Howard Schultz once faced backlash after invoking the Holocaust during a union campaign.
A 35 percent discount call option could expose E-Mart to more than 600 billion won in potential losses.
A Starbucks store in Seoul.
[Insight Korea = Lee Suk-yeong]
As the controversy over Starbucks Korea’s “May 18 Tank Day” marketing campaign continues, attention is turning to past ideological and historical controversies involving Starbucks globally. In 2021, Howard Schultz, then CEO of Starbucks, faced intense criticism for remarks that many said evoked Nazi Germany.
Schultz’s Holocaust Remarks and a Lonely Exit
Schultz, who is Jewish, is a legendary executive who turned Starbucks into a global coffee franchise. He served as Starbucks CEO three times — from 1986 to 2000, from 2008 to 2017 and from 2022 to 2023 — helping build the company into a global brand.
But remarks he made in November 2021 shocked many around the world. At the time, Starbucks was facing the first unionization vote by baristas in its history. Schultz held a meeting with store employees in Buffalo, New York, to discuss the issue.
He took the stage to argue that Starbucks was already a worker-friendly company and that a union was not necessary. But in doing so, he referred to the Holocaust, the mass murder of Jews by Nazi Germany during World War II, drawing widespread criticism.
Schultz spoke about people imprisoned in concentration camps sharing limited resources, saying that “not all, but most Jews shared one blanket with five people.” He then linked the story to Starbucks, saying the company had similarly tried to share “our blanket” with employees.
The remarks followed Schultz for some time. He faced heavy criticism, and the incident strengthened employees’ resolve to unionize. The confrontation between Schultz and workers seeking to form unions deepened, and Starbucks’ alleged anti-union actions, including wrongful dismissals and intimidation, emerged as a social issue.
Schultz was eventually summoned to testify before the U.S. Senate Committee on Health, Education, Labor and Pensions in March 2023 over union-related issues. He also stepped down as CEO two weeks earlier than originally scheduled. The official reason for the early departure was a change in his resignation schedule, but the controversy had begun with his Holocaust remarks.
What Happens to the Call Option?
Schultz’s Holocaust controversy in 2021 and the 2026 Tank Day controversy in Korea are similar in that both were triggered by the misuse of history. But there is one decisive difference. At the time, criticism was directed mainly at Schultz, the CEO. This time, it is being directed at Starbucks Korea and the entire Shinsegae Group.
In particular, the latest marketing controversy could go beyond reputational damage and brand image concerns and potentially cause direct financial harm to the group. That is because the stock transfer agreement between Shinsegae, through E-Mart, and Starbucks’ U.S. headquarters includes a “35 percent discount call option” clause.
A call option is a right to buy a specific asset at a preset price. Under the clause, if Starbucks Korea damages the brand image or if its licensing agreement is terminated because of a breach of contract, the U.S. headquarters can buy E-Mart’s stake at a price 35 percent below market value.
If the current situation is not properly resolved, the call option could be triggered. At the time of the 2021 equity agreement, Starbucks Korea was valued at about 2.7 trillion won. E-Mart’s 67.5 percent stake was estimated to be worth about 1.82 trillion won.
If the 35 percent call option is applied, the U.S. headquarters could acquire the Starbucks Korea stake for about 1.2 trillion won. From E-Mart’s perspective, that would mean an immediate loss of more than 600 billion won in asset value.
The fact that Starbucks is one of E-Mart’s core subsidiaries makes the issue even more painful. Last year, E-Mart posted operating profit of 322.5 billion won, while Starbucks Korea, operated by SCK Company, recorded operating profit of 173 billion won. By a simple calculation, more than half of E-Mart’s operating profit came from Starbucks.
Past Anti-Communist Remarks Resurface as Boycott Spreads
Starbucks’ U.S. headquarters has issued an official statement on the Tank Day marketing controversy, saying it was something that “should never have happened” and offering a deep apology. According to recent media reports, the company is also investigating discussions around the possible exercise of the call option.
Shinsegae believes the incident is unlikely to lead to the termination of the licensing agreement. But the continued negative public sentiment toward Starbucks remains a risk. Even after the dismissal of the Starbucks Korea chief executive and the release of an apology, criticism appears to be growing.
Past comments by Shinsegae Chairman Chung Yong-jin about the Communist Party and “anti-communism” have also resurfaced. Politicians have criticized Starbucks for standing at the center of an ideological dispute. Meanwhile, calls for a consumer boycott are spreading.
Lee Jong-woo, a professor of distribution marketing at Namseoul University, said a sincere apology is needed. “Chairman Chung needs to show more sincerity,” Lee said. “Whether through a press conference or by visiting Gwangju in person, he needs to calm people’s emotions.”
- This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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