle will be the premiere artist for Starbucks' Hear Music Label has been one of the world's worst-kept secrets, confirmed officially today by Howard Schultz at the company's annual meeting, where the Starbucks chairman also found himself rallying shareholders in the wake of his infamous leaked memo.
Financial and contractual details for the Hear Music deal weren't discussed by Starbucks, beyond the fact that Mr. McCartney's album will be the first released on the label created by Starbucks Entertainment and Concord Records. But the partnership officially marks the end of Mr. McCartney's four-plus-decades relationship with Capitol, a Concord Records spokesman said. Representatives for Mr. McCartney wouldn't comment.
"How could a coffee company sign a Beatle?" asked an awed Mr. Schultz at the meeting, where he admitted to having butterflies in his stomach before meeting Mr. McCartney for the first time two weeks ago in New York. "I was nervous," he told the artist, who appeared at the Seattle event via live video feed from London.
"Love and kisses to all of you there," Mr. McCartney told attendees, noting that the new album, due in stores in early June, is "very personal" and includes some songs he considered new while others are retrospective. "I look forward to with all of you guys and reaching people around the world in a new way, and let's get on with it, man!" he said, drawing applause.
About that memo ...
It was a high point in a meeting where Mr. Schultz found himself trying to explain the widely reported missive he penned that warned company executives of the dilution of the Starbucks brand. "In 25 years, I've written hundreds of memos" with the common thread of the pursuit of excellence, he said. "It was not a memo that intended in any way to be critical of or demonstrate a lack of faith in the management of this company. Please do not read into that memo. In the best of times when we're knocking the cover off the ball, I am challenging the status quo and have for 25 years."
Determined to "set the record straight and separate fact from fiction" about the state of the company, Mr. Schultz also bemoaned the fact that company shares this year for the first time weren't at a higher price than the prior year. He said that, and the memo, improperly "cast a shadow on the company."
"I don't feel good about" the share price, he said, but assured attendees that "there's never been a better time to be a Starbucks shareholder, despite the stock price in last 12 months. After 15 yeas as a public company and 25 years with the company, you can see for yourself [that] although we're not perfect and we make mistakes and have a crisis or two, that the values, the guiding principles and what company stands for ... you can continue to respect."
Over those 15 years, he said the company's 5,000% share-price growth has beaten "hands down" the growth of the Nasdaq, the Dow Jones Industrial Average, the S&P 500 and companies in its sector. An investment of $10,000 in June 1992 today would be worth $467,000.
Keeping it about the coffee
Because the memo led to speculation among analysts and others that the company might slow growth, Mr. Schultz clarified that the company would open at least 10,000 stores over the next four years, doubling its store count.
He stressed that Starbucks is at its core a coffee company, and its ability to expand beyond that requires the company to be the best at coffee. "We have to make sure before we dream things that are extensions that we have in fact strengthened the core of our coffee experience," he said. "We are dreaming of extensions ... the best is yet to come."