Starbucks Corporations' (SBUX) CEO Howard Schultz Hosts 2017 Annual Meeting of Shareholders (Transcript)

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Starbucks Corporation (NASDAQ:SBUX) 2017 Annual Meeting of Shareholders March 22, 2017 1:00 PM ET

Executives

Howard Schultz - Chairman and CEO

Kevin Johnson - President and Chief Operating Officer

Gerri Martin-Flickinger - Executive Vice President, Chief Technology Officer

Molly Liu - VP of Digital Ventures, China

Leon Bridges - Artist/Singer

Lucy Helm - Executive Vice President, General Counsel and Secretary

Analysts

Jan Drago - Shareholder

Justin Danhof - National Center for Public Policy Research

Howard Schultz

Good morning. And welcome to the Starbucks’ Annual Meeting of our Shareholders, our 25th as a public Company. And as you now know my last as CEO. Let me begin by thanking the Seattle Recruiting Battalion color guard representing United States Army and the Starbucks’ quire, please given them a nice round of applause.

There are a number of important guests I’d just to acknowledge and recognize. Our entire Board is here this morning. We’ll introduce them formally in a little while. But I would like to introduce and recognize our three new Directors and ask them to stand. Satya Nadella, the CEO of Microsoft; Rosalind Brewer, the former CEO and President Sam’s Club; and Jørgen Vig Knudstorp, the Head of the LEGO Group. We had a Board meeting yesterday and Board dinner, and they weren’t shy, they were right in there. And the three of you are going to add so much value to the Company. Thank you very much for becoming part of Starbucks family. Thank you.

27 years ago, when a young brash kid from New York was trying to raise money for a coffee company that was not succeeding in Chicago, people did not pronounced the Italian names in our menu. Not a lot of people were willing to invest in our Company, and 27 years ago one venture capital stood up and he is retiring from the Starbucks floor after 27 years. I want to say thank you and really recognize with great respect and admiration, Jamie Shennan.

I know we have a number of business partners internationally are here, Plácido Arango from Spain; Alberto and Paulino Torrado from Mexico, Noey Lopez from the Philippines, Rocco Princi from Italy. Thank you for being here. It means a lot that you’ve travelled all this way. Thank you. And I would like to ask all service members, veterans, military spouses to stand up and be recognized. Thank you.

And to all the Starbucks partners who are here today and the thousands who are watching on the webcast from 75 countries, everything we do is for you and what we’ve tried over the years has really demonstrated the compassion of our Company, and our shareholders are here to applaud and salute all of you who wear the green apron. Thank you so much. Thank you.

And last, thank you. My wife Sherry is not here tonight, today. Two weeks early, our grandson arrived on Sunday. She is back in New York. 25 years, no one can do anything like this alone, all the families that represent our partners and my wife Sherry and our kids, they all know that I stand on their shoulders and I am here because of them. Thank you so much. Thank you, Sherry.

Okay. Those were the thank you’s. So let’s begin. Every hour of every day someone somewhere, everywhere in the world, is walking into a place named Starbucks. And as we gather here today, there’re over 26,000 stores in 75 countries, and last week alone, over 90 million customers pass-through our stores. And we now employ over 330,000 partners who proudly wear the green apron somewhere in the world.

From the very beginning, we said that we’re in business for a number of reasons, but we’re also in business to create value for our people. And I want to share with you, after 25 years of being a public company, I think what we’re most proud of is the unbelievable commitment and conviction we had to our partners and their families. And as we go forward, not only are we trying to build shareholder value for you but at the same time we take it very seriously the conviction we have, to make sure that we share success with our people and bring our families along with us. So, for all the partners who’re watching, as I said earlier, make no mistake about it. We believe shareholder value for value for our partners and that has made the Starbucks experience so special after all these years.

Now 25 years ago, in 1992, it’s hard to believe this little coffee company was about 150 stores, and only one quarter of profitability was getting ready to go public. And of course, in Seattle and on the West Coast, there was great fanfare about what Starbucks could accomplish. But as we went on the road show and tried to talk about the Starbucks story, there was resistance. And interestingly enough, there wasn’t much resistance about whether or not what we do every day in our stores was going to transfer to other markets. The resistance came because two years before the IPO, we had the novel idea at a time to recognize that for us to succeed as a company we had to exceed the expectations of our people, so that they could exceed the expectations of our customers. In a way, that manifested itself is we became the first company in America to provide equity in the form of stock options and comprehensive health insurance, in 1990, to everyone that worked at Starbucks, including those people who were working 20 hours a week, part time people. And that became the foundation of the culture of the Company.

But the shareholders who were looking at investing in a public company, a retail public company, many of whom made the decision in the conclusion that those benefits and the generosity of the Company, the benevolence of Starbucks management at the time, that these benefits would be shareholder dilutive; in a sense that it would not create value as much as it could if we gave that money back to the shareholders. Now that was a very important moment because it imprinted in all of us the conviction we had then as we do now in recognizing that it’s not about the healthcare, it’s not about the equity in the form of stock options, it’s about creating the balance that we’ve always believed-in in creating long-term value for the shareholder, profit in everything we do, but at the same time, recognizing the importance of the fragile balance, of social impact, conscience, benevolence and serving the communities and serving our people.

So, as we look back on the 25-year public history of the Company and how others viewed us then and how they view us now; what we’ve accomplished in terms of the record financial performance, is just about unparallel. I mean when you look at this slide, it’s hard to believe that a small coffee company in 1992 that had a 150 stores and a market cap of $250 million of the IPO is sitting today with a market cap of over $80 billion. And if you were smart enough to hold on to your stock, Jack I know you were. And you invested a $1,000 in 1992 that investment is worth over $180,000 today, we’re pretty proud of that. But not many people believe, so there’re shareholders here today, I see them friends of mine; Jack and Nancy Rogers, Carole Bovoso, Steven Lorry Rick. These are people who were kind of friends of mine in those early days who really, really believed that we could build a different kind of company.

So, I think that as we think about what’s really important and what has driven the success; and as I stand here before you, of course, it’s the quality of the coffee the store design and everything; but it’s the culture; it’s the values. And as a result of that, we have been recognized, time-and-time again, as having one of the most respected and recognized brands in the world. And just last week, the equity of the Starbucks brand was once again recognized. For the 11th consecutive year, Starbucks was named one of the world’s most ethical companies in the world by Ethisphere Institute and then Fortune Magazine, which does its study every year named Starbucks the third most admired company in the world.

I mean, Scotty, I’m glad that you’re on that list, I got to say. But, when I was the kid growing up, GE was everything and I look at Starbucks on the same list as GE. I just -- I can only wish my parents were here to really understand what Starbucks has become. So, we’re very proud of that as a Company, very proud of that personally.

So, you look at the financial performance which has been extraordinary. And here I am in front of you in the year where it’s been an anomaly for Starbucks, because it’s one of the few years in our public life where the stock is not up year-over-year. And of course, the favors are out for Howard and something is wrong, we got mobile order and pay issue, and is congestion and we have analysts who believe maybe the bloom is off the rose at Starbucks. They don’t know what you’re talking about.

So, even though the stock is not up year-over-year, if you ask me to assess this past year, putting the stock prices aside for a moment, I’d honestly say and I believe this, this probably has been one of our best, most strongest most meaningful years, in our history. And let me tell you why; one is, we’ve always taken the long view. We’ve always tried to invest ahead of the growth curve. We’ve always recognized that success is best when its shared, bringing up people along on the journey and investing in the communities in which we operate; never succumbing to short-term pressures and the mentality of others, but being true to the long-term aspirations of building a great and enduring company.

Now, two years ago when I stood on this stage, I framed a very important question that was heartfelt, it’s was personal, and something that I was very concerned about. And that was, what is the role and responsibility for a poor profit company. If you think back two years ago and where we are today, I think that question and the answers to that question are more important than ever before. So, it begs a number of questions. For example, why are we opening up stores in Fergusson, Missouri, Inglewood outside of Chicago, Jamaica Queens? Why did we convene over 40 likeminded companies to try and hire 1 million opportunity use among the 5 million young people, ages 16 to 24, mostly African-American and Latino, who are not in school and not in work. Why will we do that? Why have we hired 10,000 veterans and their spouses? Why have we opened over 30 family military stores near basis around the country? Why were we one of the first companies in America to support marriage equality? And why are we the only Company in America providing three, four year tuition for every single person at Starbucks? Why are we doing that? Why do we host an annual meeting in China for the parents and the families of Chinese partners? Why do we do anything quite like that? Why did we have the courage, the conviction, to address the issue of race and try and elevate the national conversation about racism? And yes, why did we make the announcement, just a few weeks ago, to hire 10,000 refugees globally?

And the answer, for me personally and everyone that works with me, is pretty simple. Not every decision in business is an economic one, and because leadership and moral courage is not a passive act. Because since 1971 when we opened the first store in a tight place market and again in 1992 when we went public from Seattle to Mumbai, from Shanghai to Paris, Starbucks has succeeded because of our people, because we recognize what our responsibility is in addition to making a profit. It’s also a reminder that these investments and levels of innovation are not only marketing and customer facing, they are about conscience. And we have, for decades, been driven by principles, guided by a set of beliefs that are skit in humanity. That is the role and responsibility of a public company. And I think a great way to demonstrate that to you is just a short, a very short video that we put together that’s not marketing and not about a press release, it’s literally about the compassion of the Company. Take a look.

So, I can assure you that our commitment to building long term value for you, our shareholders going forward, is an absolute. But looking ahead, we’re going to advance this work even more boldly in the years to come. Three years ago, we said we’d hire 10,000 veterans and military spouses by 2018. I’m proud to announce that we’ve already met and exceeded that goal. And let me just say something about that that I think is important. So much was written, as veterans were coming home and trying to make the transition from military life to civilian life, we sat down with a group of young people who are getting ready for the transition. And I heard one of them make the comment that I’ll never forget; when he said that he had more anxiety and trepidation about going to a job interview than he had about going back to Afghanistan. Think about that.

And unfortunately, so many people who are coming back from Afghanistan and Iraq were misrepresented about who they were and what they’ve done. These are extraordinary people who’ve been through extraordinary things; they come back with skills, leadership, ethics, integrity; not an ounce of entitlement. And everyone of them that has come to work at Starbucks in our office wearing the green apron on their own merit have done a great job, but they have made us a better company, we are better because of them.

