Editor’s note: This article was first published in October 2015; Starbucks’ market capitalisation and store count, Howard Schultz’s net worth and his role as CEO are 2015 figures, and the claim that there is no Starbucks in Italy no longer holds, as the first Italian store opened in Milan in 2018.
Talking today about Starbucks, a company with a market capitalisation of almost 90 billion dollars, and about Howard Schultz, the company’s CEO, with an estimated net worth of 3 billion dollars, might make it look like an easy success. But the truth is that getting here was anything but easy for Howard Schultz, one of the business leaders most loved and respected by his employees (you’ll soon see why), who comes from a poor family and, as an adult, had a few jobs that gave no hint of his future success.
Schultz was born on 19 July 1953 in Brooklyn, New York, where he could clearly see the gap between rich and poor in his own neighbourhood.
See also: 9 lessons from Howard Schultz’s success
He experienced poverty at an early age, when his father broke his ankle while working as a truck driver picking up and delivering nappies. At the time, his father had no health insurance and no workers’ compensation, so the family was left with no income when Schultz was just 7 years old.
His family struggled to get by for some time. Schultz won a sports scholarship to go to university, although he later decided not to play football, and he paid for university with student loans, which he paid off by taking on several jobs. He worked as a bartender and also made some extra money by selling his blood.
After graduating in 1975, Schultz spent a year working at a ski lodge in Michigan, waiting for inspiration. He didn’t know what he wanted to do with his life, but in the end he decided to join Xerox’s sales training programme, where he gained experience in cold calling. He spent 3 years in sales, which gave him the kind of seasoning that would later help him in business.
Schultz eventually left that job and started working at Hammarplast, a company owned by the Swedish firm Perstorp that sold housewares. There he did well professionally, rising to vice president and general manager, leading sales teams in the New York office.
It was through that company that he first came into contact with a small business called Starbucks, whose main business was selling coffee to consumers. At the time, Starbucks had only 3 stores, all of them in Seattle. Schultz’s attention was caught when they ordered an unusual number of coffee makers.
Schultz wanted to meet the owners of that business, and he was struck by the passion those men had for their product: gourmet coffee.
At 29, Schultz persuaded one of Starbucks’ partners to hire him as director of operations, sales and marketing.
The fate of Starbucks changed forever when Schultz was sent to visit a supplier in Milan, Italy, because it was there that he found his passion for good Italian coffee: espresso, cappuccino…
Schultz came back from Italy with lots of ideas to apply to the company and revolutionise the coffee shop business in the United States, but the founders rejected the ideas he proposed.
In 1985, Schultz decided to leave Starbucks, because he was convinced that his business vision could succeed, so he left the company to start his own, called Il Giornale.
His negotiating skills allowed him to raise more than 1.6 million dollars to start his own business. He admits that he had to talk to more than 242 people to raise that money. 217 of them told him no.
See also: Why customers come back to your business, and why they don’t
Schultz admits that the search for funding to start his own company was one of the most humiliating periods of his life, above all because he kept hearing that his business idea wasn’t worth investing in.
In the end, Schultz spent two years focused on opening several Il Giornale coffee bars, inspired by Italian coffee culture, something that was undoubtedly very innovative in the United States, given that espresso-machine coffee was practically non-existent there.
Schultz’s coffee bars were so successful that in August 1987 Il Giornale bought Starbucks for 3.8 million dollars, and he became CEO of Starbucks, which had 6 stores at the time.
Under Schultz, the company opened 165 Starbucks stores, at which point he decided to take the company public, with annual revenue of only 93 million. By 2000, Starbucks had a total of 3,500 stores and more than 2.2 billion in annual revenue.
By 2007, Starbucks had 7,100 stores in the United States, and Schultz was an immensely rich man.
But in the world of business…
In 2008, Starbucks nearly ceased to exist, because the crisis hit the company’s sales and it began to post large losses. This is the moment we described in a previous article, when Schultz closed all his stores for a few hours to train his thousands of employees and give them a talk on the importance of focusing on the customer, as well as on making the perfect espresso.
In just 2 years, Starbucks managed to triple its pre-crisis profits, going from 315 million to 945 million.
Howard Schultz’s values
As we said at the beginning, Schultz is one of the billionaire business leaders most highly regarded by his own employees.
He decided to hire more than 10,000 military veterans and their spouses under a hiring plan running until 2018. That’s because Schultz knows how hard it is for war veterans to enter the job market.
Starbucks is also deeply committed to its employees, being one of the few companies that pays its employees’ university tuition. Starbucks doesn’t just want you to work for the company for a while; it wants you to build a career there.
In fact, when he talks about his workers he doesn’t call them employees but partners, giving them stock options and full health coverage. Schultz has not forgotten the hard times his father went through when he was poor because he had no health insurance. He doesn’t want any of his employees to go through that.
Today, Starbucks has 21,000 stores in 65 countries around the world. Ironically, there isn’t a single Starbucks in Italy.
Sources: Onward | Pour Your Heart Into It | Business Insider
Further reading
Featured image: The original uploader was Sillygwailo at English Wikipedia, CC BY 2.5, via Wikimedia Commons.
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