Starbucks ‘Dragged Into’ Presidential Race as Schultz Considers Run

(Bloomberg) -- Big consumer brands generally try to avoid politics. Starbucks might not have a choice.

With Howard Schultz, who built Starbucks Corp. into a global brand, considering an independent run for the White House, the world’s largest coffee chain could get pulled into the contentious politics of a presidential election. And while it’s toed a political line in the past with public stances on hot-button issues, a Schultz run could take that to a whole new level -- perhaps to the detriment of the chain’s U.S. growth plans.

Starbucks declined to comment on a potential run by Schultz, who retired as chairman last summer but remains a large shareholder and the best known face of the brand.

“They’re being dragged into this -- it’s very volatile for the brand,” said Allen Adamson, an independent branding expert and marketing professor at NYU’s Stern School of Business. “They’ve been flirting with going beyond serving coffee, but Schultz stepping into the campaign really escalates it.”

Growth Areas

Starbucks has nearly 15,000 U.S. stores, including locations in every one of the 50 states. Right now, it’s more ubiquitous in urban and suburban coastal markets that tend to skew Democratic, but it’s targeting an expansion in the Midwest and Sun Belt for the next wave of growth.

In those markets, including many states that voted for President Donald Trump, an independent political campaign could serve to introduce customers to the liberal-leaning politics of Starbucks.

The brand has been more willing than some consumer companies to take controversial stances on social issues, including asking baristas to start a conversation about race with customers. Schultz openly supported Hillary Clinton during the 2016 campaign and the company faced calls for a boycott after it injected itself into the debate over immigration in 2017 with a pledge to hire 10,000 refugees.

But Schultz’s political ambitions may not play well in liberal states, either. In left-leaning bastions like New York, Seattle and San Francisco -- which have traditionally been strong markets for the company -- Starbucks could suffer if Schultz is seen as dividing Democratic voters and, by extension, boosting Trump’s re-election bid. Neera Tanden, the president of the Democratic-aligned think tank Center for American Progress, threatened to boycott Starbucks if Schultz were to make his bid official.

With critics on both sides, Starbucks faces a challenge if its longtime leader gets into the 2020 race. Its shares fell as much as 1.8 percent Monday, weighed down by a broader decline after Caterpillar Inc. reported worse-than-expected earnings and chipmaker Nvidia Corp. cut its revenue guidance.

Political Minefield

There’s a reason large consumer companies eschew politics: As the thinking goes, it’s a big country out there and thorny political issues can be extremely emotional and should be avoided.

That has changed a bit in recent years, with the perception that younger shoppers want brands to stand for something -- and that being stuck in the middle isn’t always a great option either. Nike Inc. recently faced calls for boycotts after releasing an advertisement featuring controversial former quarterback Colin Kaepernick. But the furor died down, and the company reported a sales bump in the quarter after the ad was released.

When Starbucks has weighed in on issues of race and immigration in the past, it was making a deliberate decision to take a political stance, betting that a display of its values would resonate with customers and outweigh the risks of alienating more conservative coffee drinkers. This time it’s different: The company might find itself in the middle a contentious election as a result of decision of by former executive who’s no longer in a formal role.

Starbucks is already facing pressure from investors including activist Bill Ackman to streamline its operations and cut costs. Adding a political Schultz to the fray could spook some shareholders concerned about yet another obstacle.

“Their goals aren’t necessarily aligned,” Michael Halen, an analyst at Bloomberg Intelligence, said of Starbucks and Schultz. “In this day and age, you can’t say anything without pissing someone off.”

--With assistance from Sahil Kapur.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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