And so we’re upping our goal and we’re going to hire 25,000 by 2025. And that’s not all. Two years ago, we made a commitment to hire 10,000 opportunity youth at Starbucks. We’ve exceeded that goal and we have 40,000 now. We’ve held jobs there in Seattle, Chicago, Arizona, Los Angeles; and let’s look into that photo. This photo here, this is like 8 AM in Los Angeles. We open the doors to our job-fair and these young kids, you can see how they’re dressed, you can see their facial expressions, they’re running into the door and all they’re looking for is one thing and that is that that their station in live should not to find them, and all their looking for is an opportunity. And just like the variance that we’ve hired, these young people have done extraordinary things at Starbucks and all they’re looking for is for someone to open up the door and to view them on their own nerve. So, we’re upping our goal for opportunity youth and we’ll try and higher 100,000 by 2020.

And finally building on our Starbucks College Achievement program with the partnership with Arizona State University; we’ve created a new program, which is called pathway to admission. And that basically opens access to college to every Starbucks partner who previously did not qualify for college for one reason or another. So regardless of your test stores, regardless of your history, everyone at Starbucks is now going to have access to a three-four year college tuition, and we hope to have 25,000 partners graduate from ASU by 2025.

So, as I mentioned, this is my last Annual Meeting as the CEO of Starbucks. And the question has been what is going to be my role responsibility going forward, as Executive Chairman. And I will be focusing a majority of my efforts on the new area of the ultra-premium Starbucks Reserve brand and retail innovation. So, two years ago, we began this program, and with the Reserve brand. And we had an unbelievable success with the Seattle Roastery. But I just want to take you back to something.

In 2008-2009 as we were having this trouble. I wrote down this little private story to myself. I wasn’t clairvoyant, but I was dreaming about something. And the dream was, could we create a different immersive theatrical romantic flagship experience that do not exists, not only in coffee but anywhere. Could we take the elements of Disney and Willy Wonka and do something that would just be dream like? Can we take our customers on a magical carpet ride? Well, the Seattle Roastery has done just that and more. And we are now on our way to a whole new level of expansion and opportunities with the Roastery.

Beginning with the fact that we discovered an extraordinary artisanal baker in Milan, and that’s Rocco Princi who is here today. I tried to convince him for like seven years to be our partner, and he kept saying no; he operates five stores in Milan and one in London, kept saying no, no, no. I thought we had a language because he doesn’t speak English. I don’t speak Italian. But we both spoke the language of love. And I got him to Seattle I took him into the Roastery. And this fall, we will be bringing Princi Food fresh cake, which we’re actually baking into the Roastery and we’ll bring Princi into all of the roasteries going forward.

So if we look at this map. So go back please; so the Seattle Roastery far left; Princi Food on the left; this is New York on the corner of 9th and 15th in the Meatpacking District next to the Chelsea market across from Google; next to Apple; this is under construction. Shanghai, which will be almost twice the size of the Seattle two levels in a location we can only dream about on NanJing Road, will open up in December; you’re all invited. And the crown jewel of it all is then my lifelong dream since I walked the streets of Milan in 1983 to one day open in Milan. And we decided we just can’t open up a store, we have to open Roastery. So, last week we were in Milan making the announcement and take a look.

That was an extraordinary moment for all of us and for me personally. When that Roastery opens in Italy and about a year and a half, it will be a seminal moment for the Company, for me and going back to ‘83, who could have possibly imagined that we would be here celebrating 25 years as a public company. So as I said before, we’ve tried from day-one to play the long game. I can’t imagine to be surrounded a more talented committed, compassionate team of senior leaders at Starbucks, and now led by one person, Kevin Johnson.

So, let me tell you a little bit about Kevin, and why I’m so enthused, why I’m so confident, and why our shareholders, you should feel very, very comfortable that the company is in extraordinary hands with a great person and a great leader. I’ve worked side-by-side with Kevin the last two years when he’s been President and COO of Starbucks. And six years prior to that, he served with great distinction as outside Board member. And certainly, everyone on the Board would agree with that.

Who is Kevin Johnson? Above all else, he’s a serving leader with tremendous sense of humanity, compassion and an understanding, a deep understanding, of the human condition. He’s been labeled, maybe fairly and unfairly at times, as a technologist. I mean that maybe his avocation. But he’s an extraordinary person who has a great understanding of Starbucks’ business, what it means to be a merchant, and above all else, the partner experience. So, we thought a great way to introduce Kevin before he comes on stage is just to give you a glimpse into Kevin, his life and the man. Take a look.

Please welcome the next Chief Executive Officer of Starbucks Coffee Company, Kevin Johnson.

Kevin Johnson

Thank you, Howard. Good morning everyone. This is my 8th Annual Shareholder Meeting, and this is very special one for me. Certainly, it’s the opportunity to recognize and celebrate what Howard and hundreds of thousands of Starbucks partners throughout the years has created. Now, my life’s journey has taken me to this place here today. As a young boy, the mission of sending a man to the moon captivated me. It always began with the bold aspiration and a mission to inspire and nurture the human spirit, one person, one-cup, one neighborhood at a time.

How many publicly traded companies do you know that have a mission statement that begins with the words to inspire and nurture the human spirit? Only one I know. And that’s why Starbucks hold a special place in my heart. Every life experience I’ve had, every achievement, every struggle, every lesson learned, every person that touched, has shaped me and Starbucks has shaped me. And I could tell you, I am prepared to do the hard work with a taste to elevate this great brand, and Starbucks lead us into the future. And I am so optimistic, so optimistic, about the future for three reasons.

Three reasons that I think are relevant to all shareholders; first, human connection. Starbucks is in the business of human connection in a world that needs it now more than ever; second, relevant innovation. We have the strongest innovation pipeline in the history of the Company; and third China. China is our fastest growing market and represents an amazing opportunity. Now, let me take you through each one of these reasons in more detail, and then I’m going to connect them back together to our commitment to creating to shareholder value.

Human connection, Starbucks partners around the world connect with over 90 million customers a week. The concept of the third place is universally accepted as a gathering place for community, a place for people to connect. Communities embrace their local Starbucks as a hub, and this was so evident to me a year ago. A year ago, I attended the store opening in Ferguson, Missouri. Certainly, following the unrests the protests and that riots that unfolded in Ferguson in 2014, we decide to build a Starbucks store in support of the community of Ferguson. When we announced we’re putting a store in Ferguson, the young man Cordell Lewis, heard about Starbucks coming to Ferguson and he applied to be the store manager and we hired Cordell. Cordell Lewis is here today let’s give a hand for Cordell.

Now, when I arrived to that store, Cordell has hired just a wonderful team [indiscernible], some were 10 years Starbucks partners and some, it was their very first job. On the day of the opening, community leaders, leaders from the urban league, the Mayor, the City Council, Police Officers and citizens of Ferguson, showed up for that store opening with excitement, optimism, about their community. Every person was there, was proud to be able to say that Ferguson would now have a Starbucks. It was a vote of confidence for their community. Now, I listen to these customers, I listen to our partners that day in Ferguson and I observed something; I observed a sense of connection; a desire to come together; and a feeling of joy.

Now, the week prior to the store opening, Howard was in South Africa, opening our first Starbucks store in South Africa. And when we got back to Seattle, we sat down in Howard’s office and we shared our experiences; two store openings in very different places, different hemispheres, different continents, but with the same similar sentiment from customers and partners; pride, community and joy. And I asked myself, why is this that people almost 10,000 miles apart, different hemispheres, different continents, but they have the same reaction, why; the answer, human connection.

Now, following that visit, a few months later, I was reading an article in Fortune Magazine. And the first paragraph of that article captured, it’s that humans were not designed to these solitary creatures. We evolve to survive in tribes the need to interact is still deeply ingrained in our genetic codes, so much so that the absence of social connection triggers the same primal alarm bells as thirst, hunger and pain, wow. So, I look, and the quote was from a leading researcher on human connection from the University of Chicago, John Cacioppo. So what did I do? I picked up the phone and I call the University of Chicago switchboard and I asked to speak to John.

And he took my call; I said John, my name is Kevin; I’m at Starbucks; I want to learn more about your research around human connection. And John spent an hour educating me on his studies around what he believes is a modern-day epidemic of chronic loneliness. And he shared with me, he said Kevin, I think in my research it points to three factors, or at least three factors. He said, for example, the rise of technology, often-times people are spending more time in their device then they’re connecting with another human being. He said, growing division in the world causes people to turn inward. And he said, in periods of economic struggle, people have to spend more time working and less time with family. The antidote he says, human connection. Well, that is the business of Starbucks. There are so many great stories of our partners connecting with customers in meaningful ways that changes their lives. And I just picked one to share with you today, a small video.

Human connection, it happens every day in 26,000 stores around the world. It is our foundation and it is a strong foundation. But we’re also innovators. We’re driving relevant innovation for our customers that amplifies Starbucks as a destination, and our innovation pipeline is the strongest in the history of the Company; beverage, food, store design, equipment, digital, every aspect of innovation that it takes to create customer experiences that are joyful.

Now, let’s start with coffee innovation. Starbucks Reserve has created the renaissance of small-lot coffees; two examples, Eastern Congo. Our work with Eastern Congo initiatives is rebuilding the country’s coffee industry. They are now producing coffee that is a customer favorite with its lively orange citrus flavor and notes of cocoa. Pantheon Blend is a one of the kind blend, made up from Reserve coffees from Ethiopia, Nicaragua, Guatemala. When it comes to coffee beverages, the Roastery in Seattle has now become our innovation incubator. Beverages like Cascara Latte were invented in the Roastery and are now part of our core Starbucks beverage offerings across the entire footprint; the latest innovation from the Roastery, Barrel-Aged Coffee. Take a look.

That’s the Roastery today. Now, these are just two examples of many where the Roastery is fueling innovation that will propagate throughout the Starbucks fleet.

Now, let’s move on to tea, and tea innovation. Today, we sell over $1 billion of Teavana teas in Starbucks stores around the world. And we look to our customers; customers care about wellness; they care about natural ingredients; they are working find ways to reduce calories and no added sugars. So later this summer, we are introducing new Teavana shaken iced tea infusions. Shaken iced tea infusions take our freshly seeped core Teavana teas and we combine them with freshly seeped flavors that come from fruit and botanical blend that deliver the delicious flavored beverage that are free from artificial flavors and sweeteners.

Now, we are reducing the added sugars in all of our standard tea beverages and you can request them un-sweet. Teavana iced tea infusions delicious unsweetened at zero grams of added sugar, a great, great beverage. Food innovation; let me highlight some of the work we’re doing in the areas of food. We recently launched the new Sous Vide Egg Bites in January, and I can tell you, they are hit when you can find them. We are adding capacity as fast as we can to not only catch up but keep up with customer demand. Now, we’ve also listen to customer feedback of around more gluten free choices, right?

