Quick Links
Starbucks is currently the largest coffeehouse chain globally. However, once upon a time, it was only a retail coffee and equipment seller. The vision to make it bigger was painted in the mind of a poor boy from Brooklyn, Howard Schultz. The project known today as 'Starbucks' went through a lot of transformation before it met with success. Despite all the bad days the company had to face, Starbucks has changed how the masses perceive coffee and has made it into an experience rather than just a beverage. Here's how Schultz built an $80 billion coffee empire from almost nothing.
The Career Of The Boy From Brooklyn Begins
Howard Schutz was the first generation kid from his family to get a college education - something he managed to afford a sports scholarship. However, he hurt himself during a football match in his college in northern Michigan and had to quit his education. After which, Howard started working as a bartender, and his financial state was so fragile that he even had to sell blood sometimes to afford the necessities.
Schultz somehow managed to graduate from college and land a job at Xerox. It was more of a sales training program which trained him as a salesman. He also worked with a Swedish company selling kitchenware, but Howard did not feel like he was living up to his potential. He did not feel content even after becoming the vice president and general manager at this company. Howard Schutz wanted more than just a paycheck of $75,000 every month, fancy cars, and vacations - he wanted to build something of his own.
The Story of Starbucks
Starbucks and Howard Schultz were both getting started - it seemed like fate that led them to make each other great in the future. In 1962, Gordon Bowker, one of the original Starbucks founders, tasted excellent cappuccino in a café in Rome while travelling across Europe. It was nothing like the instant coffee or the overcooked coffee that Americans usually had.
After returning from his world tour to his home town in Seattle, he began pursuing his interest in coffee by visiting 'Murchie's', a shop that sold unroasted coffee beans. When he got the idea of opening a shop in Seattle itself that sold fantastic coffee, he offered his pals, Jerry Baldwin and Zev Segal, to join him.
The three of them then took Alfred Peet's help, the 'Peet's Coffee' owner. Peet was originally a Dutch immigrant who had expert knowledge of all kinds of coffee beans. It was Peet who taught them how to roast coffee and make it dark, the European way.
Howard Schultz Discovers Starbucks
In 1981, Starbucks caught Howard Schultz's attention when he noticed that a small business was purchasing too many products, even more than Macy's. He could not resist visiting their Seattle store in Pike Place Market. There he came to know that Starbucks only sold retail coffee beans and offered a coffee tasting. On trying a sample, Schultz's world changed. He knew right at that moment that this was his calling.
Howard contacted Jerry Baldwin and tried to convince him about how he could contribute to making Starbucks better. At first, the three of them were a bit suspicious of Schultz, but eventually, they let him come on board.
The Transformation
After joining the team, Howard was part of Starbucks for a year before he was sent to Milan to attend an international event. There he discovered what real latte was and then came back to Seattle with the idea of turning Starbucks into a coffeehouse. The other three members of the team were not very happy with this new idea. They wanted to stick to Starbucks being what it originally had been - a retail shop for selling coffee beans.
At this point, Jerry Baldwin and his two pals were more interested in buying Peet's Coffee instead of turning Starbucks into something more. This business deal did not fare well for Starbucks; it incurred massive debts and brought them closer to bankruptcy. It was then that Howard made his bold move to open his store called Il Gionale, modelled after the Italian coffee houses. But that kind of coffee culture was not popular in the 1970s and 80s in America.
Howard's luck got better when he acquired Starbucks from Jerry and co., at the cost of $3.8 million. At the same time, Il Giornale also started prospering. But there was one fine point when Schultz was losing his business to big investors. The billionaire co-founder of Microsoft, Bill Gates, was there to support Schultz at that point in his life emotionally. By raising some money from a group of small investors, Howard was again able to recover from the crisis and gave birth to the Starbucks that exists today.
From that point on, it has been chiefly rosy days for Starbucks. There have been a few setbacks, but nothing that the coffee giant has not recovered from. The credit for it all goes to the boy from Brookly, who did not give up on his dream and turned it into an $80 billion company. Today Starbucks produces about 57 per cent of the caffeine that is consumed globally. It keeps compromising its sales by closing certain stores, as it did in 2019, to stay focused on offering an exclusive experience to its customers.
Sources - CNBC, Hook, Britannica, Start it Up.