Why Starbucks chose to expand in Philippines

MANILA, Philippines – Setting up a Starbucks franchise in the Philippines was a risk, admitted a former key executive of the largest coffeehouse company in the world.

The decision to expand in the Philippines — the 3rd market it entered in Asia over a decade ago — initially did not sit well with the Seattle-based premium coffee retailer, according to former Starbucks International president Howard Behar, 64.

“When I made that decision (to allow franchises in the Philippine), there were people at Starbucks in headquarters who were mad at me. They said, ‘Why are you focusing on a country that has fairly shallow upper incomes?’,” he related at a conference on Wednesday, February 8, with over 200 Filipinos in the audience. 

About P32 a day — less than half the cost of Starbucks smallest coffee — was what nearly 1/4 of the population lived on as late as 2009 according to the government family income and expenditure survey. 

In 1996, it came as no surprise that the high-end coffee chain had targeted 2 of Asia’s wealthiest countries, Japan and Singapore, for its first franchise hosts in Asia.

But many people didn’t expect Starbucks to choose the Philippines next over all the other Asian countries. 

Good relationships matter 

“I didn’t choose the Philippines because of the Philippines. I choose the Philippines because of the people,” explained Behar.

He pointed out Noey Tantoco Lopez, chief operating officer for Starbucks Philippines. “It was because of the Lopezes and the Tantocos. We connected on a values level.” 

Behar related that he met with a various business leaders when he first visited the Philippines. One of them was Noey Tantoco Lopez who comes from the family behind the Rustan’s conglomerate, and is the grandson of Ambassador Bienvenido Tantoco Sr. and Glecy Tantoco.  

“The number one thing was always about who were they as people. And we connected,” said Behar. 

Looking into a business partner’s eyes and just knowing the relationship will work sounds corny, he said. But snap judgements can matter. A study by Princeton psychologists Janine Willis and Alexander Todorov cited in Psychological Science in 2006 revealed it only takes a tenth of a second to make an impression, such as the trustworthiness of someone new, and that over time those impressions usually strengthen. 

Behar cited the Tantoco’s real estate experience, customer-oriented background and their adequate capital. But other companies possessed the same assets. “When all the rest is equal, it’s who you’re comfortable with,” he said.

The move has been paying off. The Starbucks Philippines website lists 195 outlets in the country. Behar said he only expected there to be 25 stores. He said Noey Tantoco Lopez knew better. 

At the forum, which was jointly hosted by the Asia Society and Rustan Coffee Corporation, Lopez announced that Starbucks would aim to have 200 stores by the end of 2012.

Choosing partners

Behar said, “Every mistake I made at Starbucks International… was because we choose the wrong people.”

Behar’s book about his lessons learned at the international coffee giant, called “It’s Not About the Coffee,” focuses on a people based approach to business.

Behar, a man who takes relationships seriously enough to post a marriage mission statement in the room he shares with his wife, advised the crowd of businessmen, students and journalists, “Be careful with the partners you choose in life.” – Rappler.com