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"Black people are going to eat dinner at the movies"-How Magic Johnson's market awareness propelled his Starbucks and theater businesses

Magic Johnson's minor food menu tweaks proved to be pivotal as they boosted his revenues.
"Black people are going to eat dinner at the movies" - How Magic Johnson's market awareness propelled his Starbucks and theater businesses

A good chunk of Johnson's business portfolio is a chain of first-rate movie theaters in urban communities — Magic's market of choice

Magic Johnson didn't become a successful business magnate simply by capitalizing on his stature as a basketball icon and the fortune that came along with it. Instead, Johnson, whose estimated net worth runs up to $600 million, worked his way up the business ladder by applying what he observed in the inner-city neighborhoods where he grew up in.

Kool-Aid

A good chunk of Johnson's business portfolio is a chain of first-rate movie theaters in urban communities — Magic's market of choice. Johnson had already learned that one of the first things an aspiring businessman should do is to know his customer. Magic, who grew up in the inner-cities of Michigan, knew his market like the back of his hands. Instead of serving the usual food items in the concession stands, Magic added Kool-Aid. It was a little tweak that caused their revenues to soar.

"See, you've got to understand black people. I know my customer base, because I'm it. I told Loews, black people are going to eat dinner at the movies -- those hot dogs are our dinner. Same with the drinks. Our soda sales were just O.K. I said black people love flavored drinks, because we were raised on Kool-Aid. So we put in punch and strawberry soda and orange, and the numbers went through the roof," Johnson said, per the New York Times.

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Apart from the flavored drinks, Johnson's theater concessions also have other neighborhood staples like Buffalo wings, pizza, and popcorn shrimp.

No scones

Perhaps Johnson's most lucrative business partnership is with Starbucks. When he sealed a deal with Starbucks chief executive officer Howard Schultz in 1998, Magic claimed that he knew he had become a "serious businessman."

Like the chain theaters, Johnson took the Starbucks brand to underserved urban communities. He removed scones from the Starbucks menu and replaced them with food items that are familiar to the urban customer.

"People said there's no way Latinos and African-Americans will pay $3 for a cup of coffee. Yes, we will pay $3, but we don't eat scones. I had to take scones out of my Starbucks and put in pound cake, Sock It to Me cake and sweet potato pie — things that resonate with the urban consumer. You have to know your customer and you have to speak to that customer every day," Johnson said, per Knowledge at Wharton.

It was a minor tweak but generated millions for Starbucks. It also proved Johnson's hypothesis that the African-American and Latino communities' spending power is quite robust. Not only did Johnson provide these communities access to films and coffee, but he also raised the employment rate.

In the same way, Magic made teammates better during his playing days; he made the lives of people in the inner-cities way better, too.

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