Now, in fact at the last two Annual Shareholder Meetings, one of our shareholders, Mr. Kath, Mr. Kath has come to the microphone two years in a row during the Q&A session. And he made his request for more gluten free choices. Mr. Kath, are you here today? Okay. Mr. Kath, this one is for you. Yesterday, we launched another gluten free item on the menu, our Smoked Canadian Bacon Breakfast Sandwich with more gluten free innovation coming. Mr. Kath thanks for the feedback.

Now, let’s talk about much, another big opportunity for Starbucks. Now, last year, I sat down and met with our chef in the innovation lab and I asked him, I asked him to provide us with a culinary point of view for a wonderful lunch menu. And they went on in Discovery Journey. They came back from that Discovery Journey and I said Kevin here is an idea, what if we created a Mediterranean, Californian inspired culinary experience for lunch that is second to none. And I said what if we created a supply chain so we could be prepared fresh daily, prepared and consumed within a 24-hour period, so every item is fresh. And what if we had the range of options from high-protein offerings to vegan, and what if at the end of the day any of that food that was not sold through in that store was then donated to feed the hungry.

Introducing Starbucks Mercato; vibrant solid party sandwiches, all made fresh daily. Now, Mercato will be available in more than 100 stores in the Chicago area beginning in mid-April, just a few weeks delay. Based on the customer feedback and reception we’ll then plan to expand into other markets. Now, not only will Mercato, the Mercato lunch offerings in Starbucks provide you a wonderful lunch and selection, it also contributes to the positive mission of feeding the hungry through our food share program; Mercato, in stores in Chicago mid-April.

Now, digital, I got to talk about digital. Before we jump into the customer facing innovation coming from digital, I want to touch upon how we are using digital technologies internal to Starbucks to create a real-time connection with our store managers. When you think about it, just in U.S. we have over 9,000 Company-operated stores. And the question was posed, how can we better connect with our store managers; how can we communicate with them in the two way vehicle and do it fast; and how can we help store managers to create community amongst one another.

Well, in January, we implemented Workplace by Facebook. Now, think of Workplace by Facebook as a private Facebook for Starbucks partners to communicate and share information. Workplace allows us now to stream live open forums and have real-time dialogue with our store managers. We launched this thing in January with a live open forum hosted by Howard and myself with all store managers in the U.S. That’s what you see up here on the screen. This is actual live open forum in January. And you can see by this slide here, we are getting real-time comments, hearts, thumbs-up sometime a thumb down, mostly thumbs up. And store managers are asking us questions. Now, this was a new experience for both Howard and myself but we have now started doing these workplace live open forums with our stores managers, every month. And store managers have bounced on their way to create community, instead of connect with us.

So recent examples; about a month-ago, a store manager posted on Workplace; he posted a post that said, that they are selling more than 20 beverages a day that are not on our official beverage menu, they are beverages that were featured on Instagram. How many people use Instagram, get your beverage see all kinds of beverages on Instagram. Well they’re selling 20 a day they’re not truly have the right recipe. Well, within 24-hour period, nearly 40 other store managers also posted and said I too; I am selling 15 of these a day; I’m selling 30 of these a day.

And then that evening, our category marketing teams saw the volume of post and how much this beverage, featured on Instagram, was selling in our stores and they made a decision that night and posted back to store managers by the next morning that they had made the decision to add this to be official beverage recipes something that could have taken weeks if now months to happen before Workplace, happened in one day. That is creating visibility with our store managers that’s enabling us to have more velocity in the way we make decisions, so we can better serve our store managers and our partners in the stores.

All right, customer-facing digital; Mobile Order & Pay continues to grow, and just last month, it represented more than 8% of all transactions in the United States. And in our last earnings call, we highlighted how we are focusing on increasing throughput, improving the customer experience and reducing congestion at the hand-off plane. Now, we have already deployed a number of these measures, and they are having a positive effect.

For example, in our busiest stores, we’ve added two new dedicated roles for partners at that peak, just for Mobile Order & Pay. We streamlined a hand-off plane in the way that beverages are consolidated and given to our customers, and we’ve deployed new tools to support the increased throughput. Now, the early feedback from store managers and customers has been very positive. But keep in mind, these are just the first steps of a number of things we are doing to improve capacity and throughput in our store. And rest assured that this progress will continue to be fully felt in the back-half of this fiscal year.

Now, to show you some of the new innovation and the exciting new customer features that we are bringing to our mobile app, I want to introduce our Chief Technology Officer, Gerri Martin-Flickinger. Gerri?

Gerri Martin-Flickinger

Thank you, Kevin. Good morning. I am so pleased to have the opportunity to spend a few minutes with you today to talk a little bit about the digital innovation at Starbucks. At its core, Starbucks is all about the importance of human connection; one person one cup of coffee and one neighborhood at a time. I truly believe the technology when done well helps enrich and enhance the human connection. And over the last several years, we’ve innovated to make our mobile application even more personalized.

Let me start by taking you on the journey. We launched Starbucks mobile application three years ago, and we started this mobile payment, giving customers the ability to pay from their phone and track reward. It was less than two years ago that we enhanced this application to allow ordering and further extending our brick-and-mortar stores with added digital convenience. And this year, we extended this experience to make it personal. And let me explain how?

We leverage Artificial Intelligence and Big Data. We switch data from many different sources, including a customer’s past purchases, information about trend, weather data, as well as product availability at a store. And then we give each and every customer personalized offers and recommendations to anticipate and delight. And that’s not all. We also surprised customers with gains that are developed just for them, giving our customers rewards and opportunities to try new products or visit more frequently.

Like Kevin said, our customers have made it clear that these personalized experiences are enriching their connection to Starbucks. Starbucks reward members, the said is 20% higher than last year and we’ve seen a tripling personalized marketing sales lift, reflecting a more engaged member base. The growth in MOP has been impressive. Our highest volume MOP stores are seeing more than 20% of their transactions through MOP at peak. And as Kevin mentioned, with this volume we recognize the need to continue to streamline and enhance the in-store experience. We’re using and testing text notification to let customers know their orders are ready, allowing our customers time to relax and improving the experience at the hand-off plane. We’re also introducing technology to help abreast manage the production of orders, so they can focus on the customer engagement.

So, we’ve talked a lot about Mobile Order & Pay and the digital divide. But that’s only one form of interaction. Today, customers can even pay with an eye watch. And I’m sure we could all imagine many more devices and many more methods of digital engagement. And innovation continues to touch all of our lives. The way we interact with technology is also radically changing. I love to ask a question, how many of you took a typing class to learn to use a computer? Yes, I mean I see some hands out there. Okay. How many of you kids took typing? Yes, okay. So, if your kids are like my kids, they use one finger and they point and click. And I would suggest to you that the next generation won’t even do that, they will use their voice.

Earlier this year, we announced voice ordering in our mobile application. Let’s take a quick look at how this work. So this feature has already rolled out to about 100,000 customers, and we plan to have rolled out nationwide by the end of the year. As you can imagine, the opportunity for voice and other settings becomes quite intriguing. For example, we delivered and elect the skill that allows you to order coffee at home from your Amazon Echo. Our technology foundation is allowing us to embrace conversational commerce very, very rapidly. In fact, I’d like to give you a sneak-peek of something that I got a chance to see this morning.

So, what you just saw was real; available in market later this year for customers with the Alexa Skills, and Ford with Sync 3. So, it only takes a little imagination to think about where conversational ordering will show up next. But we’ll say the few things for next year’s shareholders meeting.

I’d to shift now to gifting. Over the years, giving and receiving Starbucks’ gift card has become iconic. They’re given for birthdays, holidays, thank you, business events or just because. Traditionally, our customers have purchased gift cards from our stores and other retailers, and now customers can also purchase them digitally in our MOP app or Web site. But what if we like gifting occur in other channels? What about social channels? The virtual places for you engage with your friends, your colleagues and loved ones every single day.

Earlier this year, we released an add-in for Microsoft Outlook 365, which many consumers and businesses use for email. The add-in allows you to get someone at Starbuck gift card without ever leaving your email session with just a few clicks. What an amazing way to quickly send a thank you or birthday gift. This spring we’ll release Starbucks gifting for iMessage. This will allow our customers to give a Starbucks Gift Card within an iMessage conversation on an iPhone or an iPad. Let me show you how this feature works.

In this example two co-workers are messaging one-another. One coworker wants to thank his colleague for job well-done. Without leaving the iMessage conversation, he’s able to select the gift card and pay with Apple Pay with just a few taps. The recipient can redeem the gift card right from their iPhone using Apple Pay. This will be released in April. And that’s just the beginning. We’ve many more social gifting solutions coming all with the intent of making gift giving and receiving even easier for our customers. The trends I’ve been talking about here today are not just U.S.-centric. We’re driving towards these types of solutions all around the world.

I’d now like to introduce Molly Liu, VP of Digital Ventures China, who will share with us technology innovation in that region. Thank you very much.

Molly Liu

Thanks Jerry [ph]. Good morning, my name Molly Liu. I’m a five-year partner. I think I have the best job in the Company. I lead the Digital Ventures team for Starbucks China. Very excited today to share with you a recent social phenomenon we created across our second home market. It was a mission to inspire and nurture the human spirit that brought me to Starbucks five years ago. We have been thrilled to this mission. Our 2,600 stores across Midland China serve as an attractive surplus destination that brings people together over a cup of coffee.

As we expand the experience to the digital platforms, we saw a unique opportunity for Starbucks to create deeper social connection digitally. To encourage and cultivate a behavior of everyday kindness and appreciation among family and friends, a behavior truly needed in today’s fast developing China. This was a purpose behind creating a breakthrough social gifting feature. We wanted to partner with the strongest social engine hence the strategic partnership with Tencent WeChat was formed last December.

With over 889 million active users of which many of them logging everyday and about half of them spent at least a 90 minute on the app. Tencent WeChat is one of the most and powerful social media in the world. Starbucks and WeChat co-created a social gifting experience and it’s actually named a set with Starbucks [Foreign Language], which had a similar pronunciation as [Foreign Language] meaning, Say It With Your Heart. We aspire to people the shared moments of connection by allowing our customers to speak from their hearts together with a gift of Starbucks coffee or digital store value cards.

I want to share with you, how in a very short time, Say it with Starbucks has made a difference in my own life. My first gift was sent to my best friend from collage [Asim]. We no longer leave in a same city and haven’t met for a long time. My biggest regret was not being able to be there for her when she most needed my support. When I browse through the social gifting offerings, the thinking of you card caught to my attention and I immediately picked on for [Asim], paid with retail pay and easily select [Asim] from my recent contact list. This new feature also allows me to edit to attach text, photo or video in my gradients.

