Starbucks' Secret Weapon

Starbucks’ Seattle headquarters is a temple to coffee, with walls of muted espresso-colored woods enclosing trees ripe with coffee cherries and barrels of roasted beans. But one floor stands apart. Two flights up, where Michelle Gass has been transforming Seattle’s Best Coffee, there’s an explosion of bold reds and oranges, with silver streamers dangling from the rafters and discarded party hats from a weekly coffee tasting.

“We are so serious about our coffee. We love coffee,” says Gass, 43, eyes wide, a 15-year Starbucks veteran. She loves shaking things up, too. She led Starbucks in a new direction in 1996 by making a huge success of Frappuccino, now a $2 billion brand. She ran the company’s big turnaround for Chief Executive Howard Schultz after he returned to the top job in 2008. She led Starbucks to triumph in the usually reviled world of instant coffee with the introduction of VIA in 2009. Now she’s going to run Europe, the Middle East and Africa for the company.

In early 2008, after Starbucks’ sales started free-falling—a collision of market saturation, a tanking economy and fierce competition from McDonald’sand Dunkin’ Donuts—Schultz’s very first organizational change was to appoint Gass, then the youngest member of a mostly male executive team, to be his chief strategist. “Michelle is a courageous leader with a rare combination of business and interpersonal skills,” he says. “She was the perfect person to be at my side as we coauthored the transformation of the company.”

She helped restructure the operation and reinvigorate 137,000 employees in 17,000 stores. “I love a great challenge,” she says, beaming. “It was a very unique role, with an ability to have a huge impact.” Working side by side, she and Schultz created a “transformation agenda” with seven big moves. They shuttered 900 stores worldwide, cut almost $600 million in costs and closed every single cafe for three hours to retrain baristas while tightening operations to improve coffee quality.

At the same time, thirsty for new revenue streams, Schultz turned to a decades-in-the-lab formula for instant coffee. He wanted to roll it out as soon as possible and leaned on Gass. “I felt so much pressure to get the details right,” she says. She pored over marketing research even as “some of our own people said, ‘That’s crazy! You’ll denigrate the brand.’” She concluded they needed more time, so she and a colleague went to Schultz and said, “It’s too early. We’ve got to test this.” He acquiesced. “Michelle has strong views, but that’s what I want in a leader,” Schultz says. During test marketing she had a critical insight. The term “instant coffee” repelled people. She decided to reframe it as “Ready Brew.” Later, in a whiteboard session, someone floated the idea of a challenge: pitting fresh-brewed Starbucks against VIA instant to see if customers could tell the difference. “Now, that’s a big idea,” she said, pouncing.

“It was audacious,” recalls Chris Bruzzo, senior vice president of Seattle’s Best. “It got people nervous. But it took someone like Michelle to see the opportunity and then bring an entire organization through the curve of believing.” Sales hit $100 million just ten months after the nationwide launch.

In late 2009, with everything in place for VIA’s launch and company profits finally on the upswing, Schultz called Gass into his office and asked, “What do you think about Seattle’s Best?” That brand, as old as Starbucks, had been acquired in 2003 and promptly forgotten. “I want you to turn it into a $1 billion business. You can do whatever you want.”

She didn’t flinch. “I was drawn to it,” she says. “There were no rules here. With a smaller brand in a nascent stage, I had the ­opportunity to create everything.” She spent weeks brainstorming in a dark, windowless meeting room. “When she gets a new challenge,” Bruzzo says, “she becomes this concentrated nucleus of focus, doing really fast and deep assessments and looking for ­opportunities. Then, bam! You get the outpouring.”

Gass decided to swerve from the company’s usual customer to a new, down-market one: “What Starbucks owns is richness, layers and exotic geographies. For Seattle’s Best, I thought, how could we own simplicity?” Wanting to “bring great coffee everywhere,” she built partnerships with Burger King, Delta, Subway, convenience stores and supermarkets, exploding the brand in a year from 3,000 distribution points to over 50,000. She cut 40% of its line of packaged coffees, concentrated on five core coffee types and took the packaging from traditional coffee-brown to bright teals, reds and oranges. “As a small brand you’ve got to be disruptive,” she says.

Seattle’s Best hasn’t hit $1 billion yet, but it will, Gass insists. And it hasn’t  been easy. “I had plenty of sleepless nights.” Before the vision was laid out, many employees wondered whether sending her to “this languishing bastard child” was a demotion, says Jack Anderson, founding partner of brand design firm Hornall Anderson, who worked with her on VIA. Now, he says, everyone wants to be involved. “She is Starbucks’ greatest-kept secret.”

Raised in Lewiston, Me., Gass got a degree in chemical engineering from Worcester Polytechnic Institute in ­Massachusetts and then was recruited by Procter & Gamble to do product research. She spent six years in P&G’s Cincinnati office, identifying trends and launching ­toothpaste flavors. Then her husband got a business opportunity on the West Coast, leading them to Seattle.

Soon after they moved there she was hired as the Starbucks Frappuccino marketing manager, with a team of just three. The sweet, creamy drink had launched the year before and had no growth strategy. “Let’s think of how big this can be,” she said. She spent countless days in stores talking to customers and learned that people saw the drink as an escapist afternoon treat. She decided to add a domed lid, whipped cream, syrup, green straws and new flavors like caramel, which is now the most popular. When she got pushback from people who said the changes would be too difficult, she stood her ground. What began as a two-flavor side item is now a $2 billion platform with tens of thousands of possible combinations. “To create something sustainable, you have to be close to the details,” she says. “As an engineer I use facts and data, but it’s about seeing inside them.”

In June 2011, after barely two years at Seattle’s Best, she was called into Schultz’s office yet again. He had decided to divide Starbucks’ foreign operations into three regions: the Americas; Asia-Pacific; and Europe, the ­Middle East and Africa, or EMEA. He asked Gass to run EMEA, 33 countries with 20 languages and ten currencies. “Wow,” she said, stunned. She accepted and quickly moved her family to London, where her husband now stays at home with their 12- and 8-year-old children.

She started as EMEA president in October, and she says the region is “oozing with possibility.” Today just a quarter of Starbucks’ $10.7 billion revenue comes from outside the U.S.; Schultz wants to eventually double that. With an Americano in hand, Gass is there, peeking around corners for the next big idea.

Forbes