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Schultz, Howard - Overview, Personal Life, Career Details, Chronology: Howard Schultz, Social and Economic Impact

starbucks company coffee stores

(1953-)
Starbucks Corporation

Overview

Howard Schultz is not a household name to most North Americans, but those living in urban or suburban communities know his company: the specialty-coffee retailer Starbucks. In the span of a decade, Starbucks has grown into the largest coffee roaster and retailer of specialty coffee in North America. As the millennium approaches, Schultz’s company is busy establishing its successful, cozy coffee bar formula around the globe; even President Bill Clinton has been photographed with a Starbucks to-go container in his hand. According to the trade journal Chain Store Age Executive, Schultz’s “merging of the three C’s—coffee, commerce, and community—surely ranks as one of the ’90s greatest retail successes.”

Personal Life

Schultz was born in 1953 and grew up in the federally subsidized Canarsie housing project in the Brooklyn borough of New York City. His mother worked as a receptionist, and his father held a variety of jobs, none of which offered decent pay or benefits such as medical coverage for himself or his family. When “Howie” was seven, his father lost his job as a driver for a diaper service when he broke his ankle. Sick pay or even legallymandated disability assistance were luxuries to many in low-paying jobs at the time, and in the ensuing months, the family was literally too poor to put food on the table. It was a memory that Schultz would carry with him into adulthood.

During his youth Schultz was ashamed of his family’s “working poor” status. He escaped the hot Brooklyn summer one year to attend camp, but would not return when he discovered that it was funded with government money for low-income families. When he began dating, he feared that his girlfriends’ fathers would ask where he lived. He turned to sports as an escape: competitive by nature, he marshaled that drive into succeeding on his high school’s football, baseball, and basketball teams. He was awarded an athletic scholarship to Northern Michigan University, and earned a degree in business administration in 1975 which made him the first person in his family to graduate from college.

Career Details

When he graduated, Schultz was offered a job with the Xerox Corporation, and was trained as a sales and marketing associate. It was a job at which Schultz naturally excelled, and he spent three years there. Sensing more opportunity in working for a smaller company, he then left the Fortune 500 name to head the U.S. operations of Hammerplast, a Swedish housewares company. After a few years, Schultz noticed that a small Seattle company named “Starbucks” was buying an unusually high number of Hammerplast’s manual cone coffee filters and espresso machines. Intrigued, he flew across the country to investigate, where he found four Starbucks outlets, named after the first mate in the Hermann Melville novel Moby Dick, selling roasted coffee beans and specialty coffee products. Starbucks, however, set itself apart from its few competitors and had quickly gained a cult following by using stronger, more flavorful beans. An arabica bean, Schultz learned that day, yielded the strongest coffee he had ever tasted; by the end of his first cup, he too was a devotee.

Schultz set up a meeting with the pair who had founded Starbucks in 1971, Gerald Baldwin and Gordon Bowker, and begged them to hire him as director of marketing. He believed so strongly in their product that he saw great potential for expansion. His enthusiasm made them wary. “After Baldwin called to tell Schultz they were not offering him the marketing director’s job, fearing he’d be disruptive, Schultz pleaded with them to reconsider,” wrote Lee Moriwaki of the Seattle Times. Twenty-four hours later, they called and offered him the post.

Thus in 1982 Schultz became director of Starbucks retail operations, which meant a move from New York City to Seattle with his wife Sheri Kersch, an interior designer. Under Schultz, Starbucks expanded its retail presence and catalog sales, but he had an even greater vision. On a trip to Italy around 1984, Schultz was moved by the profusion of corner coffee bars in Milan; they seemed to serve as a focal point for the neighborhood much as convenience stores do in America, but were also places where people lingered a bit as well as bought their lottery tickets. Baldwin and Bowker had different plans for expansion, so Schultz left to launch his own chain of coffee providers, which he named Il Giornale, Italian for “the daily.”

The first Il Giornale store opened in Seattle in April of 1986, and is still home to a Starbucks. It was a hit, and within a year he had opened more, but knew he needed much more funding in order to expand and purchase his own roasting facility. In a stroke of good timing, the partners at Starbucks, Baldwin and Bowker, wished to sell their assets. Schultz decided to try to raise the investment money to make the purchase. He pitched his idea to a total of 242 potential investors; 24 were impressed enough with his vision to give him money, but it was a dicey venture for a while. Sheri Kersch Schultz was pregnant at the time, and continued to work to support them. “It was humbling and scary,” Schultz told the Puget Sound Business Journal ’s Sather about this make-or-break time in his life.

Furthermore, Schultz learned that one of his investors was trying to engineer a coup of sorts to secretly purchase Starbucks, and then make Schultz simply a manager instead of a major shareholder. He met with the turncoat, and “the investor laid out his plan and gave Schultz a take-it-or-leave it ultimatum,” wrote Moriwaki in the Seattle Times -a proposition to which Schultz replied: “It’s my idea…. You’re not taking it away.” He then retreated to the lobby where, overwhelmed, he wept. In the end, it was the verve and dedication that Schultz had displayed to his other investors that saved him: a group of them rallied to raise the money. In 1987, Schultz became president and chief executive officer of Starbucks.