I wrote a personal note to encourage my friend, find more time to relax in a Starbucks store. And the coffee is on me for sure. She received the gift instantly and replied with a big smile. If you think about it, 25 seconds were all that it took for me to make up for this long overdue reconnection. And her big smiley face reply really made my day. Well, sending a gift is a convenient and rewarding experience. Receiving one could create a memorable moment of surprise and delight in anyone’s life. I just received such a surprise gift from my little boy Harry this morning. He knows that I need coffee to overcome jet lag flying from China. So, he sent me a latte together with the heart melting video.

[Audio/Video Presentation]

I miss you too. Miss you too. Miss you to want to hug you, right now baby. My stories are only two out of the over 1 million stories of love, friendship, connection and appreciation that has happened in a past six weeks since we launched sage with Starbucks. Our customers are falling in love with this innovative feature for the seamless experience, emotional attachment and personal touch. Many customers purchased more than one gift and keep coming back. When it takes to receivers start to purchase a gift and pass them love to other people as well which in this a truly viral social phenomenon.

You can tell that I am extremely proud of the Starbucks and we have honored who works tirelessly to bring innovation to life. I’m also humbled when our customers recognized Starbucks for being, not only a global brand that offers a best-in-class service, but also a local brand that created truly relevant experience for the Chinese people. Despite the early success, this is only the beginning of an exciting Starbucks digital journey in China. The best is yet to come.

Thanks again for the opportunity of sharing with you, what we’re doing in China. Thank you. Now, let’s welcome Kevin.

Kevin Johnson

Thank you, Jerry and Molly. Now, in case you didn’t realize what Molly said there is over 800 million active users of WeChat in China around the world. In the first six weeks of launching this social gifting feature, over 1.2 million gifts have been given and our being redeemed in our stores in China, huge, huge opportunity. Now, what I share with you are just a few of the innovative things coming, but I strongly believe that we have the strongest innovation pipeline in the history of the Company.

But now I want to build on what you saw from Molly and amplify the importance of our work in China. Our Starbucks China team is world class, world class, and I’m proud of the work they’ve done to get us to this point. Perhaps nowhere has the Starbucks experience been embraced more enthusiastically than in China, a country we entered 18 years ago, it is our fastest growing market with 2,600 stores across 127 cities, serving more than 5 million customer visits per week.

Now, we’re committed to double the number of stores in China over the next five years, and today we are opening a new store in China, every 15 hours. So, when I put these three things together, Starbucks is about humanly connection at a time when human connection is in more demand. We have the strongest innovation pipeline in history of the Company and we have this amazing opportunity in China. I add those three things together and I come up with the one conclusion, growth. This is why I’m so optimistic about our future and creating shareholder value.

The fact is that we’ve returned $10 billion of cash to shareholders over the last five years in the form of dividends and share buybacks. This year we’re deploying $1.6 billion of capital much of it to build and renovate the most profitable stores in our history and create more shareholder value. And we are investing for our future. We’re investing for the long-term by investing in our partners, investing in digital to position us to capture this opportunity. And you put this altogether and you should all have great confidence in the future of Starbucks, but there is one more reason. Why I believe in Starbucks? And it is the power of our partners.

Starbucks is really gift in my life, and I’ve learned so much by traveling the world and listening to partners share their life story. Share what Starbucks means to them. My partners have taught me three things; first, the power of one, one store, one partner, one customer connection at a time. My partners have taught me the power of family. When I do roundtables in our stores, I have heard hundreds of times partners tell me Kevin, these partners are my Starbucks family and I love them and the power of purpose.

You’ve taught me there are reason for being human connection and doing good in the world, has purpose that can change people’s live, it’s about being part of something that is bigger than anyone of us, it’s a mission I chose to pursue. So, I want to take this opportunity for all of us to recognize and thank to the more than 330,000 and partners who proudly were the green apron and the partners who serve them day-in and day out. This is recognition for the Starbucks partners globally.

I’m proud to be a partner and I want you to know that I’m here to serve you. To our shareholders, I feel a great sense of responsibility to you as well. I know I have vent issues to fill, that’s not last on me, but I will be authentic and committed to stay true to the Starbucks mission, values and guiding principles while working tirelessly to create shareholder value for you. And I want every Starbucks customer and community we serve to know that together we are committed to do good in this world.

My life’s journey has led me here for a reason to serve all of you as we continue on our journey, and I can’t think of the better group of people or a better mission to serve at this moment in my life. Thank you.

[Audio/Video Presentation]

Unidentified Company Representative

Thank you very much. Let me try and explain what you just saw and how it relates to the last 30 plus years of the Starbucks experience. First off, that is what we call a open forum at Starbucks and to the past 30 plus years in order to really elevate the internal conversation within our company on a quarterly basis domestically and around the world, our leaders have in our province a open forum or a town hall. We learned over the years that most people that come to work for a company had a previous Starbucks experience. And that job experience more often than not disappointed them, for whatever reason.

And so we have said early on that the currency to the culture, the values and guiding principles of Starbucks, has to be trust and the question is how do you build trust, and so after 30 plus years of having these clients of meeting, we have created environment where people feel very safe, very vulnerable, and if they have a complaints or a concerned, they know there is no retribution and this is really created domestically and around the world, the opportunity for us to really understand with great sensibility, how our people are feeling about the Company each other, what we are trying to do and most important how can we get better and how can we serve them even more.

The San Antonio Open Forum was very unique. We had a market visit in Texas two weeks ago, we visit markets all the time, but why we were there, we decided to go down to McAllen in Texas. For those of you that don’t know what, where or what McAllen is, it is the Rio Grande Valley and it is the border of the U.S. Mexican border. And we wanted to see firsthand, the issues, the complexity not to politicize but really to just on the ground levels see what people are experiencing. And without going into detail, it was a part heart-wrenching day for many of us who heard very, very tough stories.

Now, we recognize this is a problem of great complexity that’s mean there has been try to solve for many years now, but there is no doubt that there has been a significant cause and effect on lots of people and Starbucks partners. And so the open forum was filled with tremendous emotion and what you just saw was a sniff it of what people have to say and how they are feeling who are living and working there. So, we tried to thinking about what should we do today that would really with great transparency demonstrate who we are. So, we are going to take a great risk unscripted and for the next 20, 30 minutes, we are going to have an open forum that Kevin and I are going to host.

Kevin Johnson

Okay. Welcome partners. First time we’ve ever done one of these. I know the first question is the, the first person to share asked the question as always difficult one, so maybe I’ll call on Jenny [ph]. Do you want to go on first? Microphone, over here. Thank you.

Unidentified Company Representative

Gosh, there’s a lot of people out there. Morning everybody, my name is Jenny Robert. I work in the sourcing department and I’ve been a partner for two years. And I’ve always said if I ever got the chance to get in front of our leadership, I would thank them for updating recently a paternal leave policy -- parental leave policy. It’s something that I thought about a lot of really important to me my daughter just turned one year old last week.

She was born last year eight weeks premature and I was in the hospital for a week. She was in the hospital for four weeks and at the time, I was the single income earner for my family and it was, as you can imagine nearly difficult time for us. And so when the partner resources team opened up for us to have a forum to discuss, where we were last fall with parental leave policy, I attended because I really felt strongly about sharing my feelings and my families experiences and at the time what I said was, I think that I really believe in this company’s mission and vision and values and our ability to choose and do the right thing. And low in the hole a couple of months of ago, it was announced that the parental leave policy was updated and I just wanted to thank you from the bottom of my heart, it’s so important to us parents and people growing families and I can’t say thank you enough, I really appreciate that.

Kevin Johnson

Thank you, Jenny. Jenny what’s your daughter name?

Unidentified Company Representative

Hi, Howard and Kevin, Melissa Nussbaum [ph], I’m a 10-year partner and I’m proud to be a benefits specialist from SCAP team here in Seattle. And over the past ten years of working for Starbucks, much like many 10 year partners, I’ve been able to grow and be in an inclusive environment. So, I kind make the jokes that have come out few times in my life, the first time was nine years ago. I’m originally from tiny town called Raymond Washington, a home of 2,000 people and it was really hard for me to come out as a lesbian.

But thankfully to my Starbucks family because we have such an inclusive environment for member of the LGBTQ community, it was like a non-issue at Starbucks. And so my Starbucks family really gave me the courage to be my authentic self at work, do my best work, because I could be myself. And in addition, it gave me the courage to be myself with my family. So, now my family actually loves my wife, pretty more than me, so they are all dead. But it took a while, so thanks to Starbucks.

And the second time was a couple of years ago, the Starbucks call it achievement plan program was announced and until then I felt like I was in the closet per se and I’ve finished my college degree. I start out with WSU, while it’s happened and I was the first person of my family to go to college. My mom didn’t earn up high school diploma. So, I took a lot of pride in that and when I didn’t finish it, it was a big chip on my shoulder. So, I proudly stand up here and say that along with myself, my wife will be graduating from the SCAP program, spring 2018, and I will be the first person of my family with a college degree in spring 2018. And you’re both invited to my graduation.

Kevin Johnson

Thank you. Melissa.

Unidentified Company Representative

Oh, you all saw me in the video earlier. My name is Tony Ambriz [ph]. I’m from the US-Mexico Border down in Texas. So, it is my privilege to be flown and to know you all, get to know everybody here. Seattle is a wonderful place. So, I am going to share my story with even more people, ten times the amount of people. So, as Howard mentioned earlier, he was in South Texas, McAllen in US-Mexico Border, as you all know immigration is a very, very touchy subject right now with the border wall and all this, negative segment of that, illegal immigrants carry. I was one of those illegal immigrants grown up. I was brought here at the age of four with my parents wanting to bring me for a better life.

The challenges that I faced growing up were very difficult and I was in the deepest of position. So, in 2008-2007 around that time, I was able to finally after so many long hurdles become legal resident, and in 2013, I became a U.S. citizen. After becoming the U.S. citizen, I got my college degree and everything, but I still couldn’t find a job. So, the first place I went to was Starbucks. So I took a leap of faith and I applied. Two years later, I’m still here and it is now my pleasure to share this because it goes to show that.

Yes, I was in that position, I was the bad person as the President or anybody likes to call it but we’re not all of that people, I am here wearing apron in this case the blank apron serving both sides of the U.S. and Mexico Border and we know being in that area, we divided by a wall still, but we’re still the same community, same culture, same people, two different languages and two different governments. So from me to serve both sides of the border in the City of Brownsville, Texas, it is a huge honor.

Kevin Johnson

Thank you.

Unidentified Company Representative

Hi, Howard and Kevin. I am Lee Fellow [ph]. I’ve been with the Company for 20 years, going on 21. I am and actually part of the Retail Systems team and I am the Chair of the China and Asia-Pacific Partner Networking System. It’s some just a long. So, I really want to share with you that family really is core of my family because of my culture and I am so proud to be a part of the Starbucks family. And I was doing, if we’re going to have a family from here?

Kevin Johnson

Family from here?

