Ex-Starbucks CEO Howard Schultz 'vividly' recalls advice from Costco co-founder—it 'became a core principle for us'

CNBC

01-05-2025

Howard Schultz's advice for CEOs on weathering economic uncertainty is simple: "Serve every customer and partner beyond their expectations," the former Starbucks CEO wrote in a LinkedIn post on Wednesday.
That's what Schultz tells the business leaders who reach out to him for insight into handling the global markets' current uncertainty, amid President Donald Trump's tariff policies, he wrote. "I'm not sure there is a playbook other than staying true to your values and a maniacal focus on the things you can control," he added.
Schultz would know. He led Starbucks through a turnaround during the 2008 financial crisis — relying on advice he now "vividly" remembers from Costco co-founder and former CEO Jim Sinegal, he wrote. "Howard, the cost of losing your core customers and trying to get them back during a down economy will be much greater than the cost of acquiring new customers," Sinegal said, according to Schultz.
"[Sinegal's] sage gift became a core principle for us during that time of crisis, helping us emerge stronger as the headwinds died down," Schultz wrote.
During the financial crisis, Starbucks faced an "existential crisis" and flagging sales, CNBC reported in 2009. Schultz cut costs, closed hundreds of locations and ignored pressure to raise prices — opting instead to offer customers discounts and easier mobile ordering through a loyalty program.
He also shut every Starbucks store for three-plus hours of employee retraining to improve the company's focus on quality and customer service. "We reinvested in our people, we reinvested in innovation, and we reinvested in the values of the company," Schultz said in a 2010 Harvard Business Review interview.
Starbucks' annual profits rebounded: $945 million by 2010, up from $315 million in 2008.
"Great, enduring companies have the innate ability to effectively manage through turbulent and uncertain times by embracing customer centric innovation, value and brand [relevance]," Schultz wrote in his LinkedIn post.
Sinegal's advice has helped at least one other industry giant. The Costco co-founder met Amazon founder Jeff Bezos for a coffee in 2001, when the tech company was struggling, and reportedly made quite the impression, according to the 2013 book "The Everything Store," by journalist Brad Stone.
At that meeting, Stone wrote, Sinegal touted Costco's ability to maintain strong customer loyalty with "dirt cheap" prices made possible by keeping costs low and cultivating relationships with suppliers. Costco operated on the principle that "value trumps everything," meaning that a high degree of bang-for-the-buck was the best way to keep customers happy, Sinegal said, according to Stone.
With Amazon's stock reeling after the dot-com bubble burst, Bezos committed to offering customers value, slashing prices on core products, The New York Times reported at the time. The company's sales rose, and Amazon posted its first-ever quarterly profit at the end of 2001.
Today, Amazon is one of the world's most valuable companies, turning an annual profit of $59.2 billion in 2024.