A “Short” PR Crisis – Starbucks College Plan a Good Brew that’s Missing the Sweetener

It would seem that Starbucks forgot to put the sweetener in their new college tuition reimbursement plan.

This week, the purveyor of the finest coffee on earth made a big splash of an announcement about their new College Achievement Plan in partnership with Arizona State University. “Partners” at Starbucks can enroll in an ASU online college program and receive tuition reimbursement so long as they work a minimum of 20 hours per week at Starbucks and carry a minimum number of credit hours.

The coffee retailer received great news coverage across the country about its new initiative, with banner headlines about its commitment to its workforce and for demonstrating leadership on a hot topic of the day – the heavy burden of college loans on today’s graduates.

The good news coverage was rightly so. The company and its CEO Howard Schultz are demonstrating exceptional innovation and setting an example for the rest of corporate America with this program. The company, which donates over $30 million per year to charitable causes, is really putting its money where its mouth is. Or is it?

Two days after the announcement, The Chronicle of Higher Education revealed in an AP story that despite proudly announcing its “investment” in the plan, Starbucks is not offering upfront tuition reimbursement to freshmen and sophomores. Instead, those students receive a discounted tuition rate from ASU as well as anticipated federal aid, meaning ASU and taxpayers are in line to pay before Starbucks.

The overall costs of this plan to Starbucks are certainly fuzzy, and that’s the problem that the coffee crusader has run into. Either through a sloppy error or an intentionally vague description, Starbucks was not transparent in its original announcement. Furthermore, the company referenced its “investment” in the plan too many times in their press statement not to be asked soon thereafter, “How much is this costing you?”

ASU President Michael Crow was the one to reveal that Starbucks is not investing in the reimbursements to underclassmen.

What was Starbucks thinking when they failed to disclose this bit of information, which has now been the unfortunate focus of their announcement for two days – and has gone somewhat unanswered by the company?

The way the media has played it reminds me of the “Scott’s Tots” episode on The Office, in which Michael Scott reveals to a group of high school seniors that he can’t pay for their college tuition after all, despite promising it in exchange for good grades ten years prior.

So what kind of damage might this cost the coffee giant? Will anyone stop buying coffee because of it? Will the stock price be impacted because of it? The answer to these questions is a definitive “no,” but companies do face consequences when they are not fully transparent in their public pronouncements. The consequence in this case is a loss of credibility.

Despite making a major commitment to the College Achievement Plan and in its announcement – including a major event with the US Education Secretary, a multimedia web page with a lot of resources and reference information, and more – the lack of clarity around the company’s investment in this plan caused it to on Wednesday to lose some of the substantial credibility it had properly earned on Monday.

Thus in the future when Starbucks makes a major announcement about a significant new initiative, brandishing its well-earned brand integrity in the process, there will be reporters, Wall Street analysts, and others that think twice about the message and the messenger and scrutinize the details in new and skeptical ways.

In truth, this plan is a real benefit for Starbucks partners and is something of which the company should be proud. Right now though, to regain some of the credibility it lost, Starbucks should be aggressively and transparently communicating about its total investments in this plan.

Howard Schultz should have already issued a video statement online with a simple explanation about the company’s vision for tuition reimbursement, its investment in the plan, and the many benefits it will provide his employees. After all, how many low wage, part time workers have ever gotten college tuition reimbursement from their employers? That is a story that needs to be reinforced with new information about the actual investments Starbucks is making in the plan.

For sure, on the scale of PR crises this one rates more of a short or a tall than a grande or venti one, but there is more that Starbucks should be doing right now to sweeten their story.

Starbucks at a Glance

  • 20,000 locations
  • 64 countries
  • 135,000 employees
  • 70% of employees are college students or aspiring college students
  • Market Cap: $51 billion
  • Highest stock price: $74.23

College Achievement Plan at a Glance

  • Previous plan: $1,000 reimbursement per year
  • Benefits under new plan:
    Juniors/Seniors: $2,420 per semester (40% of tuition costs), including upfront Starbucks reimbursement of gap between student aid and out of pocket costs
    Freshman/Sophomores: $1,276 CAP scholarships (discounts) per semester (22% of tuition costs) from ASU but no upfront Starbucks reimbursement on the gap between student aid and out of pocket costs
  • Cost to plan partners (for every 1,000 students):
    Arizona State:                           $24 million
    Starbucks:                                  $11 million
    Pell Grants:                                $7 million



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