The company soon began opening more stores, expanding to other cities in the Pacific Northwest, but it was not just the arabica beans and specialty drinks that made Starbucks a success, it was the enthusiasm and professionalism of its employees. From the start, the hiring and personnel practices that Schultz implemented were almost radical: he trained them intensively, and paid them a far higher wage than the average hourly food-service worker. It was a reasoning described by Chain Store Age Executive as “treat your employees well and that is how they will treat your customers.” A competitor in the coffee industry, Larry Mindel, told Nation’s Restaurant News that “the real secret of Howard’s success is that he put together an infrastructure of professional people who make every one of those stores operate like a Swiss watch.”

Chronology: Howard Schultz

1953: Born.

1975: Earned a BA from Northern Michigan University.

1982: Joined Starbucks as director of marketing.

1986: Opened first Il Giornale store.

1987: Returned to Starbucks as president and CEO.

1988: Opened 12 stores in Chicago.

1992: Took Starbucks to Wall Street in initial public offering (IPO) of stock.

1993: Starbucks opened 100 additional stores.

1997: Starbucks packaged coffees made available in selected grocery stores.

Starbucks had become a major presence in Seattle, Chicago, Washington, D.C., all of California, and most American cities by the early 1990s. It even expanded into New York City in 1993, a notoriously difficult market to conquer. The following year Schultz stepped down as president of the company, but remained its chief executive officer and board chair. He did this in part to devote more time to other projects that the company became involved in, such as Cucina Cucina, a chain of Italian restaurants, and the Fresh Fields gourmet health-food supermarkets. By 1997, Starbucks had over 1,300 outlets in North America, stores in Japan, Hawaii, and Singapore, and served 5 million customers in an average week. Annual sales were expected to reach $1 billion before the end of 1998.

Social and Economic Impact

Starbucks employees, about two-thirds of whom are part-time, receive full medical, dental, and even optical insurance for working at least 20 hours a week. This generous employee benefit program, in an era when most companies prefer to hire only part-time workers so that they can skirt regulations requiring them to offer such benefits to full-timers, is a direct result of Schultz’s own hardscrabble childhood. “I watched my dad’s self-esteem fracture and I watched his self-respect fracture,” Schultz told Puget Sound Business Journal writer Jeanne Sather. “It had a lot to do with how he was treated in the workplace as a blue-collar worker.”

Schultz also implemented “Bean Stock,” Starbucks’ stock option plan. Once a year, the company awards between ten and fourteen percent of an employee’s base salary in stock. The stock, however, is not fully transferable to employees until they have been with the company for five years, which gives many a great incentive to stay on board. When the company’s stock was first traded on Wall Street in 1992, it sold for $2.25 a share. Six years later, it was trading at over $47 a share. Some longtime Starbucks employees now own property in some of Seattle’s most exclusive areas. “I believe very strongly that the success of our company has been achieved because of the relationship with our people,” Schultz told Sather in the Puget Sound Business Journal. “Bean Stock has meant everything to the growth and success of the company.”

The company’s record profits are not just reinvested in employees. Since 1991 Starbucks has also contributed to CARE, the Georgia-based international relief and development organization, and has since become its largest corporate donor. Starbucks stores sell products specifically for CARE, and the proceeds given to CARE are designated to be used in developing countries from which the company purchases its coffee beans, such as Guatemala, Kenya, and Ethiopia. Schultz’s 1997 book Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time, written with Dori Jones Yang, is a corporate history twined with Schultz’s personal and corporate philosophy. Proceeds from the book were donated to literacy programs via the Starbucks Foundation, which was established to fund worthwhile causes. “Success is empty if you arrive at the finish line alone,” he wrote in Pour Your Heart Out. “The more winners you can bring with you—whether they’re employees, customers, shareholders, or readers—the more gratifying the victory.”

Still, the success of his company set in record time has earned Schultz some barbs. On the Tonight Show in 1997, Jay Leno joked that cameras on the Mars “Pathfinder” had indeed sent back proof of life on the planet: it had found a Starbucks and a Gap store. Some urban residents have picketed the openings of Starbucks outlets in their neighborhoods, viewing the mermaid logo and its two-dollar-plus coffee drinks as the arrival of the “bourgeois” lifestyle in what was once a formerly mixed-income community. Schultz takes it personally when people poke fun at Starbucks and its ubiquitous presence. “It’s difficult when you try and do good work, try and build the kind of company that I think we’re all proud of, and people for whatever reason don’t like you,” he told Washington Post reporter Margaret Webb Pressler. “It’s emotional.” He reportedly hires protection for his two school-aged children.

Schultz plans to take Starbucks to an international level of recognition, becoming a presence in Asia and even Europe by the year 2000. He dedicated his book to the memory of his father, to whom he had once spoken harshly and accused of a lack of ambition. They were words Schultz would regret the rest of his life; his father died of lung cancer before his son became a millionaire. Schultz once told a San Diego audience that his greatest success was that “I got to build the kind of company that my father never got to work for,” according to the San Diego Business Journal.

Schultz, Michael (1938–) [next] [back] Schrieffer, John Robert

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over 6 years ago

lol

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almost 6 years ago

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almost 6 years ago

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over 6 years ago

lol

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almost 6 years ago

Really good information about Howard Schultz, yet it lacks professionalism. Somehow difficult to use this for intext citation as well as to use it as reference. The article doesn't say when it was written or by whom it was written. Where's the article's title?

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about 5 years ago

this class is funnyyyyy

lol howard

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over 5 years ago

I like it. Good information (: Plus I just love starbucks <3

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almost 4 years ago

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