Unidentified Company Representative

Yes, in U.S.

Kevin Johnson

We haven’t one here in the United States yet, but maybe it’s time for us to consider doing that.

Unidentified Company Representative

The capital and I will be willing to help.

Kevin Johnson

Thank you.

Howard Schultz

I’m sorry. Welcome to everybody. Go ahead.

Unidentified Company Representative

A great day to you Howard. A great day to you Kevin. Congratulations on this journey to cheer us have barked on. My name is Harry Pearson [ph]. I’m with Military Talent Acquisition. And my question is regard to -- we have been a leader in setting the standards on the hiring of veterans military spouses and service members. As we look forward with our new mission, are there going to be any new plan to help more companies understand the value that this magnificent population talent will bring to the table?

Kevin Johnson

One of the thing that we had enable to do is, because of the success we’ve enjoy with bringing military and into the Company. As we’ve shared that with many, many companies. And we had two very successful meetings for musters, where we brought life might in companies together and organization and I think it’s a great level of interest and understanding about the value of military and spouses coming into this company. So, the answer is, yes, and we are telling the story to lots of people and I think as a result of that other companies are following soon, absolutely.

Unidentified Company Representative

Good morning Howard, good morning Kevin. My name is Tammy Somers [ph]. I’m the partner on the inclusion and diversity team. And next Tuesday, I’ll celebrate my one-year anniversary with Starbucks.

Unidentified Company Representative

Congratulations.

Unidentified Company Representative

Thank you. And as I’ve been approaching this milestone, I really spent a lot of time thinking about what is Starbucks mean to me? And well there’s many aspects of this amazing company means to me, two things really stand out.

And the first is, Starbucks is a place where I can be me. Being a women, a women of color and corporate America, it’s not always been an easy experience to come to work and really be your full often itself and I’ve been able to do that at Starbucks each and every day to come to work, to be vulnerable, to remove the mask, to share my story and own it without being judged but to be embraced and to be welcomed. And that feeling has really made a difference to me in my life.

And the second is opportunity, in my role I’ve the good fortune of working with leaders and partners in the field and driving inclusion and diversity, well it had been some success. We’ve an opportunity to do more. And that really excites me, as to the opportunities to dream that and to have impact and thank you both for the experience, I am really grateful for it.

Unidentified Company Representative

Thank you for sharing that. We’ll go here.

Unidentified Company Representative

Good morning Howard, good morning Kevin, good morning partners and shareholders. My name is Saunjah Powell-Pointer [ph] and I’ve been a partner for three years. I’ve sourced furniture for our beautiful stores and there’re two defining moments in my career here at Starbucks. One of them was December 10, 2014 when our leaders were brave enough to have an open dialogue on race. It touched me because it was on the backdrop of many unarmed black men being killed and a lot of unrest around that. Because I’ve seven brothers and a host of cousins and I know that, that could have been them. It moved me in a way that will stay with me for a lifetime.

And the second moment was June 19, 2015, and in a very quiet and humane way, our leader Mr. Howard Schultz took time to go to Charleston, South Carolina, after nine people were killed at Mother Emanuel church. You asked me to join you on that trip. I don’t think that would have happened in any other company, but you take time to go make sure that the community feels safe, that the community is taking care of, and to see what we can do to use our skills for good and when we visited that church and then we visited our partners in that store, and we heard about how our partners activated that community.

They created safety, they created normalcy. Just that cup of coffee or their pastry, got them through what could have been a very harrowing experience for a lot of people. There were partners who were not working; do you remember? And they came into work in order to be there for the community and I was left with the vision of the Mother Emanuel Church and chalk on a board behind our bar letting the community to know that we stand by before you and with you. And that’s what I mean to be performance driven through the lens of humanity and I thank you for demonstrating that leadership.

Unidentified Company Representative

Thank you.

Unidentified Company Representative

Thank you for sharing. My name is Rebecca Badger [ph]. I’m 12 year partner at the SSC and I have a similar story of saying. In 2004 I came to the Company as the young professional who has had all of the time in the world to get a degree and put it aside. And 10 years later, May 2014, I found myself a single moment to solder in one of whom had down syndrome and required additional support and I saw all the time in the world slip away. And then in June of 2014, scholarship, the Starbucks College Achievement Plan was announced and a new hesitation was not an option because I’ve given the opportunity to achieve the dream of a college degree. And I started immediately with one of the first classes and stand here before you to two and half years later and finish my course towards to end of February.

I will look for in May and in this first of my family to finish the college degree. And that when I think about the equity of the Company and what they can get to their partners and the benefit, benefits that I’ve received from you over the last 12 years that’s what I carry with me and that’s a message I want you to shareholders to understand to. Is that value is so much greater than just the few thousand dollars to get me there. But it’s what I talk about and that’s what I move forward to rest of my Starbucks journey.

Howard Schultz

Thank you.

Kevin Johnson

Thank you.

Unidentified Company Representative

Hello, my name is Sean Greenlee. I’m a District Manager. I’ve been with the Company for about three years. And I just want to follow up with what Saunjah was saying and even Rebecca over that. Providing some space, yes, I understand we all know the totality where performance driven company who lead through the lens of humanity. But Starbucks truly provides us that space to do that, as a maybe veteran, socially conscious, biracial partner. I truly feel that the mission and values really aligned with what I personally and professionally stand for.

Recently and when I talk about Starbucks giving us the opportunity to do what’s right, when nobody else is looking, I was sent on a civil rights pilgrimage to represent Starbucks down to the South, and it was amazing transformative experience one in which helps me to better understand the social and racial inequities that are going on out there. And to be able to continue to provide partners those hands on opportunities and implement the social impact initiatives out in the store, so that’s real and it resonates with us. Well, much more effectively couples to be able to translate that in the communities in which we serve. So thank you.

Kevin Johnson

Thank you

Unidentified Company Representative

Hi, I’m Kerry Siraj [ph]. I’m a two-year partner, part of Partner Resources. And I love the thought behind these open forums and the transparency that we get from it. And something that we stay with for hours, but one will rise to the top of that, it was the prompt forum that you hosted Howard immediately after you announced the decision to pass on the ring to Kevin. It was heartfelt, it was moving, but I found myself even only being a two year partner being so overcome with emotion in a roller coaster. I think about why that was and that’s because that have the opportunity to join Starbucks to have this opportunity not only what it means for our company, but what it does for community.

I’ve chose to uproot with the support of my husband and my two little girls. I move from the Midwest here as I jump at the opportunity for role here. So I want to thank you for that. But I do have a question, as I’ve since that time reflected and thought about the range of emotions that the two of you have gone through and coming to this decision in this historic time. That your families have taken on and I’m curious as I work through my range of emotions, I can’t only imagine your range of emotions. Then I’ve a question for you in terms of there are few words of wisdom that you’ve shared Kevin through this journey that you’re comfortable sharing with the few 100,000 of your closest friend.

Howard Schultz

As you can see this is completely unscripted. What Kevin and I have spoke about privately and with the team is pretty simple when you think about try to do the right thing. And I share with Kevin that for many many years with we are in our leadership team meeting and when we’re in the board meeting, I try and metaphorically think about two seats in the room that are empty. One is occupied by partner and one is occupied by a customer. And I try and being mindful of whatever we are discussing and ultimately whatever we are ready to decide is that decision going to make our partners and our customers proud.

And it’s true that principle and purpose that has guided me and I know that has guided Kevin the last few years. And there is no doubt in my mind that we’re not perfect we make some mistakes along the way. But conscious and heartfelt commitments we have is trying to owner our customers and our partner and make them proud the decisions we make. It’s a pretty simple thing, business can be very complicated but when you reduce it down to the lowest common denominator and that is our collective responsibility as managers and leaders is to make our people better and proud and to do the same thing with our customers. That’s all we have to do, the rest is MOP.

Kevin Johnson

You asked a bit about sort of the emotions as you go through and as I shared in the video introduced that was showed today. At this point in my life I only want to spend my time on things that bring me joy with people I love. And so that part of it is pretty simple. The harder part though is the fact that we’ve got an iconic founder who’s created this wonderfully beautiful place called Starbucks. And there is great sense of responsibility that I feel to you to every partner in this company to our shareholders to our customers and the communities we serve. And the times that it can be little inseminated, but what gives me comfort is the mission and values of the guiding principles that got us to this point today are the same ones that will guide us in the future. The commitment of partners all our view that I’ve met around the world in the great confidence that we’re in this together and the fact that we still have Howard sitting in the office next door, that’s kind a comforting too.

Unidentified Company Representative

My name is Debra and I am the Store Manager at in San Antonio, Texas. I’ve been with the Company about five years. My store was the veteran community store, but now it’s a military family store. And last September, I have a brother who is in the air force currently in last September, he suffers from PTSD and he had an attempt of suicide. And as I was -- we were driving to SAMMC, the military hospital down there in San Antonio at Fort Sam.

I remember looking at the building, the surroundings, and I knew as much as I lost control because my brother was in there. I knew I wasn’t alone, but because of the programs that we have, the opportunities, the volunteering that we have within military the U.S. so mission continues. I knew I had a bag of people behind us, me and my family to support us at anytime that we needed them, and I like to tell you thank you, thank you very much from the bottom of my heart for allowing those program to happen here at Starbucks.

Howard Schultz

Thank you so much.

Kevin Johnson

Who are you? You need to tell people where you work?

Unidentified Company Representative

I am Cora Carter [ph]. I am the Store Manager at Pike Place Market [ph]. And mainly I just want to say thank you to Howard as there are so many we could all share about the amazing experiences we all have everyday but I just want to thank Howard for his amazing vision of creating a company where we feel like we belong. I know when I was in high school I always wanted to work for Starbucks and then my parents bought a restaurant and we were into all my dreams temporarily and I moved after high school to Hawaii and didn’t have a lot of my family or a lot of my friends around and I was 1,000s of miles away, and I walked into Starbucks store and applied and instantly felt like, I was close to be there.

I knew I belong, I knew it was going to be my family and now being in Seattle at Pike Place eight years later, with all over year later. I feel like it’s our job as partners, but especially a Pike Place to really see an environment where everybody feels safe, everybody feels welcomed, everybody feels like they belong whether it’s a customer is coming from all over the UK, from all over the Japan, Korea or wherever they are coming from, they are going to feel like their family, and they are going to feel like they belong there and that goes with our partners from all over the world as well.

Kevin Johnson

Thank you. How many partners work in Pike Place?

Unidentified Company Representative

Right now about 45, but sooner that will be somewhere so probably close to 60.

Kevin Johnson

Thank you.

