Starbucks faces up to reputational risk following racial bias accusations

Coffee giant making changes following arrests of black men that led to boycott calls

Starbucks faces up to reputational risk following racial bias accusations

Risk Management News

By Lucy Hook

Starbucks is grappling with something of a reputational crisis.

The coffee giant closed more than 8,000 of its US stores on Tuesday for racial bias training following an incident in which two black men were handcuffed and arrested in one of its Philadelphia cafes in April for doing little more than waiting for a colleague without purchasing anything – an incident that promptly went viral and sparked calls for boycotts of the brand.

175,000 Starbucks employees were put through a four-hour training program this week on understanding racial bias and the history of public accommodations in the US, in what the company has called a “foundational step in renewing Starbucks as a place where all people feel welcome.” Some reports have suggested that the store closures could cost the firm as much as US $12.4 million in lost sales.

On Tuesday, executive chairman Howard Schultz published an open letter to customers in which he described the incident in Philadelphia as “reprehensible” and said the company was reflecting as a result.

“After investigating what happened, we determined that insufficient support and training, a company policy that defined customers as paying patrons—versus anyone who enters a store—and bias led to the decision to call the police. Our CEO, Kevin Johnson, met with the two men to express our deepest apologies, reconcile and commit to ongoing actions to reaffirm our guiding principles,” Schultz said.

“The incident has prompted us to reflect more deeply on all forms of bias, the role of our stores in communities and our responsibility to ensure that nothing like this happens again at Starbucks. The reflection has led to a long-term commitment to reform systemwide policies, while elevating inclusion and equity in all we do.”

Starbucks also revealed that it would be changing its bathroom policy following the arrests, so that it will now allow anyone who wants to use the bathroom in one of their stores to do so, even if the person hasn’t purchased anything.

But despite its efforts to manage the crisis, the company’s reputation among consumers as a place to work has experienced a significant hit, according to a YouGov BrandIndex score released this week. Purchase consideration, YouGov’s metric of potential sales revenue, had also fallen.

“Starbucks’ workplace reputation score is at its lowest level in at least 10 years,” YouGov said, describing the result as a “difficult blow for a company that has been well-known for its employee benefits and culture, including helping pay for college tuition.”

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