One of the pitfalls of being a well-loved, popular company is how consumers and media hold you to account. Starbucks is a part of the fabric of UK life – the coffee is good, the shops are comfy, and the marmite toasty is legend.
On Wednesday (today) the founder, President and CEO of Starbucks, Howard Schultz, will make a (belated) public statement about the allegations that Starbucks evaded tax in the UK.
If a week is a long time in politics taking 10 days to offer a robust response to a PR crisis with a statement (and an interview) from the top man is a lifetime. Why? Because it means that the story and speculation has continued for far longer than is necessary, and crucially it has been allowed to damage the company’s reputation. Lack of comment creates a vacuum which gets filled by speculation and social media makes this worse. Sony learned this at its cost when they took 10 days to tell customers why it had closed down the Playstation Network when it had been hacked.
According to an article by Stephan Shakespeare, CEO of YouGov in City AM (http://www.cityam.com/latest-news/stephan-shakespeare/starbucks-suffers-more-nike-after-reputational-hits) Starbuck’s has taken quite a reputational hit. Buzz, which measures the positive/negative news about a brand shows Starbucks falling from a score of 0 to -25. And this is reflected in brand perception too with Starbuck’s score falling from +1 to -11.
Now, having given an interview and a statement on the matter it appears that there is a straight forward reason why Starbucks has paid so little tax in the UK – its stores have made a loss. Had the company said this at the outset the story would have had very few legs. Instead journalists have been allowed to run with it quoting “experts” who have very little insight into the company’s finances.
Evidence of this is clear. In his interview with the FT the CFO Troy Alstead says “I have been very angry in the last week not because there is scrutiny, but because it has been so misrepresented and inaccurately reported.”
So how should companies handle damaging allegations?
1. Be prepared to offer a swift response (this can be as simple as a short holding statement to buy some time until they have a fuller response)
2. Get senior executives prepared to speak to the media.
3. Be robust. Rebut incorrect statements clearly and emphatically
Acting quickly is vital. A fast response can help companies regain control of the story and mitigate the damage. Taking decisive action early in the process may mean taking a direct hit, but it is far less damaging that allowing a head of steam to build around negative sentiment.
The problem for Starbucks is that mud sticks. Having left it so long to counter the story the image of them as “tax cheats” will not quickly be dissipated. Moreover, their response – whatever it says – risks being lost among the chatter.