Unidentified Company Representative

Good morning Howard and Kevin. Thanks for hosting this partner forum and congratulations on the birthday of grandson. My name is Lauren Alford [ph]. I work in Risk Management and I’m very appreciative to be one of the first 10,000 veterans hired. Today I’m representing the Access Alliance. The information you showed earlier about the tremendous success of our hiring initiatives is awesome and inspiring. And I’m really, really proud to work for an organization that meets a single aspirational goal and then response by saying that’s not enough and re-doubles their efforts.

Today, I’d like to mention another community of highly talented individuals who are underrepresented in the workforce. There is 57 million Americans with disabilities in our communities today, but sadly only 20% are in the workforce compared to 68% of their nondisabled neighbors. My question for you and of course my further hope, you said Starbucks can use our tremendous forces for good to find way to create perhaps the new initiatives to hire 10,000 Americans with disabilities. Thank you.

Kevin Johnson

Well thanks for sharing your story and certainly we have many opportunities to help so many people in need, clearly this is a community of people that we can probably be more for. I know we’ve done a lot to well come them into our stores and to make at Starbucks experience easier, but perhaps there is much more we can do to bring them here as partners. Thank you.

Howard Schultz

So, I want you to perform a special act right now. Kevin and I’ve had more opportunities to discuss and celebrate the transition, feels like happen at least five months ago. But this really is a special moment and I wanted our partners to see it. So I have had one piece of Starbucks that is been in my pocket for almost 35 years. When I came to work at Starbucks, I work in the Pike Place store and more than any other store in the world we would not have a company without Pike Place that really defines everything we stand for. And what I had in my pocket to the last 30 plus years was the key to the Starbucks store at Pike Place. So, this morning which I do every moment I can to go to Pike Place, but every annual meeting I start up with Pike Place, I asked Kevin to join me there this morning. We did this earlier, but I want to do it in front of all of you, I’m proud to give Kevin the key to the Company and to the Pike Place store.

Kevin Johnson

Thank you. I must say, very humbling experience but it’s quite an honor and it’s also comes with a lot of responsibility and I want all my partners to know, our shareholders to know, our customers the communities we serve and I want Harvard to know. I will not let you down. Thank you.

[Audio/Video Presentation]

Howard Schultz

It’s already been quite meeting, we’re not done yet. As Kevin shared with you earlier when he was in Ferguson, Missouri opening our store there, I at the same time was in South Africa opening our first two stores in Johannesburg. And let me show the photos of the Johannesburg store. You get to a market and get ready to open up stores you really never know what to expect, but this is not normal. This was a two hour wait I was pretty warm and these lines have pretty much continued. It was an incredibly successful opening Johannesburg and now we’re getting ready to open up in Cape Town as well.

But the opening in Johannesburg for me personally and emotionally was much more than a opening of a market. Whenever we open up a market, I try and make myself available to all the new partners who are going to wear the green essence for the first time and since in time with them and really honor them and hear their personal story. What happened in Johannesburg was not the usual experience. I really heard the stories the people living in townships and the poverty and the lack of opportunity and hope of business of so many young people and to my surprise all 50 partners that we hired for the two stores have never had a job before, this was their first job.

You should see the joy on their face and level of self that came with the opportunity to represent Starbucks to their friend, their family and obviously to be in front of a customer. And as I was sitting down with them and hearing the stories I kept hearing in African words that I have never heard before. And it kept coming up time and time again and then finally I just said you guys, you keep using the word I’ve never heard before. What is it? The word is Ubuntu. It’s a word that Nelson Mandela used time and time again and finally I got up here to say what is that mean. And I couldn’t wait to just almost yell it out. Howard, it means I mean because of you. I am because of you.

It is stuck with me for a month, the word and its meaning. The story of Ubuntu coupled with a success that we have enjoyed in South Africa throughout the Middle East, China, Asia Pacific, Mexico and Central America, all of the Europe and the universal acceptance of Starbucks now in 75 countries. And everything you’ve seen today is, why I’m still optimistic about the future of our company. Yet, I realize more than ever before that we do not operate in isolation. We live in a time that feels so fragile and so uncertain. We live in a time of increasing divisiveness and vitriol, a little bit time of rising nationalism and isolation that fixed redirects

Unfortunately, we leave in a time when hate and violence, both at home and abroad threaten our shared values. And I think we all know that none of us are new to this danger. And we want for ways in which we can help our families our communities and yes our country. I think we should be asking ourselves two important questions, what is the core purpose and our reason for being and what will it take to build a great and enduring America? When I look back on the last 25 years, two truths are self evident today as ever before. Starbucks coffee company’s success is rooted in the compassion and the empathy our partners show to one another and to our customers every day and you just saw unscripted.

That humanity and generosity lift all those, and both have contributed to the creation of a company far-far greater than anyone’s expectations, not simply because of the quality of our coffee or the design of our stores, but literally because of the power of the human spirit, and the power of Ubuntu. What we’ve achieved as a company in the past quarter century has not been an accident; we’ve been guided by a set of strong core beliefs, we believe living our values is where it all starts; we believe that access to learning is access to a better life. We believe first jobs are how you opt in to the American dream and the promise of America. We believe hiring veterans bring extraordinary talent into the business. We believe doing good in the community is critical to doing business the right way. We believe in opportunity, innovation and the entrepreneurship [Audio Gap] spirit. But the belief that transcends all is our belief in our shared humanity.

What we’ve learned over these years at Starbucks is that it’s always been about walking in each other’s shoes, demonstrating compassion, empathy [Audio Gap] America because we see it every day in our stores with our partners and with our customers. The student studying to become the first in their family to graduate from college; the entrepreneur writing a business plan inside our stores, the police officer sharing a cup of coffee with community leaders. The volunteers readying in for data service; and people of different faith, races, sexual orientations and political beliefs coming together in a respectful and civil dialogue that’s what makes me so optimistic about the future of Starbucks and more importantly about the country we all love. To our customers and shareholders, I thank you for your trust and support throughout all these years. To the millions of partners who have proudly worn the green apron at Starbucks since 1971. I humbly say thank you.

I am because of you. Thank you. I am because of you. Starbucks is because of you. And we are because of each other. Thank you and god bless you all. Thank you. Thank you very much. We little, I’m not done yet. We do and traditionally and this year is no different have a very special treat for you. Just a few years ago there where I got to be slow. Just a few years ago, just orders was performing at local open mic sessions mostly in Texas working with well busing tables and really working as a dish washer. And we’ve had a long history of Starbucks with music and every now and being able to identify someone with extraordinary talent and hard and someone who really need and opportunity. And not that this person needed an opportunity but we have built relationship with him and he is on fire, his first album was nominated for Grammy, the powerful video for his song the River earned him another Grammy nomination. His musical career has been about passion and perseverance. His songs are sung and written from the heart and I’m so proud ladies and gentlemen to welcome my friend Leon Bridges.

Leon Bridges

How are you doing?

[Performance]

Unidentified Company Representative

Ladies and gentlemen please welcome Executive Vice President, General Counsel and Secretary, Lucy Helm.

Lucy Helm

Good morning, ladies and gentlemen. My name is Lucy Helm and I am 17-year partner and proud of that. I am here today for the sixth time in my Starbucks career to present the formal portion of the annual meeting of shareholders. We’ve experienced a lot of great things this morning, a lot of wonderful music and inspiration. But I know, I realize in my heart of hearts that this is a part of the meeting that you value the most, anxiously considering the results of your shareholder vote and proposals and the proxy statement.

And in the past, I tell you, I felt pretty confident in my ability to deliver those results to you clearly and accurately. However, this past year I have to tell you, I admit, I’m a little nervous. The past several years, we’ve all experienced a number of notable snap-oohs in the press about the reading of important results. From Steve Harvey, we have to name of Idina Menzel to Adele Dazeem and Warren Beatty and Faye Dunaway most recently mistakenly announcing the year’s Oscar winner a La La Land instead of Moonlight. So, you guys, if I get anything wrong, texting seems to be working, and I think tweeting [ph] is big in the administration right now. So, please let me know.

So, first, before we consider the proposals detailed in the proxy statement, it is my honor and privilege to introduce the 2017 nominees for our Board of Directors. All of the Starbucks Board members and nominees are here today, and I’ll ask them to please stand as I introduce them. Mr. Howard Schultz, our Chairman and Chief Executive Officer; Mr. Kevin Johnson, our President and Chief Operating Officer; Senator William W. Bradley, Managing Director, Allen & Company; Ms. Rosalind Brewer, former President and Chief Executive Officer of Sam’ s Club; Ms. Mary N. Dillon, Chief Executive Officer, Ulta Salon, Cosmetics & Fragrance, Inc.; Secretary Robert M. Gates, former United States Secretary of Defense; Ms. Mellody Hobson, President Ariel Investments; Mr. Jørgen Vig Knudstorp, Executive Chairman LEGO Brand Group; Mr. Satya Nadella, Chief Executive Officer and Director Microsoft Corporation; Mr. Joshua Cooper Ramo, Co-Chief Executive Officer and Vice Chairman, Kissinger Associates; Mr. James G. Shennan, General Partner Emeritus, Trinity Ventures and who as Howard mentioned, retired from the Board immediately prior to this meeting after 27 years of service; Ms. Clara Shih, Chief Executive Officer, Hearsay Systems, Inc; Mr. Javier G. Teruel, retired Vice Chairman of Colgate-Palmolive Company; Mr. Myron E. Ullman, III, retired Executive Chairman J.C. Penney Company; and Mr. Craig E. Weatherup, retired Chief Executive Officer Pepsico Company. Those are the nominees for the 2017 Starbucks Board of Directors.

I would also like to introduce to you Andrew Wilcox, who is representing Broadridge Financial Solutions and he will not give me the wrong envelop. Mr. Wilcox has been appointed the Inspector of Elections to tabulate the votes today. We have received an affidavit signed by Broadridge Financial Solutions that notice of this meeting along with related proxy and annual report materials was mailed or made available on January 27, 2017 to each Starbucks shareholder of record as of the close of business on the record date of January 12, 2017. Based on that affidavit, this meeting is duly called with timely and proper notice. In addition, based on information provided by Mr. Wilcox, a quorum of shareholders is present today to conduct our meeting.

Please note that a list of shareholders as of the record date is available for your inspection by shareholders at the Investor Relations table, which is located in the grand lobby behind this auditorium. The polls for the matters to be voted on today are now open. The polls will close immediately after I present the matters to be voted on at this meeting. If you are a shareholder of record as of January 12, 2017, and you have not previously voted or you wish to change your vote, you should deliver you ballet now to the Investor Relations table on the back of the auditorium.

We will now proceed to the five proposals detailed in the proxy statement of this annual meeting. Because notices were submitted within the advance notice period in our bylaws, no nomination or proposal other than those appearing in the proxy statement will be presented at this meeting. The matters to be considered here are all described in our proxy statement. The first order of business is the election of the director nominees as nominated by the Board who I just introduced to you. The Board of Directors recommends a vote for each of the nominees.

