When Starbucks opened its first store in Japan in Ginza in the summer of 1996, it redefined the coffee-drinking culture in Japan. The Seattle-based company now has 920 stores in Japan and is on track to open another 50 by the end of this year.

In Japan, Starbucks (which is named after the first mate in Herman Melville’s “Moby Dick”) operates as a joint venture between Sazaby League and Starbucks Coffee International. Japan was the company’s first overseas market and remains its most profitable outside North America.

Stores are located in all sorts of locations, ranging from shopping centers, office building and hotel lobbies, to universities, hospitals, airports, and train stations and drive-through sites, employing more than 21,000 partners (as the company calls its employees).

Chief Retail Officer for Starbucks Japan is Barbara LeMarrec who joined the company in 1994. Originally from Newport Beach, California, LeMarrec came to Japan in April 2009 and oversees the day-to-day operations and support of the stores, as well as looking for new site locations, maintaining and enhancing the brand’s existing store portfolio. Prior to her Japan assignment, LeMarrec successfully launched Starbucks in France and was senior vice president of operations back in Seattle.

GaijinPot, together with Japan Today editor Chris Betros visits LeMarrec at the Starbucks Japan headquarters to hear more.

How did the March 11 earthquake and tsunami affect Starbucks?

It had a big impact. A lot of stores were closed because of physical damage or because of disruption to power and transportation. We ended up having about 240 stores with physical damage that needed repairs and were out of service for a day or more. However, I’m happy to say that all our stores are now open.

I was amazed at the response of our partners, as we call our employees. Right away, they went into action, first of all helping people, giving away free coffee, without any prompting from us. Then they also started turning off lights.

How do you intend to cope with projected power shortages?

The latest figure we have is a projected 15% cut in power. Because we have stores in all sorts of locations, such as shopping centers, hospitals, universities, train stations, hotels, lobbies of office buildings, how we handle the power shortage will be largely determined by where we are and what the landlord will do.

Our stores are like little production plants. We are reliant on power because we are making our product fresh for every customer. We want to be able to make sure the store environment is comfortable and safe from a food quality perspective. So we simulated a worst case scenario – power out for three hours every day with no power for refrigeration. Hopefully, we won’t get to that point.

Besides that, we’re looking at simple things that can make a big difference, like making sure all our filters are clean, pastry cases. We are preparing materials for stores to give them guidance on reducing energy consumption. Many of our stores have two espresso machines but they don’t actually need two operating all day long. They can turn down the second one when it is not needed.

Did the quake impact your earnings for fiscal 2010?

It did. We had a strong performance for fiscal 2010 but we did not get the record-breaking result we were on track to achieve. Immediately after the earthquake, we saw a 10% decline in our sales. Almost half of our stores were closed at one point. Transportation and power were our biggest challenges, followed by supply chain disruptions, as well as getting partners into the stores. It was difficult getting information. Rolling blackouts were announced and we would close stores; then the blackouts would be cancelled.

Is Japan a big market for Starbucks?

Japan is the 2nd biggest international market outside North America and the oldest international market. We have 920 stores currently operating in Japan. We opened 46 stores last year and are on track to open 50 this year, although that may be impacted by the earthquake.

How do you decide where to open stores?

The most common question we get is: “Why isn’t there a store in my area?” When we are looking for new locations, we examine the demographics, but basically we are looking for our customers and for available real estate. A store needs to be in a convenient location, and it needs to be profitable. Traffic flow and accessibility are important, especially if it is a drive-through. What I see as an opportunity is to make our business model leaner, invest less into construction, have fewer partners working in the store and simplify our lineup. That would allow us to go into smaller locations.

Different stores cater to different types of customers, don’t they?

Yes. The Ebisu Garden Place is an interesting example of what our consumers want from us. What I have learned since coming to Japan, is that in an office tower, people want to hide from their boss. So that store is turned around. The production faces toward the elevators while the seating is tucked behind the store.

Hospitals are another interesting area. In Japan, there is a significant amount of retail activity in hospital lobbies, much more than overseas. Patients come down to eat at Starbucks. We sell a lot more food such as sandwiches in our hospital locations. I think the atmosphere makes people feel good.

How much autonomy do you get from head office in terms of menu items and store design?

With Japan being such a profitable market for the company, we are given a lot of latitude because we have a track record of elevating the brand. Although R&D is done in Seattle, they are very interested in the Japanese market and consumer trends here and whether they will flow into other markets. We do have a marketing and product category team here to come up with products for the Japanese market. Some items developed here, such as Sakura Tea Latte, are only sold in Japan, but other products developed here find their way into other markets. Coffee Jelly Frappucino is one example. Another is Green Tea Frappucino, which is served in other parts of Asia and also the U.S.

