In this success story, we are going to share Howard Schultz biography, an American entrepreneur, and the chairman, president and CEO of Starbucks Coffee Company, which is well-known as one of the largest coffee store chains of the world. The story of his “American dream” coming true is widespread, but Howard’s breakthrough is not an easy one to overachieve: he did not only earn a fortune, but also reached the hearts of an entire generation of coffee fans.
Behind The Scene
Howard D. Schultz was born on July 19, 1953, in Brooklyn, New York, in a family of a former US Army trooper and later truck driver Fred Schultz, and his wife, Elaine.
With little money, both parents worked long hours to support the family. To escape being “poor” young Howard turned to sports and played football, baseball, and basketball. He did so well in high school that he was awarded an athletic scholarship to Northern Michigan University.
The childhood of the future billionaire was spent in the neighborhood of the houses for low-income families, where there was nothing but the basketball court. Most of the people over there were extremely poor and it is evident, that the children from this area were considered quite ordinary. That is why Howard always knew how difficult it would be for him to break out of this poverty. However, his dream of becoming successful was stronger than any obstacle.
When he left New York to go to college, Schultz’s father was a broken man. He had never gotten ahead in any of his low-paying jobs and was rarely shown any respect by his employers. Because of his family’s financial troubles, Schultz made the most of his college days, both athletically and academically. He received a bachelor’s degree in business and marketing in 1975, proud to be the first member of his family to attend college.
First Steps Inside The Rat Race
At the age of 12, Howard got his first job. First, he was selling newspapers and then working in a local cafe. The boy faced rather hard experience when he turned 16. He was working at the fur store, where he had to deal with stretching the leather. This exhausting job only made Howard stronger and firmed his wish to succeed in future.
After his graduation, Howard Schultz spent three years as a sales manager at Xerox, and then he started working at a Swedish company Hammarplast, where he was selling home appliances, including coffee grinders to the businesses like Starbucks.
On The Right Track
On a business trip to Seattle, Washington, in 1981 Schultz walked into a Starbucks and fell in love with the flavorful coffee. He met with one of the owners, Gerry Baldwin, to sell Hammarplast coffee makers and expressed an interest in working there. By the following year, Schultz was hired as marketing director for the Seattle business.
When he started at Starbucks, the company had about a dozen locations and sold coffee beans and related products, not coffee by the cup. Yet after a trip to Milan, Italy, in 1983, Schultz became convinced that espresso or coffee “bars”—which served the steaming beverages by the cup and offered customers chairs to sit and chat awhile—were the wave of the future.
The Turning Point
This concept of Italian café amazed Schultz the most – it was not just a store but a place for social meetings and leisure. In the United States, the socializing role was mostly held by the various fast-food restaurants.
The founders believed that such approach would cause their shop to lose its individuality. They were the men of traditional views, which supposed real coffee to be made at home.
The owners of Starbucks disagreed, so Schultz decided to venture out on his own. Rounding up money from investors (including the Starbucks partners who were willing to invest), he opened the first II Giornale coffee bar in 1984.
The small, friendly cafe was a hit with Seattle’s sophisticated coffee drinkers who, thanks to Schultz, could get Starbucks coffee by the cup and a bag of beans from the real Starbucks down the street.
Make It Fly
As Schultz planned additional Il Giornale coffee bars, he heard that one of the Starbucks partners intended to leave the business. Schultz offered to buy out all the partners and did so in 1987. He then merged II Giornale and Starbucks to form the Starbucks Corporation.
From the start, Schultz wanted to make Starbucks a nationally recognized brand, to take the premium coffee from the West Coast to the East Coast and everywhere in between. He succeeded, and Starbucks coffee bars blossomed almost overnight, creating devoted customers with every new opening.
In 1992, Schultz decided to make Starbucks a public company. In June of the same year, he put its shares on the New York Stock Exchange at a price of $14 per share. In just one day, the cost rose to $33!
Expansion was important, but quality and consistency, as well as the company’s workers, were the keys to his success.
The name “Starbucks” comes from the name of one of the characters of Herman Melville’s novel “Moby-Dick.” A twin-tailed mermaid or a Siren as she is known in Greek mythology became the image of the company. She symbolizes that Starbucks’ coffee is delivered from the different areas of the world. You can still find the original Starbucks logo at the first store in Seattle.
The Third Place
Call Me By Your Name
When the first Starbucks opened in New York City, The New York Times had to define what a latte was (and explain it was pronounced “LAH-tay”). Starbucks played up its exotic nature in everything it did, down to its sizes, with “grande” and “venti” providing a connection to the Italian coffee culture that inspired Schultz.
Barista is supposed to know all the regular customers by their names, and, also, to remember their preferences. When Schultz first visited Italy, he was fascinated by the magnificent theatrical presentation given by barista, who was pouring espresso with one hand, whipping cream by another, while chatting with the customers at the same time.
When he visited Italy, Howard brought home not only photos and menus but also videotapes documenting the baristas in action. Later, they became a teaching material for practical training of the staff. This is the one of many key points that explain the success story of Starbucks.
Scalability Is Equity
By the 1990s, Starbucks was an international phenomenon, with locations and sales jumping upwards from year to year. By 1992, there were 165 Starbucks locations and just two years later, by 1994, there were 425. Sales mushroomed from $100 million in 1993 to $465 million in 1995, while new products such as bottled Frappuccino and Starbucks ice cream began appearing on grocery store shelves.
Between 1998 and 2008, Starbucks grew from 1,886 stores to 16,680. Schultz took the chain from just an idea to an entirely new kind of store that hadn’t existed before.
Starbucks now has more than 28,000 stores in 77 countries. The chain reported net revenues of $22.4 billion in 2017, and the company’s market cap is roughly $84 billion.