The second item of business is the approval an advisory resolution on executive compensation. The Board of Directors recommends a vote for this proposal. The third item of business is an advisory resolution on the frequency of future advisory votes on execution compensation. The Board of Directors recommends an annual vote regarding this proposal. The fourth item of business is a ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the current fiscal year ending October 1, 2017. The Board recommends a vote for this proposal. The fifth and final item of business is the shareholder proposal and supporting statement submitted by Mr. James McRitchie regarding an amendment to the Starbucks proxy access bylaw.

I would now like to recognize, Mr. Todd Paglia, [ph] a representative of Mr. McRitchie for a period of three minutes. Mr. Paglia, [ph] would you please come to the microphone?

Unidentified Company Representative

Thank you. I am here to advocate for proposal five, proxy access amendment. This proposal asks the Board to make three amendments to the Company’s proxy access bylaws which allows shareholders owning 3% of shares or 2.4 billion continuously for three years to nominate two directors and place the names on the proxy. First, the proposal asks the shareholders be able to nominate 25% of the Board, instead of 20%. We have seen what kind of numbers are required to make real change happen on Board.

Second, Starbucks bylaws limit the number of shareholders that can form a nominee group to 20; each would have to hold an average of 72 million in stock continuously for over three years and so continuously. As of the end of the last reporting period, there were 73 institutional investors that held at least 120 million of stock but only 53 for three consecutive years. Most of these funds have never filed a proxy proposal or participated in an activist campaign. They’re highly unlikely to ever join a nominating group, regardless of the circumstances. This proposal would allow for any or all of our Company’s more than -- 350 institutional investors that have held their shares for the years to form a nominating group. Third, current bylaws prohibit re-nomination of candidates receiving less than 25% of the votes. There has never been a proxy access candidate at any company. Once that happens, it’ll take shareholders sometime to understand the process and the candidates. It’ll take some time to elect proxy access candidates. This proposal will remove the threshold for re-nomination.

Proxy access at Starbucks today is somewhat illusory. Just as the word natural does not mean organic, proxy access at Starbucks does not mean shareholders can actually nominate even a single director. Real proxy access will drive a competition for ideas and talent among Board candidates and create direct accountability to us, the shareholders, vote in favor of proposal five. And I would also like to bring up an issue that many of us experienced coming into this meeting today, which was somewhat disturbing. This is an incredible Company, a leader in so many different progressive issues and the protestors outside; we’re talking about the Starbucks cup, which is not recyclable still. This is an amazing thing, giving your record of incredible progressive work, Costa announced today the number two coffee chain that they are piloting a recyclable cup, the cup that Starbucks promised to bring into it stores by 2015. So, I’m asking you, given all the amazing things that this Company has done, why is it still dragging speed on living up to the promise of delivering a recyclable cup that doesn’t cost over a 1 million trees per year, where Starbucks goes, the world will follow. Please make your cup recyclable. Thank you.

Lucy Helm

Thank you, Mr. Paglia. [Ph] As to the second question is not related to the proposal, we will take that up in the question-and-answer period after this formal portion of the meeting. Thank you for your input on the resolution number five. Respectfully, the Board recommends a vote against this proposal for the reasons set forward in the Company’s proxy statement.

Ladies and gentlemen, that concludes the matters to be voted on as outlined in the notice of annual meeting. Because no other proposals were submitted within the advance notice period and our bylaws, no other business matters are in order.

In accordance with our bylaws and at this time, I hereby declare the polls for voting and our 2017 Annual meeting to be closed.

I have received the preliminary tabulation from Mr. Wilcox. And based upon that tabulation, I can tell you that all the director nominees were elected, each of the management proposals were approved, and the shareholder proposal regarding an amendment to our proxy asset bylaws was not approved. The final results will be reported on a Form 8-K within four business days of the meeting.

That now concludes the formal business and I declare the formal meeting to be adjourned. I now turn the meeting back to Howard, Kevin and our CFO, Scott Maw for the Q&A session. Any shareholders who does not have an opportunity to ask a question during the Q&A may submit their question by going to the investor relations table in the grand lobby and completing their comment card. Thank you.

Question-and-Answer Session

A - Howard Schultz

Perhaps, we will take the cup question that was posed earlier, as the first question, while people come to the microphones. I believe that there is no one doing more than Starbucks to make our cups greener. Since 2006, we introduced more than 10% of the content in cups as post consumer fiber. We championed reusable cups and created incentives for customers to use reusable cups. We’ve reengineered lids and worked with the recycling organizations around the world and into the different markets that we do business in. Does that mean we could do more? Certainly. We’re constantly working and sustainability is a big part of our mission and our agenda. But I think in all due respect to the way the question was framed, we think we have done quite a bit in the industry to make our cups green and we will continue to do more. Thank you.

Unidentified Analyst

Fellow shareholders and members of Board, my name is Bruce Freed, [ph] and I’m here on behalf of Green Century Capital Management, an environmentally responsible mutual fund company. Over the past few months Green Century has worked closely with Starbucks it developed its new antibiotics policy to eliminate the routine use of medically important antibiotics in the poultry supply-chain by 2020. This commitment is significant and valuable to shareholders and customers. Congratulations to Starbucks for taking an important leadership role on this issue. The Company’s commitment comes at a crucial time when antibiotic resistance has been named a global public health threat, expected to kill 10 million people a year by 2050.

Starbucks’ commitment offers material value to the Company and it shareholders through mitigation of reputational and regulatory risk, innovation and adaptation to changing consumer preferences and then upholding company values. With this commitment, Starbucks has joined a growing group of companies that has moved to reduce the use of antibiotics in the meat supply chain such as Panera, Chipotle, McDonald’s, Perdue Farms and Tyson Foods. By acting now, we believe that instead of lagging behind the industry and risking competitive disadvantages and reputational damage, Starbucks is instead fortifying its brand value and market share.

Starbucks’ new commitment is also forward thinking. Consumer preferences are rapidly changing to favor sustainable and safe foods. From 2011 to 2015, antibiotic-free meat sales grew over 28%, while conventional meat sales grew less than 5%. Starbucks’ commitment demonstrates the Company’s ability to innovate in response to shifting market conditions, differentiating itself in an otherwise highly competitive market. And finally, Starbucks’ antibiotic policy demonstrates a commitment to the Company’s core values of offering responsibly produced high-quality and sustainable products, upholding existing consumer trust and brand respect.

To summarize, antibiotic misuse in agriculture is a major contributor to one of the most pressing public health crises of our time. As a concerned investor, Green Century thanks Starbucks for its leadership, foresight and commitment to creating shareholder value and protecting the health of all consumers. We look forward to continuing to work with Starbucks on this issue. Thank you.

Howard Schultz

Thanks for your comment.

Jan Drago

Hi. My name is Jane Drago, I’m a shareholder but I’m also a Board member of Mary’s Place. I’m here to say thank you. Mary’s Place is a non-profit that provides shelter and services to children and their families. And this December, we ran a campaign called no child sleeps outside. And I want to say thank you to Starbucks customers in King County, to all the Starbucks partners, to the Starbucks Company, Starbucks Foundation, and Sheri and Howard Schultz foundation to helping us raise $4.5 million in less than 30 days. We’re already putting that money to good use just. Just yesterday, we opened the first shelter and facility outside of Seattle in White Center. And I can promise you that we will continue to operate effectively and efficiently as we go forward. Now, I do have a question or a comment. We know that the fastest way to solve the homeless problem is for people to have a home. And the most direct route to having a home is having a job. So, maybe you could consider yet one more initiative to hire 10,000 homeless people. And thank you, Howard and thank you Kevin.

Howard Schultz

Thank you very much.

Kevin Johnson

Thank you.

Justin Danhof

Hi. Good morning. I’m Justin Danhof from the National Center for Public Policy Research. In response to President Trump’s first executive order on immigration, Mr. Schultz, you wrote very publicly, “with a very heart, we are witnessed to the conscience of our country and the promise of the American Dream, being called into question.” And that’s of course when you announced plans to hire 10,000 refugees over the next five years. However, according to Business Insider, since that announcement “Starbucks brand has taken a beating.” Starbucks said it would focus on hiring refugees who have served with U.S. troops as interpreters and support personnel. While that sounds noble, it’s also interesting, because ABC News reported that in 2011, after discovering two Al-Qaeda members with links to Iraq operating in Kentucky, the State Department stopped processing Iraq refugees for six months, even for many who had heroically helped U.S. forces as interpreters and intelligence assets. One Iraqi refugee who had aided U.S. troops was assassinated during this President, Obama and Secretary of State Hillary Clinton travel ban. Where was your heavy heart then?

The media didn’t even report on the Obama and Clinton travel ban until 2013, two years later. Starbucks didn’t seem to have anything to say about it then either. I have two quick questions. I understand that as you said, not every decision is based on economics but economics are a hard reality. So, the first question is how much will Starbucks investors have to spend so that the company can properly vet refugees that federal government admits it can’t always afford to vet. And why were you willing to have Starbucks’ reputation take a beating by attacking President Trump’s executive order when you lack the courage to speak out against the Obama, Clinton travel ban?

Howard Schultz

Let me try and answer the two questions and remove the rhetoric from questions. If there is one message that I think I hope you came away with today is that none of the things that we have tried to do as a company which is based on humanity and compassion is based on politics but it’s based on principle and our core beliefs, which I try to really outline very specifically.

First off, on the issue of brand dilution or anything happening as a result of our business with regard to the 10,000 hiring of refugees globally, I can unequivocally tell you and we all know this from the research we’ve done that there is zero, absolutely no evidence whatsoever that there is any dilution in the integrity of the Starbucks’ brand reputation or our core business, as a result of being compassionate.

You keep referencing President Obama versus President Trump, this is not about politics, and there is no additional cost of Starbucks as a result of vetting. But, when you do have people who have defended the nation and saved lives in very, very unsafe areas as interpreters, helping American soldiers, we strongly believe that we have a moral obligation to help them transition back into United States. Thank you very much.

Next question?

Unidentified Analyst

Thanks, Howard. Congratulations on the birth of your grandson and on the new challenges that I am sure will keep making Starbucks even greater company. Congratulations, Kevin on the issues fulfilled. But from everything we’ve heard today, I am very sure that you are going to carry the torch and pick up the mantle on that wonderful corporate culture that Starbucks enjoys. My name is Claudio Vercado, I am a global stock portfolio manager who used to manage fund for Fidelity and other global organizations. Over my long carrier, I invested in hundreds of companies, Starbucks, I’ve been fortunate to be an early shareholder of Starbucks and never sold my shares, and that allowed me to retire early. Thanks, again.

