SECTION A There are THREE (3) questions in this section. You are required to answer ALL questions. (20 MARKS

CUPPA COFFEE CORPORATION (3Cs): A BITTERSWEET REPUTATION RECOVERY In November 2018, a financial review of Cuppa Coffee Corporation (3Cs) showed that fiscal year 2018 had been a success, even though the company had faced one of its most serious crises in recent history. On April 12, 2018, video footage of an incident at a store in Philadelphia went viral on social media. The unwarranted arrest of two Black men, Rashon Nelson and Donte Robinson, resulting from the actions of a single employee, caused a controversial public relations (PR) and brand image crisis for the worlds biggest coffee retailer, which then had almost 30,000 stores worldwide. The resulting public outrage was directed at the coffee giant. Protesters surrounded the store in the following days, accusing 3Cs of racial bias and chanting such slogans as, A whole lot of racism, a whole lot of crap, 3Cs coffee is anti-black. In series of press releases posted a few days later, Chief Executive Officer (CEO), Kevin Johnson issued a remorseful apology and promised a thorough investigation of the incident. Another press release on the same day, April 17, announced a bold promise: the company would close over 8,000 company-owned stores in the United States for an entire afternoon on May 29 to provide partners (employees) at all levels with racial-bias education and training.

While the general public and PR experts alike commended 3Cs for its proactive, textbook response, criticism continued to circulate on social media and news platforms. With a new year ahead, what should 3Cs next steps be? What should 3Cs priorities be, in the wake of this incident? Moving forward,what more could 3Cs do to prevent similar social mishaps from occurring at the customer-facing level? 3Cs CORPORATION: HISTORY The first 3Cs coffee house opened in 1971 in Seattle, offering high-quality, freshly roasted, wholebean coffees. The store had a prime location in the historic Pike Place Market and a name inspired by the romance of early, seafaring coffee tradersfrom the 1851 novel Moby Dick. From the start, the creation of 3Cs focused on providing a genuine and comfortable experience. This focus was strengthened in the 1980s when Howard Schultz, the chair and CEO from 1986 2000 and 20082017, was inspired by the romantic experience of visiting coffee houses in Italy. Schultz wanted to bring the same experience back home, to create a place for conversation and a sense of communitya third place between work and homean intention the company still held to this day. From the notion of a third place stemmed 3Cs mission and values (see Exhibit 1), which were officially adopted in 2008. By 2019, 3Cs had grown rapidly to become the largest coffee-house chain in the world, with over 30,000 stores in more than 75 countries, of which 14,809 were in the United States. Clearly embraced despite any language or cultural differences, the 3Cs brand has made its way into the minds of consumers around the world. The company went public in 1992, and in November 2018 had a market capitalization of approximately US$76.75 billion. Social Responsibility and Sustainability In keeping with its value of driving performance through humanity, 3Cs growth over the past few decades were coupled with expanding philanthropic initiatives. 3Cs divided its social responsibility and sustainability initiatives into four official categories: Community, Ethical Sourcing, Environment, and Diversity (see Exhibit 2). At a local scale, the companys socioeconomic initiatives included a commitment to hire, by 2018, at least 10,000 opportunity youth (i.e. young people between ages 16 and 24 who were not connected to schools or employers), and the 3Cs College Achievement Plan, which offered full tuition for four years of undergraduate studies to qualifying partners in the United States. The companys goal was to have helped 25,000 partners graduate by 2025. Globally, 3Cs had achieved its goal of sourcing 99 percent of its coffee ethically in 2015, and it had recently introduced future promises to create compostable single-use cups and other drink accessories. 3Cs defined Diversity in the form of an equation. Diversity = Inclusion + Equity + Accessibility and viewed diversity as both a value and a guiding principle that was integral to everything we do. This principle included an intention to hire partners who are as diverse as the community we serve and a respect for diversity among its external suppliers and customers. The company expected its partners to treat all stakeholders with respect and humanity in order to achieve and maintain a welcoming brand image. 4 AN EASY TARGET With easy access to social media, customers were becoming more powerful, while businesses especially large, global businesses such as 3Cswere increasingly susceptible to negative publicity. Even before the incident in 2018, 3Cs had found itself under scrutiny for a number of reasons of varying severity. On the topic of racial diversity, in 2015, the company had launched a campaign to promote conversations about race (Race Together), but it backfired as members of the public criticized the advertising campaign itself for its lack of racial diversity. On the other hand, seemingly trivial issues such as the design of holiday cups had also led to controversies: in another attempt to promote diversity and inclusion, 3Cs had launched a plain, red cup for the 2015 holiday season, to welcome all stories, and in 2016, it launched a cup that featured a cluster of over 100 people drawn with one continuous stroke, as a symbol of unity. Despite the intentions behind these campaigns, they drew negative attention online, with some individuals accusing the company, via Twitter, of political brainwashing. 3Cs active attempts to promote diversity and its well-established habit of drawing attention meant the substantial reaction of the media and the general public to the April 2018 incident was no surprise. THE INCIDENT AND RESPONSE A recording of the April 12 incident, which a customer had posted to Twitter, showed Nelson and Robinson being arrested after the store manager called the police. The manager said the men were trespassing, as they had not made a purchase and had refused to leave the store after wanting to use the washroom. However,the men had actually been waiting for a business meeting with another individual, who arrived on the scene and tried to stop arrest. Witnesses said the two men had done nothing wrong, and some customers said the men had sat in the store for hours that day without making a purchase. The two men were released by the local police, who found no evidence of wrongdoing, and within a few days, the manager who had made the initial call to the police was fired. In 3Cs press releases, Johnson took full responsibility for the practices and training that had led to the incident, and he also met personally with Nelson and Robinson. This meeting resulted in a financial settlement and an opportunity for continued constructive dialogue to improve the status quo and to help 3Cs reaffirm its values and vision. The two men were also offered access to the 3Cs College Achievement Plan, usually available only to 3Cs partners, to help them complete their undergraduate degrees. In the period leading up to the racial-bias training in May, the priority for 3Cs was to prove its intentions through proactive action, not just words. Johnson and the company spent this time consulting with stakeholders to develop an educational package that would be the first step in a long-term improvement plan. In the meantime, 3Cs also reviewed and updated its policy to make its spaces open to anyone physically in the store. The goal was for a similar incident to never occur again. 