Exclusive: Starbucks CEO Says Guns at Odds with Vision for Company

April 2, 2010— -- Starbucks has become the latest battleground in a fight over whether gun owners should be allowed to carry handguns openly in public.

"We woke up one day and all the sudden Starbucks was in the middle of this political crossfire between the people who want to bring a gun into Starbucks and the people who want to prevent it," said Starbucks CEO Howard Schultz. "It is a very difficult, fragile situation. We're trying to abide by the law."

In an exclusive interview to air on "Nightline" tonight, Schultz admitted guns in Starbucks are at odds with his vision of what the company should be. But the Fortune 500 CEO said: "I'm not a politician. I run a coffee company and we're trying to abide by the laws in which we do business."

Last month, gun advocates held "open carry" meetups at Starbucks stores in the San Francisco Bay Area, where they carried handguns in plain sight. The coffee giant said it would allow the guns at stores as long as it's permitted by state law -- a decision which has enraged gun control advocates.

Starbucks has tried to walk a fine line between both groups -- hoping to stay out of the fray on the divisive issue while continuing to serve up the lattes and cappuccinos that made the company into the world's largest coffee chain.

Schultz, 56, is the man who built Starbucks into a coffee empire and made Starbucks brew a part of America's national culture.

After an eight-year hiatus, he returned as the company's chairman in January 2008 when the Seattle-based coffee roaster was reeling. With the economy tanking, a $4 latte seemed like a crazy indulgence for most cash-strapped Americans.

To meet the battle brewing over coffee, Schultz quickly announced a series of initiatives to refocus Starbucks on how it all started: a cup of coffee. He sought to reinvent brewed coffee, introducing a new blend of coffee called Pike Place Roast.

The chain also slashed a half-billion dollars in costs -- closing stores, laying off thousands, cutting back-office waste -- and has posted record earnings.

"I think people some people underestimated the resiliency of the brand, the emotional connection that we have to our customers," Schultz said. "Our customers wanted us to win, they wanted us to succeed because of the importance that the physical environment of the store was in their life and also with 10 percent unemployment ... our stores became a very important resource for people, a place to go, a place to have a meeting, a place to do their work, a place not to be depressed."

Starbucks Spends More on Health Care Than Coffee

The coffee chain has bounced back from its dip in sales. Now, the single biggest expense for Starbucks is not coffee beans, Schultz said, but health care costs, which total $300 million a year.

Starbucks has always prided itself on providing health care coverage to employees, including part-time employees who work as little as 20 hours a week.

During the financial crisis, when analysts told Schultz he had the perfect cover to drop employees' health care benefits, he couldn't. "This cut at the cloth of everything we've stood for 39 years," Schultz said.

Though premiums were raised, the company still offers the health care package.

"We had meetings with different Starbucks people at different levels of the company, open discussions and I said to them very openly and honestly, 'I'm not going to cut the health care benefit on any level, but I need more participation from our employees, what do you think is fair?'" Schultz said. "And collectively, we made this decision based on a consensus of what we could ask our people to do and our people, almost 100 percent, thank us. We explained it very openly with transparency, we have to ask for a little bit of participation, it wasn't a big number but we are keeping the benefit."

With President Obama's health care bill now the law of the land, Schultz said the changes will be a wash for Starbucks, since it already provides health insurance to employees, but will likely benefit in the long term.

"I've always believed that there was a cost shift in the system that as a result of the uninsured people who are doing the right thing like Starbucks and there are many other companies were paying more as a result of those people having to go into emergency. So I think over time that will be a benefit to the overall cost structure."