From A Bean Shop To Global Coffee House
With a revenue of $21.3 billion, Starbucks has changed the coffee culture around the world. The man who made Starbucks for what we know of it today once said,
“I cannot offer you any specific secret recipe for success, the perfect plan, how to reach the pinnacle of success in the business. But my own experience suggests that starting from scratch and achieving much more than what I dream about is quite possible” Howard Schultz.
Schultz was born in Brooklyn, his parents never made more than $20,000 a year, with three children to feed, things were tough at home. His father worked hard but couldn’t afford a house. One day Schultz came home and found his father lying on the couch with a cast from his hip to his ankle. Feeling that his father had lost his sense of dignity and self-respect, build fear in Young Howard, fear of failure. With his dad on the couch, the phone kept ringing from collectors, Schultz was instructed by his parents to pick up the phone and pretend that they were not home. The family had no income, no health insurance, no worker’s compensation, nothing to fall back on. With no money coming in, his parents would often discuss money issues, to escape money problems at home, Schultz would sit at the stairwell between floors and imagine a better life, he would also spend time on the basketball court. His mother would encourage him to pursue an education so that he could open doors for himself.
To help out his family, Schultz got his first job at 12 selling newspapers, and then at 16, he worked at a fur store. In 1971, Schultz went to Northern Michigan University, his hope of getting a scholarship did not happen, so he had to pay tuition by working part-time and by selling blood for cash. Schultz graduated from college with a bachelor’s degree in communications, he attended the graduation ceremony by himself, as his parents could not afford to attend.
His first job after graduation was selling office equipment door-to-door, he would make 50 cold calls a day. That job led to others and one day he found himself working at Hammarplast, a European company that made housewares. One of their customers was a small coffee company in Seattle, Washington. The orders from the coffee shop kept coming in, Howard curious to see their operation went to visit them in 1982.
As soon as Schultz walked into the shop, he felt special. He met the owner’s Jerry Baldwin, Gordon Bowker, Zev Siegl and heard their coffee story. Schultz felt he had found something he has been looking for his entire life. The Coffee shop was called Starbucks.
The company at the time only sold coffee beans, but that did not matter, Schultz enjoyed scooping up beans and sealing them in bags. After saving enough money for a trip to Italy, Schultz left to visit the land known for pizza. While walking on the streets of Milan, he passed various coffee bars, working for a Coffee company himself, Schultz was curious about how the coffee in Italy tastes like. He decided to walk into an Italian café, little did he knew, his curiosity would change his life. As he was waiting for his order, he saw the community presence in the bar, the barista preparing drinks, the presence of the Italian music, the friendliness between the employees and the customer, the presence of art. For Schultz, this was home; it was love at first sight.
Coming back to America, Schultz ran to discussed the idea with his bosses. They were not interested and told Schultz ‘that’s not for us’. Schultz persisted and the owners finally allowed him to open a coffee bar at the new location. The new store was not just another coffee shop; it was a community, introducing people to a new lifestyle. As successful as the coffee bar was, the founders didn’t want to go in the direction Schultz wanted to. Disappointed, Schultz left Starbucks in 1985. His departure from the company also meant he was no longer getting his paychecks. Remembering his dad’s accident, Schultz knew he had to come up with a plan to avoid loneliness. He decided to open his own coffee shop, the Il Giornale.
“I took my life in my hands, learned from anyone I could, and molded my success step by step.”- Schultz
He visited 200+ locations but no one was interested. No money was coming in for about a year, knowing that his wife was super supportive of his plans, Schultz kept on pushing. Eventually, he found some people who believed in his vision. “It was an incredibly challenging and exciting time!”- By 1987 Schultz had 3 locations for Il Giornale
And then Schultz heard that the founders of Starbucks were selling their coffee shop with 17 locations. Schultz with investors bought Starbucks for $3.8 million and took over as the CEO. He was planning one of the most ambitious retail expansions in history. He knew from his experience at Il Giornale, that the Italian coffee style shops would not work in America. As in Italy, people prefer to spend their time at the bar. Schultz wanted Starbucks to be a socializing place, where people could have conversations in an open space, while they have their favorite latte. The logo had to be redesigned; the interior had to be more welcoming.
The changes worked, people started to schedule their meetings at Starbucks. Within four years the coffeehouse chain grew from 17 stores to 140 outlets with revenues of $73.5 million, the company was now valued at $271 million.
Remembering that his dad did not have health insurance; in 1988 Schultz did something that was unheard of, he made Starbucks, the first company in America to give health insurance to all employees, including part-timers. By 1991, Starbucks becomes the first privately owned U.S. company to offer a stock option to their employees.
By 1999, Starbucks had 2,498 locations around the world. Schultz had managed to take the idea of building a community around coffee to new heights. And then in 2000, Schultz decided to step down as the CEO and became the chairman of the $2 billion company he had built.
Approaching 2007, customers felt that the company had lost the spirit of community with every cup. With the new tall coffee brewing machines, customers could not see barista preparing their coffee. But then in 2008, the recession hit. Schultz was on vacation in Hawaii and met an old friend Michael Dell. They came up with a plan to bring the company back. The challenge to revive Starbucks was not easy, Schultz had to shut down 900 stores, twelve thousand partners were let go. For Schultz letting partners go was an extremely hard decision, as he knew this decision would have a real impact on people. Even though many were let go, Schultz remembering his father, stood by his principles and fought hard to provide health coverage to his employees. Starbucks finally saw a sign of relief, after four years of hard work, their profits picked up. From the $7 million they had lost a year earlier, the profits jumped by a whopping 20%, Starbucks had rebounded financially.
Schultz’s story is much more than just coffee. Schultz used his own life experience to bring goodness, he created communities around coffee. He is an example that shows that hardships in life, are only there to improve you as a person.