5 WING THEIR COMMITMENT: THE MAY 29 TRAINING When the training began on the afternoon of May 29, customers began filing out as partners gathering together in therestaurant space. Customers whocontinuedto arrive throughout thesession were disappointed at not being able to get their regular iced coffees but were nevertheless impressed with 3Cs actions. The training, supported by a comprehensive guidebook and personal notebook designed in collaboration with field experts, included screenings of several videos. While the guidebook and notebook encouraged group discussion and personal reflection on various topics relating to bias, the videos allowed partners at all levels, including managers, to act as students and learn. The videos featured a range of people, from Johnson and other C-suite executives to managers, partners, and documentary filmmakers. While some videos were informative about certain types of biases, others included testimonies from partners who had also acted on the basis of their implicit biases. Specifically, on the topic of racial bias, 3Cs worked with filmmaker Stanley Nelson to produce an educational overview of the history and legacy of African Americans access to public spaces in the United States. Designed to stimulate discussion and create ideas using a bottom-up rather than top-down approach, the training challenged employees to think more deeply about inclusivityi.e., what it takes to create a genuine, welcoming environment. The idea was not just to learn from past mistakes but to realign partners with 3Cs mission and values, ultimately curating an enjoyable experience for all customers. The takeaways from this training included practical steps for improving the customer experience. For example, in one store, the partners committed to simple solutions such as making eye contact with every customer to make them feel at home. With diversity being a core pillar of 3Cs social responsibility and sustainability initiatives (see Exhibit 2), discussions eventually led to personal storytelling among partners and helped foster an appreciation for diversity. According to Tafsir Mbodje, a 3Cs district manager in New York, partners left the training feeling closer to themselves, their colleagues, and the company itself. THE FUTURE OF THE THIRD PLACE Despite the valuable responses created that afternoon, 3Cs decision to City, some run this training was only the first step in a long process of learning and improving. The training might have raised awareness and understanding, but partners indicated that it had failed to address how they could prevent incidents similar to the one that had taken place at the Philadelphia store. 3Cs seemed to acknowledge this omission by emphasizing that the training was but a first step in its long-term journey in renewing the third place. While many customers had let this incident slide following 3Cs unique and elaborate response, PR experts recognized 3Cs textbook, proactive response, which saw the CEO himself heading the initiative and demonstrating accountability and integrity. However, many were also continuing to assert that the companys response was nothing more than an attempt to save face. At the same time, incidents of implicit racial bias that had since occurred at other businesses had received relatively little attention from the media and the general public. At a Nordstrom Rack store in May 2018, three Black teenagers were followed and wrongly accused of shoplifting, resulting in an unnecessary confrontation with the police. At a Hilton hotel in December 2018, security called the police on a Black man, again on the basis of a presumption that he was trespassing; however, he was a hotel guest who was merely in the lobby, placing a phone call to his mother. These examples showed just how easily implicit biases could surface, leading to employee actions with negative repercussions that could potentially then taint a companys brand However, the severity of the PR crises in these instances had not escalated, as it had for 3Cs. Further, while most companies faced with similar PR crises issued public apologies, none had taken further action as elaborate as 3Cs to address the root causes of its employees actions. Why then, was 3Cs continuing to receive criticism, despite having taken more action than other companies worldwide, such as Nordstrom and Hilton? Despite the seriousness of the incident, 3Cs had exhibited financial success at the end of fiscal year 2018, with shares rising 12.1 percent overall during the year. Despite losing an estimated $12 million on the day of the training and continuing to receive public criticism, the coffee giant had continued to thrive through one of its largest PR crises. Was this resiliency purely a result of its PR response? Finally, following the training, what further steps should 3Cs take in its journey to renew its commitment to the third place? How could it prevent a similar incident from happening again? Source: Ivey Foundation, Version: 2020-10-23

EXHIBIT 1: CORPORATE MISSION AND VALUES Our Mission To inspire and nurture the human spiritone person, one cup and one neighbourhood at a time. Our Values With our partners, our coffee and our customers at our core, we live these values: Creating a culture of warmth and belonging, where everyone is welcome. Acting with courage, challenging the status quo and finding new ways to grow our company and each other. Being present, connecting with transparency, dignity and respect. Delivering our very best in all we do, holding ourselves accountable for results. We are performance driven, through the lens of humanity.

EXHIBIT 2: PILLARS OF SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Community

Community service Youth action Corporate foundation Ethics water fund Ethical Sourcing Coffee Farmer support Tea Coffee Environment Recycling Energy Water Green building Climate change Diversity By welcoming diversity of people and ideas to our business, we create more opportunities for learning and success that benefit customers, partners (employees) and suppliers.

QUESTION 1 Evaluate how did 3Cs respond to the incident of April 12. Provide TWO (2) reasons to justify your answer. (10 Marks)

QUESTION 2 Suggest an action 3Cs should do to prevent such incidents from occurring in the future. (5 Marks)

QUESTION 3 Imagine you are the owner of this company. Propose a strategy of how you would build a culture where support for diversity and inclusivity is genuinely engrained. (5 Marks)