The incredibly popular coffee company reportedly opens two or three new stores every day and attracts around 60 million customers per week.
Change Is Bigger Than Coffee
While Schultz led the company to incredible growth, especially after returning as CEO in 2008 after a period serving as chairman, his leadership has also been marked by his continued commitment to social issues.
In 2011, Schultz encouraged people not to donate to political campaigns until the government addressed national debt. In 2015, he spearheaded the Race Together campaign to address police brutality and racism. In a 2015 New York Times op-ed celebrating bipartisan leadership, Schultz said he wasn’t running for office, “despite the encouragement of others.”
Later, he announced plans to step down as CEO, saying he would instead be focusing on Starbucks’ social missions as chairman. Since then, he’s blasted Trump’s attempt to bar refugees from entering the US, written in the Financial Times about national identity after white supremacists rallied in Charlottesville, and launched the second season of Upstanders, a series committed to highlighting people making a difference in their communities.
I Love My Work
Howard Schultz came up with a set of rules of Starbucks, which later evolved into the corporate code. It was pointing to the benefits given by a well-organized teamwork, and the need of continuous improvement of coffee quality.
Howard Schultz paid an excessive attention to the human factor. But Howard himself calls it the most intelligent and far-sighted model of acting. He stated that if people are associated with the employing business, they are forming an emotional relationship; they dream with it and put their hearts in its prosperity.
Schultz truly cared about the team spirit of Starbucks. All employees who have worked at least for 20 hours a week were provided with a general medical insurance. Then, he introduced a system of stock options and it went up to the awarding the best employees with the shares.
Howard Schultz believes that people trust the Starbucks brand. Moreover, they trust it not because they like the way it prepares coffee; but they trust Starbucks, because they share the values of the company.
In 1994, the company’s employees in California noticed that during the summer season there were rather fewer customers, as Starbucks did not offer any refreshing drinks. Schulz did not really want to deviate from his “pure coffee” concept, but he still decided to give it a try. In April 1995, in all 550 Starbucks stores Frappuccino was first offered. The drink became popular, and in the same year, it brought a tenth of the total profit of Starbucks. In 1996, PepsiCo offered Starbucks a long-term licensing agreement for the production of bottled Frappuccino.
The Spirit Of Starbucks
The popularity of Starbucks inspired not only the consumers but also the competing companies. Similar coffee stores were rising all over the place; they also offered a better price.
Despite these conditions, the company maintained its most important principles of romance, accessible luxury, peace, and informality.
As Starbucks wanted to be a socializing place, it had to change the format of its coffee houses, turning them into the best place for having a conversation. The areas of the stores have been increased tenfold; tall bar stools at the counter have been switched for cozy tables and chairs. Having an opportunity to sit separately from the other visitors, Americans started to arrange meetings at Starbucks.
Quantity And Quality
The popularity of coffee houses quickly spread, but it also had a backside. Having such a high rate of sales, it was hard to combine a variety of items from the menu while maintaining a high product quality.
When a coffee package is open, a barista has only seven days to use it all, so the product doesn’t lose its quality. Seeing all the losses, Howard Schultz decided on another compromise.
The company has got the right to use a new method of preparing the soluble coffee extract, which allows getting a much higher quality of the instant coffee. Eventually, the experts were able to make Starbucks instant coffee taste naturally, as close as it was possible at that time.
Culture Is Branding
An important part of this system was the creation of an identity. Starbucks has strived to build its brand identity by offering customers a relaxing and enjoyable experience.
Schultz made his team following the uniform standards. According to his plan, not only every place had to have a similar design, but even the taste of coffee should be identical.
In addition, Starbucks has also built its brand on things that tend to be out of the box, by consistently defying conventional wisdom.
When companies were aggressively advertising, Starbucks decided not to advertise. When cost cutting was the dominant paradigm of the industry, Starbucks chose to emphasize non-routine procedures to create excitement among the baristas instead of streamlining procedures to minimize cost.
Going against rigorous and complex customer surveys, Starbucks chose casual and informal chats with customers to capture overall mood, understand experience with the store and gather valuable feedback.
By offering a pleasurable customer experience, Starbucks has been successful in focusing the customers’ attention on the quality of the experience, the enjoyable memories that can be woven together in its stores and not on the pricing of its products.
The global expansion strategy has a key objective of recreating the Starbucks experience in every new country the company enters.
The company operates a website called mystarbucksidea.com, where customers can leave ideas for the company to expand and improve its products and customer experience.
Starbucks has embraced digital innovation by developing and rolling out a Starbucks app for paying for products, tipping baristas, earning and redeeming rewards.
“Meet me at Starbucks” chronicles a day in the life of Starbucks through a mini-documentary format.
One of the company’s specialties is that they pay property owners exactly one dollar per year in many Starbucks stores. No one threatens them; Starbucks just knows that the visitors will come. Everybody knew that the atmosphere, the coffee, the name is written on the glass would make even the most godforsaken place a popular place.
The popularity of the company has reached such a high level that The Economist magazine created the Starbucks Index – an indicator of the economic situation in the country, which is defined as the price for a standard cup of coffee in the restaurant of the company.
Although it’s been years since he was a college football player, Schultz says that he still identifies with the persona of the blue-collar athlete whose determination and perseverance more than compensate for his lack of training.
Howard Schultz is more than the man behind a coffee-buying revolution—he also changed the vocabulary of millions of people who had never even heard of a “cappuccino” before Starbucks burst on the scene. Now cappuccino, caffe mocha, caffe latte, and a variety of hip coffee terms are a part of our everyday language.
Howard Schultz’s Picks