WHEN: Today, Tuesday, September 21, 2023
WHERE: CNBC’s “Mad Money”
Following is the unofficial transcript of a CNBC interview with Starbucks Interim CEO & Founder Howard Schultz on CNBC’s “Mad Money” (M-F, 6PM-7PM ET) today, Tuesday, September 21st. Video from the interview will be available on CNBC.com.
All references must be sourced to CNBC.
JIM CRAMER: Howard, I have not heard you this excited about something at Starbucks this transformational for years and years. Tell us about this new drink and why you think it’s going to be big.
HOWARD SCHULTZ: Thanks so much, Jim. Yeah, well, first off from Italy with love, Jim. You know, as you know, I discovered espresso and the Italian coffee bars in 1983, 40 years ago and this summer 40 years later in Sicily, I had another epiphany and I discovered Partanna Extra Virgin Olive Oil. Both the discovery was the alchemy and the infusion of a spoonful of olive oil mixed perfectly with cold and hot espresso Starbucks beverages. And I’m gonna bring a couple on set so you can see it. Unfortunately, you can’t taste it. This is a transformational moment in the history of our company creating a new category, a new platform and a sense of discovery for our customers. And just think about olive oil and coffee have been around for thousands of years and here the heritage of Italy we discovered it and we’re bringing it to America and tomorrow, we open in Italy. It’s going to be an extraordinary event. The name of the beverages and the category is Oleato and Oleato is the Italian word for oil. Here’s the first beverage Jim, this is Golden Foam Cold Brew. Oleato Golden Foam, you would love it.
CRAMER: Well, if I put a spoonful of my olive oil into coffee, it may be nothing special. What do you do to make it so that this is very different from just dumping a spoonful in.
SCHULTZ: Well, I’m glad you asked that. I mean over the years, you can imagine all of the customized beverages at the Starbucks innovation beverage team have created that has been at the center of Starbucks business. Well once again, we have created a secret formula of infusing the Oleato olive oil with Starbucks coffee and creating a beverage that does two things. It produces a velvety, very luscious, almost creamy, buttery flavor and extends the coffee flavor and you get a viscosity on your lips, extending the coffee. Everyone who has tasted it in Italy in preparation for tomorrow has gone wild because nobody could expect that we would do something like this and once again it is disruptive innovation that only Starbucks could do.
CRAMER: Now Howard, we know when we watch you do that do we say, when can we get it in America and where? How soon?
SCHULTZ: Okay, okay, so we opened in Italy tomorrow in our 25 Italian stores. I’m sitting in our roastery which opened five years ago. We’ll open in California, early spring starting in Southern California. We’re gonna go to Japan as well, the UK, the Middle East. This will be a new category and a platform all over the world for Starbucks. It will enhance our business but most importantly provide a sense of surprise and delight for our customers and what we know about our customers and we’ve shared this with you over the years is that they customize beverages. So even though we’re creating core beverages for Oleato, our customers are going to put a spoonful of Partanna olive oil into their beverage and customize it and have the same luscious, buttery, velvety flavor that we’ve created on our own. And Jim, here’s the next beverage. This is very simply Oleato Iced Shaken Espresso. And you’re right, I haven’t been this excited in years because I know instinctively that we have created a completely new platform transforming both the coffee business and I’m sure we’re going to transform the olive oil business. The hero of the story though is Partanna, a family-owned business in Sicily. And it’s not just any olive oil. It’s olive oil this family has been growing olives for 100 years in the valley, very unique, almost very similar to how we grow coffee, and the symmetry is just perfect. And once again Jim, the proof is not what I say or the marketing or the PR, the proof is always in the cup and that’s why I’m so happy and so proud and instinctively know this is gonna be a great success for our company.
CRAMER: Okay so Howard, you are handing over the reins in April. It sounds like to me that you will stay on, I know you’re a member of the board, as an ambassador of this new drink. Is that possible?
SCHULTZ: That’s correct. I will, I’ll introduce it in Japan in late April and I will carry the Starbucks flag and the American flag all over the world for Oleato but make no mistake, Laxman is the CEO at the annual meeting on March 23rd. There’s only one leader at Starbucks, it’s going to be him. I will stay on the board helping Melody and him as an advisor. But Jim, come April 1, the CEO role for Howard Schultz is over and Laxman is the CEO.
CRAMER: Now this is a great model for you. You have had to step back at times and come in, you will have a role that’s operating from the point of view of Partanna and Oleato but otherwise member of the board and this will not be your baby but what kind of baby are you giving to Laxman?
SCHULTZ: Well, the momentum in our business is strong. We’re serving more customers in the world than ever before. China is going to bounce back just like we predicted. And I think we’ve got a new category and a new platform for the company and our customers and I think the wind will be at Laxman and our leadership team’s back. And I think you know, our, the year for me is over, I feel really gratified about what we’ve been able to do. As you know, we’ve added about $40 billion in market cap since I came back April 4th and I feel really good about the position we’re in, the equity of the brand and Starbucks’ position, not only in America, but around the world and very happy to see that our Chinese customers are coming back.
CRAMER: Now, we know that the Federal Reserve here is worried about inflation, how much inflation including wage inflation have you had to deal with? Is it nominal or is it substantive? And are you worried about it going forward?
SCHULTZ: I’m not worried about inflation going forward and I might be the only CEO in America that feels like we’re gonna have a soft landing and not worried about what people are saying about recession. Our business is quite strong and so we had 10% comps last quarter in the U.S. double digit comps around the world. We have had inflation. We’ve raised prices about 5% or so. We don’t anticipate any more raises and we’re in very good shape as we look at the balance of our fiscal year.
CRAMER: Now you know that on Wall Street, we care about earnings and you’ve got a new drink. Is your estimation that this is a needle mover for those who are invested in Starbucks which includes my charitable trust?
SCHULTZ: Well, here’s what I believe. I believe that we are introducing a product in a category that will be disruptive in terms of innovation and Starbucks will be a market maker with Oleato. I believe it’ll be incremental over time, and I think we’re going to change behavior and enhance the value of our customer experience and always mindful of of really the fiduciary responsibility that we have in enhancing the shareholder value for Starbucks and I think Oleato will do just that over time.
CRAMER: I could not avoid my favorite drink frankly which is an espresso martini. Are you talking about someday actually putting what goes into martini into this drink?
SCHULTZ: I’m glad you asked that because in the roasteries in the U.S. and China and here in Milan, one of the signature beverages will be Oleato espresso martini and we’ve been sampling that to Italian customers and some people around the roastery and I can only tell you, the line has been out the door to get one of them and people will be able to get that tomorrow. In our Seattle roastery and in New York roastery, you’ll be getting you’ll be able to get that as well when we introduce this in the U.S. in the spring.
CRAMER: Final words from Howard Schultz about this drink and about Starbucks.
SCHULTZ: I think the wind is at our back. We’re certainly sensitive to the pressure on our customers, want to do everything we can to exceed their expectations and we think Oleato is a market maker and emblematic of the disruptive innovation and the entrepreneurial DNA of Starbucks Coffee Company. And Jim thank you, as I said, from Italy with love, Oleato.
CRAMER: Alright ciao fantastic Howard Schultz, thank you, interim CEO of Starbucks, and yes soon to be full time ambassador for Partanna Oleato. Love it. Thank you so much, Howard. Great to see you again.
SCHULTZ: Thanks Jim. Thanks very much.
