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WHEN: Today, Friday, November 3, 2017

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Starbucks CEO Kevin Johnson and CNBC's Jim Cramer on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today, Friday, November 3rd. Following is a link to video from the interview on

All references must be sourced to CNBC.

JIM CRAMER: Starbucks shares – you know, kind of doing a lot better than they were last night. Let's put it that way. After the company guided down its long-term projections of what it can do, joining us now in a CNBC EXCLUSIVE is Starbucks CEO Kevin Johnson. Kevin, interesting description between what happened when you reported the number and then when you talked during the call. Which basically said look, we've got fabulous businesses, we've got some great growth, we're going to have a U.S. pickup soon. The numbers are going to be fine. I mean, do you think people have just kind of underestimated Starbucks? And we were overestimating maybe how much it could grow at one point. Maybe we felt you were going to guide down more and we ended up with a company with pretty good numbers for a senior growth company.

KEVIN JOHNSON: Well, Jim, you know, just to put it in context, it was 2010, we last revised our long term guidance. And since then we've more than doubled revenues, we've tripled our earnings and we've quadrupled the market cap of the company while adding 10,000 new stores. So we revised our long-term guidance yesterday high single digits revenue, 12% plus growth on earnings. And at our size and scale, you know, maintaining a growth posture at that size and scale and investing in the future and at the same time returning over $15 billion of cash to shareholders over the next three years in the form of dividends and buybacks, we think is a very, very strong growth company, postured to deliver.

CRAMER: Let's talk about the so-called mosh pit, which was a term by the way, that was introduced by Ron Shaich at Panera. I saw and spent time with Adam Brotman, as you acknowledged, who was in charge of trying to fix the problem. That problem is going away. Wouldn't that mean that you could conceivably have that acceleration? Some people were doubting if there could be acceleration in the U.S. But if you get mobile pay to where it's working, you will get that acceleration.

JOHNSON: Well, that's right, Jim. And the progress that's been made on increasing throughput at peak. Look, the morning peak is the most important day part for Starbucks. With the work that's gone on to increase throughput at peak, we are in the strongest position we've been as a company, which is why we committed now to start to open up mobile order and pay to all customers. We're going to start doing that in a phased approach throughout the year those things give me confidence in the U.S. comp growth numbers we've guided for.

CRAMER: You know, it's funny, there was a time, Kevin, where Young was a company that had very good growth core fund. And then growth slowed a bit in every country but China, and people wanted a play on China. Now I know you're not going to split the company apart because I know that would destroy the flywheel but China is growing at a level that makes me feel like I want to own Starbucks China. What do you do about the blended average that makes it so that China's pulled down by the rest of the world?

JOHNSON: Well, look, you point out, we just posted an 8% same store comparable growth in China. We just announced last quarter we acquired 100% of the joint venture in East China. So we're going to unify Mainland China as a company-operated market which allows us now to lean into the growth opportunity. In addition, we're opening a Flagship Starbucks Reserve Roastery in Shanghai next month. They presents decades of growth for us. Now we think having two powerful growth engines for the company, the U.S. and China, is what's going to fuel consistent long term profitable growth for shareholders and we think both of those growth engines are important.

CARL QUINTANILLA: Kevin, you told Reuters in an interview last night I guess, we're not going to get caught in the middle of the market and I just wonder for viewers, how should they think of the brand on the spectrum from McCafe to Blue Bottle?

JOHNSON: Look, Carl we've always had a lot of competition and certainly were serving over 90 million customer occasions a week. And part of that is addressing both the needs state of convenience and need state of connection. So we will not seed the high ground of the ultimate premium coffee experience to anyone, which is why we are investing in the Starbucks reserve brand. I'm sitting here today in the Starbucks Reserve Roastery in Seattle. Next month we are opening an iconic roastery in Shanghai, China followed by Milan, New York, Tokyo, Chicago. All of that is fueling an ultra-premium coffee experience around the Starbucks Reserve Brand that is complimentary to the 27,000 stores that we now have around the world. So we're going to remain a premium coffee experience and we're investing in the Starbucks Reserve Brand to continue to elevate that experience on a global basis.

CRAMER: Let me ask you, Kevin, there's a report by Credit Suisse which says that you are even after the reset, looking too optimistically, that you have better visible than the street but they are questioning whether the margins will improve and any sort of acceleration in the U.S. What do you say to a Doubting Thomas like Credit Suisse that really doesn't believe the growth can reignite?

JOHNSON: Well, look, we study all of the data, certainly industry – industry studies and credit card data and certainly over this last year if you look in the U.S., it's fair to say that the overall U.S. retail restaurant industry has been very flat on sales and actually negative on transactions. The fact that we were able to build over 2,000 Starbucks stores globally that are performing at higher annual unit volumes than prior generations in an era where retailers are closing stores at the record pace gives us confidence that there's affinity for the brand. We then look at what we've done to increase throughput at peak, we look at our food and beverage innovation pipeline, we look at our digital flywheel and we have confidence. Look, over the last two years, we've been delivering U.S. comps kind of in that range of what we guided, but we do know that over time, away from home food and beverage is going to increase and so we've set a guidance set to -- accepting the fact that this is current – the current environment that we're operating in and with the work were doing on throughput, innovation, we're optimistic we can exceed that. Look, this quarter alone, we have a strong holiday planned and we're already off to a good start. So we're confident in our FY-18 guidance and long-term guidance that we've given.

CRAMER: What do you – I just want to go over the membership, this is the membership Starbucks reward. In q4 fiscal 2017, you said you had 13.3 million actives. Q3 you had 13.3 million actives. Q2, you had 13.3 million actives. Q1, you had 12.9 actives. Is there something wrong with the numbers? Because you do say you're up 11, up 8, up 11, what is the actual number of the active members in the Starbucks rewards?

JOHNSON: Yeah, we grew active members in Starbucks rewards 11% year on year, Jim. And what you see is seasonality in that. Think about this, when we get into holiday and we sell you know, billions of dollars' worth of Starbucks gift cards, many of those gift cards translate into rewards members. And so you have seasonality coming out of holiday where gift cards translate into rewards members. And so you have an uptick early in the year and then you hang on flat as you're engaging customers and do it again next year. So 11% growth in active rewards members we think is a good number and the fact that now we are opening up mobile order and pay to all customers, creates now a widening aperture of a digital mobile relationship, creates a feeder pool now for us to convert those customers into rewards customers. So we're very bullish on the work we've done and work we're -- we've gotten to plan for rewards program.

CRAMER: Cool. Well, Kevin Johnson, CEO of Starbucks, thank you so much for coming on the show and tell us how it's going. Really appreciate it.

JOHNSON: Thanks, Guys.

For more information contact:

Jennifer Dauble
t: 201.735.4721
m: 201.615.2787

Emma Martin
t: 201.735.4713

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