Howard Schultz wants to be president. His continued existence as a billionaire is tied up in Starbucks success in China. This should immediately disqualify his presidential run.
On Sunday, January 27th, Howard Schultz, founder, former CEO, and largest shareholder of Starbucks announced he was considering an independent presidential run in 2020. Schultz net worth is currently estimated at $3.1b, with his Starbucks shareholding accounting for approximately $2.4b of his net worth. Schultz existence as a billionaire is entirely predicated on the continued success of Starbucks, and Starbucks continued success is predicated on its dealings with China.
Coffee with Chinese Characteristics
Starbucks has exploded in China in recent years. There are currently 3,700 Starbucks cafes in China with a new store opening approximately every 15 hours. China is Starbucks fastest growing market and already its second largest market. They plan on having 6,000 stores in China by 2023. The 6,000 Chinese Starbucks would put it within spitting distance of the current US total of 8,575 company owned US stores (not including franchised stores).
Starbucks China strategy is to plumb new markets for growth. This emerging market growth is to make up for the anaemic sales growth Starbucks is currently experiencing in the US. The US is a saturated market that offers little new opportunity for coffee shop sales growth.
On Thursday January 24th, Bloomberg News released an article titled Starbucks is Basically a China Stock Now. The headline may not be factually accurate but the premise is correct. The continued success of Starbucks is predicated on continued growth in both store count and sales in China. The US market has reach maturation. Without China there will be no further growth for the coffee chain.
Starbucks Covfefe
As goes Starbucks, so goes Howard Schultz. His net worth is almost entirely predicated on Starbucks continued success. Schultz continued existence as a billionaire is tied up in Starbucks success in China.
Schultz’s announcement of his plans to run for President in 2020 raises a serious concern — could a Schultz White House be trusted to act in the United States best interest vis-à-vis it’s relationship with China? If the interest of the United States and the interests of Starbucks diverged, Schultz could not be realistically expected to act impartially given his materially significant financial stake in the company and its operations in China.
If China wanted negotiating leverage over a Schultz administration it wouldn’t be hard for the Chinese government to squeeze Starbucks China operations. Similarly, China could curry favor by intervening on Starbucks behalf whether by lowering tariffs or impeding local rivals.
Under previous administration, the President would divest himself of all financial arrangements that could possibly cause a conflict of interest. That was until Donald Trump assumed the presidency and failed to divest himself of his personal business in any meaningful way. The Trump Presidency has now created precedent whereby any subsequent president would not feel obliged to divest themselves of any conflicting investment.
On the other hand, Schultz would receive a significant windfall should he divest his ownership of Starbucks upon becoming president (or taking a Secretary role in another administration). Individuals who are forced to divest their financial investments upon assuming a federal role are able to do so tax free if they invest that money in US treasury bonds. Schultz would save himself hundreds of millions of dollars in capital gains taxes if he were to avail himself of that benefit by becoming President or serving as Treasury Secretary
He also sold out the Supersonics
Whatever financial benefits Schultz may see from becoming President, his third party campaign intentions are clear. Schultz has expressed concern at the leftward tilt of the Democratic party:
So many voices within the Democratic Party are going so far to the left.
Schultz managed to stand opposed to the Green New Deal and Medicare For All, both popular progressive policy proposals, when he said:
And I ask myself, how are we going to pay for all these things? In terms of things like single-payer or people espousing the fact that the government is going to give everyone a job, I don’t think that’s realistic.
Schultz sounds like he is gearing up to run for the Republican nomination (Schultz has hired the PR manager for John McCains presidential run). Alas, Schultz is setting himself up as the pro-business centrist third party alternative to a Sanders Democratic nomination and a Trump second term.
It would be an amusing irony if the #NeverBernie crowd, those ardent #TrumpRussia theorists, ended up supporting a candidate in Schultz who has a multi-billion dollar stake in successful dealings with the Chinese government.
Starbucks in the White House gift shop
After the debacle of the Trump presidency, and the continued allegations of financial dealings with the Russian government, the American people will not stomach another billionaire president with significant financial ties to a foreign power.
His financial stake in Starbucks and their huge push into the Chinese market makes Schultz a compromised political actor straight out of the gates. Schultz should save himself the time, and money, and end his presidential campaign before it begins.