How does the coffee-drinking culture differ in Japan?

One of the biggest differences is when Japanese drink coffee. In the U.S., the busiest day part is in the morning. For us, our biggest day part is from noon to 5 p.m. Size is another difference. The Short has been taken off the menu in most markets. Japan is the only market that continues to offer a Frappucino in a short size. We tend to sell more food such as sandwiches here than in the U.S. The U.S. is more focused on morning items such as muffins and Danishes.

Consumers stay longer in stores in Japan, so stores are larger as a result. It is all about seats. We have also found that it is really important to have flexible seating arrangements. During the day, a lot of customers come alone, much less than in the U.S. Single seats are important during weekdays. Then on weekends, group seating is more in demand.

Is there a demand for new products with greater frequency?

Yes. Our consumers want new products. When we launch new beverages, we always see a spike in our business. It’s not just about new products, though. Our consumers are looking for innovation in our marketing and store design.

What about Internet access?

Internet access is definitely important but it depends on the location, such as in business areas. Store design is important for Internet access because users want more distance between themselves and someone else.

How is Starbucks doing in convenience stores?

Good. In 2005, we started a relationship with Suntory for Discoveries, a chilled cup coffee. It’s in most convenience stores and is doing very well. Since last fall, we have had distribution in supermarkets of roasted coffee and ground coffee that you can brew at home, VIA, which is our premium stick coffee, and Origami (single-use drip coffee) in limited areas.

How has the new logo been received in Japan?

We haven’t heard a lot about the new logo because that transition happened during the earthquake. The brand is so mature here and people probably don’t realize that the logo has changed. The reason we changed it was to give us more flexibility. We are about coffee but also creating experiences and connecting with customers, and the product they are consuming may not always be coffee. In some other countries, we will be increasing our focus on consumer goods.

How eco-friendly is Starbucks?

The company has a “Starbucks Shared Planet” program based on three principles – ethical sourcing of coffee beans, environmental stewardship and community involvement. Starbucks does a lot of humanitarian efforts in coffee-growing regions, whether it is building medical centers, schools, or teaching farmers to grow more sustainable beans. Stores have been using LED lighting since 2005 and we will continue to migrate further to LED lighting as part of our green store program. We’ve actually built our first LEAD-certified (Leadership in Energy and Environmental Design) store in Fukuoka in Ohori Park.

Is Starbucks involved in local community activities?

We do a lot of CSR (corporate social responsibility) activities. We encourage our partners on a grass-roots level. For example, some stores have a storytelling event for children, while others support local charities. One store is near a school for the blind and the store manager made a Braille menu. We participate in walkathons and other many other community events.

After the quake, everyone donated supplies. The company made a 100 million yen donation within days to the Red Cross. In each store, there are cups with slits in top for donations for quake survivors. They are collecting about 10 million yen per month. Also, this year we will hold 12 concerts across Japan for quake relief.

Is Starbucks a popular company to work for?

We hired 24 graduates this year from several thousand applicants. Each year, thousands apply for part-time positions. We have a very low turnover because many see us as a career opportunity.

How much training do you give baristas?

About 80 hours, although we have modified their training over time. What we are finding is that how they learn is different from how you or I might learn. A lot of our training is now done online.

Do you sometimes visit competitors?

Yes, I do and it is really important. There are always things to learn and I like to see how they are different.

How often do you visit your own stores?

Every day. I’m out of the office quite a lot, doing real estate visits with the store development team, looking at empty pieces of land, walking through malls.

Do the staff recognize you when you go into a Starbucks store?

Sometimes, I’ll go into a store and order a beverage and I am sure the counter staff notice I have some unusual consumer behavior. The store managers know me from our annual conference for store managers.

Do you think Japan’s traditional “kissaten” will disappear?

I don’t think so. I hope not. But I do think that Starbucks and other foreign companies elevate the quality of the coffee experience overall. The number of “kissaten” has decreased but the actual number of cups of coffee being served in Japan overall has increased because there are a lot of specialty coffee houses.

When I have visitors from Seattle, I always take them to “kissaten.” Our visitors from the U.S. think of Japan as being a tea-drinking culture and are surprised to hear there are over 80,000 “kissaten.” They are wonderful, with an individual owner who is passionate about coffee. When I go, I never hide the fact that I am from Starbucks. We can have a great chat.

For further information, visit www.starbucks.co.jp