In your book, [ph] Howard, one of the things that really inspired me is that you really have walked the walk, and you really have led by example, and being true to the Company’s values. And I agree with you that Wall Street needs to put more value on values. So, in the long run, there is some debate as to whether Company should be for shareholder interest, I think you are living proof that in the long run which is what really matters, the interest of all stakeholders converge, the way you treat partners and reflects how they treated customers which generates a lot of business and the growth that we have been experiencing as shareholders. So, all of our stakeholder interest will be converged. So, I applaud the fact that all Starbucks employees get stuck.

Also, the success of the rewards program shows that rewards members, as you’ve showed us, increase the value of the business for Starbucks. So my question is and my suggestion is why not make more consumers shareholders of Starbucks? I know that headache there would be managing such a program, would be very big. But there is this new company called Stockpile that allows us even fractional ownership of stock. So, you could give rewards members a…

Howard Schultz

I think we got it. Kevin?

Kevin Johnson

Yes. I’ll just comment, I am aware of some of the new models for micro funding of equities and stocks and it’s something we have looked at it. It’s not something that is currently on our roadmap for features, but it’s something we will continue to evaluate along with many other great ideas. So, thank you very much.

Howard Schultz

Thank you for your support, sir. Because there is a number of people, let’s try and limit question to just a few minutes. Thank you so much.

Unidentified Analyst

Kevin, my name Howard Katz [ph] and I want to thank you for rest...

Howard Schultz

Mr. Katz. [Ph] It’s good to see you, sir. Mr. Katz, this would not be a meeting without you.

Unidentified Analyst

I wanted to say I would loan you my name, Howard, but Howard Johnson would never work.

Howard Schultz

Okay. Your question, sir?

Unidentified Analyst

I was honored to go to Washington DC as a veteran, as a prudent veteran as the World War II veterans are now being flown to Washington DC. And you have to have a guardian. And because Starbucks is all over the United States, we could have our new veterans be guardians. You got to have a guardian to go to Washington DC. I went at Gold Coast, [ph] I wanted to suggest that we have our newer veterans take the veterans that need guardians to Washington DC when they start to get again spring. [Ph]

Kevin Johnson

Wonderful idea.

Howard Schultz

Great idea. Thank you.

Unidentified Analyst

Hi. My name is Aaron Milo, [ph] I’m coming on three years as partner and I’m not the user [indiscernible] Seattle. First, I need to, very quickly comment, thank you Harvard. If it wasn’t for the social practices and the achievement of your partners that you’d implemented, I would have never applied to Starbucks. And if I hadn’t, I would have never met a man named Anthony back in Connecticut in my original store and had him join me flying out here for the roastery later and be getting married to him in 24 days. And my completely unrelated question, last year I stepped forward and asked about introducing more information about our café practices to you customers and making my information more accessible rather than just having a single page on 1912 Pike and a few other smaller pieces. And I know there has been a lot of development with the roster and everything else. So I wanted to ask if that was something on either of your platters that I as planning to be a little more forward your in implementation.

Howard Schultz

Well, certainly the 1912 Pike site is all about sharing information about coffee, café practices and what we’re doing to help coffee farmers around the world and ensure that we’re doing our part for sustainability and helping farmers. I know Sharon Rothstein, our Chief Marketing Officer and her routine are trying to find ways to get the content and some of the information we have on 1912 Pike out to more places. So, thank you for your suggestion.

Unidentified Analyst

Hi. My name is Adam and I’m a former partner, current shareholder, I’m actually here today with Christine right behind me on behalf of working Washington and building on the question that was asked in the in prompt to open forum regarding paid family leaves. I wanted to just quickly tell my story where I moved to Seattle from Dallas, Texas four and half years ago for my previous job at Starbucks and in less than a year, my now wife and I discovered we were going to become parents and at that time would be paid family leaves were -- excuse me, with the family leaves policy, we determined that me taking time off was simply not going to be an option; it would create too much financial strain. So, in light of that, I do like the women on stage think it’s worth commending Starbucks for taking a step in the right direction of trying to offer paid family leave that I think a company of this size to be doing that, it’s really a huge step. And I appreciate that from what I’m seeing is there is a dialog opening up about what is the path forward for this policy. And I’m kind of curious to hear more about that. Perhaps, I think Christine can put a little bit of context as well. She’s a current partner.

Unidentified Analyst

Hi. My name is Christine Piccolo. [Ph] I am current partner in Ohio and I’m a new mom. My son is four months old. And I flew to Seattle because I know as a parent how important it is to spend those first few months with your new baby. Right now, the in-store partners are not included in the new paid parental policy. And I just want you to maybe reconsider and extend this crucial benefit to all employees.

Howard Schultz

Well, thank you for sharing your story and congratulations on the birth of your child. Certainly, we are a company that has always been very creative and innovative in the way we provide benefits to our partners, beginning with healthcare for part-time workers, being stock, the college achievement program. And as we went into this year and getting feedback from our partners in the United States, there was some decisions we had to make, one of which was a significant increase in wage for our retail partners along with an enhancement to our healthcare benefits for the private exchange, which has saved partners millions of dollars in healthcare.

And so, if you’re making those decisions, we also juggle the decision around parental care or parental leaves. And we made the decision to enhance parental leaves for our retail partners but providing 100% paid for the six-week period, the same as that we had for our non-retail partners. And then for the 12-week period following that we had to make a hard decision in terms of how to prioritize where we were getting feedback from our partners. And that’s where we ended up, providing our retail partners the unpaid lead option that allows our healthcare to continue and everything else while they spend that time. That said, we are always taking feedback from partners and this is just one point in time as we had to make a set of decisions. And I understand Ron Crawford and our benefits organization had a very good dialog with you and your feedback and your perspective is very helpful. So, thank you so much for sharing your story and for the question.

Unidentified Analyst

Hello, again. I’m Geane Kellogg [ph] from Tacoma, Washington, just south of here. And last year I made a simple request that you update some of the furnitures that you had changed that made it not as conducive to just being at Starbucks and helping out. And you stunned me by saying give me a month. Well, you made the changes I love the store, I’m back every day, and just a big shout out to Cara and Sara, the partners and Stephanie and Stacy and all the people that make my day wonderful every day. So, it’s kind of trivial but you do think big and small and I just can’t say enough.

Howard Schultz

Thank you. We promised everyone we’d be done by 1 and I think this is probably the last question or two. So, sorry. That’s I guess Mellody.

Unidentified Analyst

Hi, yes. My name is Mellody. And actually I’ve been thinking about a big question about the global month of service which I think is still important in extending that. Although I will admit listening to introductions of everybody early today, I had vision of a LEGO roastery three as a product item at the LEGO. So, I wanted to actually wonder about how we can expand the global month of service and get its visibility year round. And I really do think it’s one of those things has led to my Starbucks addiction. I sometimes tell stories, a short version of it is that one time I was planting trees, and I looked over and there was Cliff with shovel doing the same thing right next to me and it’s amazing that you give back every single level, there is a Subway guy who lives in the same community, me and Cliff planting trees. And I would like to see the website where people volunteer have more visibility and the global month of service has visibility and maybe even a few more relationships with The Mission Continues, which is such a great organization and also does community service right here in our community.

Howard Schultz

We will take that under consideration. Thank you very much for your support at Starbucks. Thank you. You have the last question, sir.

Unidentified Analyst

Thank you. And this if for Kevin. So, getting back to the cup issue from an innovation point of view because I know you like innovation. So, when Starbucks was in its big drive to solve the cup issue which is identified as a major problem, you may have been less involved and in fact the cup that is fully recyclable which is made by Smart Planet Technologies, which I have no financial interest in, wasn’t invented until 2014; it was after the big push by Starbucks. This is a cup that is fully recyclable. One of your competitors is trying it out. It’s a way to avoid killing a million trees per year and

Howard Schultz

What’s your question?

Unidentified Analyst

My question is, will you return to your promise to solve the cup issue by 2015, now it is 2017?

Howard Schultz

What I would like to do if you wouldn’t mind, I’d love to sit down with you personally and our team and the innovation will learn more about your ideas and thoughts. So, thank you. Well, on that note I can’t end the meeting like that. I mean one more question. Who’s got it?

Unidentified Analyst

I am Crystal Williams, [ph] I am a 12-year partner, I’ve also been cleaning silver for over 14 years. This last year, I joined the Access Alliance and represent for addiction and recovery. And I just wanted to say very much thank you because this year we started a 12-step recovery meeting as FSC [ph] at Thursdays at noon if anyone, we have flyers around the building but I just -- everyone talks about there being -- they are authentic, but I ‘m really honored and touched that something that’s available for us that work and that I don’t feel it’s something I have to hide. I can talk about it and it’s respected. Thank you.

Howard Schultz

Thank you very much. All right. Lucy says we have to hear [Multiple Speakers]. Go ahead. Before you start, I think Lucy’s next gear is just going to be a little standup comedian at the jazz club on Friday. Where does that come from?

Lucy Helm

I don’t know, Howard.

Unidentified Analyst

Well, first of all, I’m just blow away by this experience. Over 14 years ago, I was released from prison. I came out after 13 years having been incarcerated since I was a child. I made a horrible mistake when I was a child. I went ahead of [ph] my age and I was very impetuous, risk-taking and impulsive, I grew up in a very negative environment, containing also with mental illness and substance abuse within my home.

When I came out of prison at age 26, I had a dream and hope to recreate my life and start anew. I had a bachelor degree that I had earned in prison and I thought it would be easy. Organizations after organizations, job after job, mini stores had denied me an opportunity, because of my criminal convection. Many people chose to judge me, make upon the single worst thing I had ever done, but one day I was given an opportunity to walk into the Starbucks store on the South side of Chicago, where I grew up. When I walked in I stepped to store manager, who looking my eyes said, Xavier, I’m not going to judge you based upon, what you did in the past. I’m going to judge you based on who you’re today and what you aspire to be. Because of that opportunity to work a barista, I was able to continue on in advancing my career and becoming a juvenile justice [ph] program coordinator, to becoming a clinical research interviewer with North Western and now working with a national campaign, as bringing the effort enlighten [indiscernible] justice system. Just last week we heard that Arkansas because of our effort has chosen abolish [ph] without probe for kids who are young as 13 and 14 who deserve a same opportunity that I was given. Because of that I’m happy to stand here your presence to say that I was a part of that effort, but most importantly you made it possible. Thank you.

Howard Schultz

Thank you all. Thank you for sharing that. Thank you for having the courage to share your story with us. I can’t think of a better way to conclude today’s meeting. Thank you all very much for being here, for listening to our story and welcoming Kevin as the next CEO of Starbucks Coffee Company. Thank you very much.

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