Howard Schultz Biography: Success Story of Starbucks

CEO
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Howard Schultz

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.

Contents

 Howard Schultz Childhood Biography

 Education and Career

 Birth of the Modern Starbucks

  Enthusiasm and Professionalism of Starbucks' Employees

 Unique Spirit of Starbucks

 Howard Schultz Makes Starbucks the World's Leading Coffee Business

 Howards is Back in Game

 Family Life of Howard Schultz

Howard Schultz Childhood Biography

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. The

family had three kids and was poor, even though the parents worked hard to give a

decent future to their children. Then they could not even imagine that their son

would become one of the wealthiest businesspersons of the United States.

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 obvious, 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.

Being a little boy, Howard often watched his father trying to find a job, which would

meet his expectations. When Howard was seven years old, his father broke a leg

while being at work. As he had no medical insurance, the subsequent family

financial difficulties left an indelible mark in the boy’s memory.

“I saw my father losing his sense of dignity and self-respect. I am sure that this was

caused mostly by the fact that he has been treated as an ordinary working man.” –

Howard Schultz recalls.

Howard Schultz grew up in the Bayview Projects in Brooklyn, New York.

Education and Career

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. Being physically strong, Schultz excelled at sports and was awarded an

athletic scholarship to Northern Michigan University where he received his

Bachelor’s degree in Communications in 1975.

After his graduation, Howard Schultz spent three years as a sales manager at Xerox,

and then he started working at a Swedish company Hamamaplast, where he was

selling home appliances, including coffee grinders to the businesses like Starbucks.

Once Schultz discovered, that this little company orders way more of his coffee

machines then some popular stores. Howard decided to meet the owners of

Starbucks and went to Seattle.

Starbucks Corporation is an American global coffee company and coffeehouse chain

based in Seattle, Washington. Three partners who met at college founded it: English

teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. These

guys adored coffee and decided to share their passion by opening a small coffee

shop.

The store opened in a quiet inconvenient time: at the end of the 60s, the Americans

completely gave up on instant coffee. Moreover, the majority of them did not even

know that there is some different type of coffee, which is other than instant. Thus,

there was not too much of the visitors.

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.

After tasting Starbucks coffee, Howard immediately fell in love with it, as it was

something much better than everything he had tried before. Later, Schultz recalled,

“I went outside whispering to myself: Oh my Gosh, what a wonderful business, what

a wonderful city! I want to be a part of this.” It was a love at first sight.

The first version of logo was based on a 16th-century “Norse” woodcut. Starbucks

siren was topless and had a double fish tail. The original brown logo was used from

1971–1987.

The company had a credo, which made its stores popular in Seattle – they actually

taught the customers the art of making coffee. This approach and the enthusiasm

impressed 29-year-old Schultz, and he was literally begging for a job at Starbucks

and bothering its director, Jerry Baldwin, with the phone calls. Schultz was trying to

persuade him that the company is capable of opening more stores but Baldwin

feared that a rapid expansion might kill the spirit of Starbucks. Once, Schultz

finished his attempt with the words, “Well, let’s do it all gradually, in your usual

pace, but let’s also create something truly significant.” Next day he was asked to

become the marketing director at Starbucks with a salary less than half of what he

was getting at Hamamaplast. Howard saw a great potential of the business and

realized that he wanted to connect his life with Starbucks. Thus, he agreed to work

there even under such inconvenient conditions. In 1982, he moved to Seattle.

In 1983, Howard went to Milan and returned with the recipes of latte and

cappuccino, which tripled Starbucks’ sales over the next year. However, the 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 hold

by the various fast-food restaurants. Schultz spent long time thinking of this totally

new concept, when in 1985 he proposed Baldwin to make a focus on creating a

network of coffee houses. But the CEO of Starbucks answered with categorical

refusal. 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. But the idea of drinking coffee out literally elated Schultz, and

he, being confident in his venture, resigned from the company to open his own

business.

Howard Schultz remarks, “Only those who go by unexplored roads, creating new

industries and new products, can build a strong, long-lasting company and inspire

others to achieve great results.”

Birth of the Modern Starbucks

Howard needed $1.7 million for opening his own business. The owners of Starbucks

partly borrowed the money and the rest of the money he lent in a bank. In April

1986, Schultz opened a coffee shop in Seattle. He gave it an Italian name of ‘Il

Giornale’, (Italian pronunciation: [eel johr-nah-leh]). This place was a great success

and 300 people visited it during its first working day.

Il Giornale coffee packaging.

A year later, Howard found out that the owners of Starbucks were going to sell their

stores, the roasting factory, and brand itself, as they could not manage functioning

of the large company. They announced a price of $4 million, and Schulz immediately

went to his creditors, persuading them to give him a new loan. It is interesting to

know that one of the early investors of Starbucks was Bill Gates, the founder of

Microsoft. Like McDonald brothers, three coffee fans from Seattle stepped out of

their own business for the worthy reward, and Howard Schultz became the only

owner and manager at Starbucks.

There was a bar counter in every single store where professional baristas (experts in

coffee preparation) were grounding coffee beans, brewing and serving fresh coffee.

Barista was 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

local coffee shops (as we have already mentioned), and, especially, as he called it
later, ‘a 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. Two years later, Howard went to Italy for the second

time. He 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 explains the

success story of Starbucks.

Unlike hamburgers, coffee is an elegant product. Thus, in order to get the ordinary

Americans “addicted” to it, you have to try really hard. It seemed unreal to lure any

people to a place where they weren’t allowed to smoke, and there was nothing but

the smell of freshly brewed coffee. Therefore, Schulz can be called an adventurer at

some point, which was certain in his own ultimate success.

Howard Schultz promised to his creditors that in the five years he would open about

125 stores in the United States. In fact, by 1992 he was able to open much more

items than it was planned. He began in New England – with Boston and Chicago –

and gradually got to California. Schultz took franchising system of McDonald’s as an

example, and managed to create his own corporation.

He carefully thought on the strategy and to tell the truth, it was quite insane. To turn

over the minds of Americans, Schultz decided to make accents on the quantity,

quality, and publicity. Marketing team of Starbuck were constantly telling Americans

that drinking true coffee at Starbucks is romantic. Advertising slogans were easy to

memorize, causing a smile and the thought of a cup of this flavored drink. The head

of the company made sure that this advertising is not different from reality.

Howard Schultz offered a democratic coffee house, which worked on the principle of

self-service. Here, the customer had a freedom of choice: the type of a drink (not
just coffee, but latte, cappuccino, espresso, mocha, macchiato and other

alternatives), the size of a cup, and the type of milk (regular or fat-free) completely

depended on a choice of the visitor. This approach has given their customers an

opportunity to order a quite individual drink. At some point, it also caused the

emergence of a new slang: the order may sound very floridly, like ‘double tall skinny

decaf latte’.

The fact that the coffee shop is ruled by the principle of self-service did not scare

the customers. At Starbucks, an order is taken by one person, and another staff

member prepares the drink. It makes the system quiet fast, especially if to compare

it with some fast-food restaurants. Since a large portion of orders in the U.S. (and in

some other countries) is still takeaway coffee (in the U.S. it makes about 75% of all

orders), even a large number of customers do not lead to overcrowding of the coffee

stores.

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.

Starbucks Corporate Headquarters, Seattle, WA.

Enthusiasm and Professionalism of Starbucks’ Employees

Two years before starting the incorporation process, Howard Schultz came up with a

set of rules of Starbucks, which later evolved into the corporate code. It was

pointing on the benefits given by a well-organized teamwork, and the need of

continuous improvement of coffee quality. Its final statement was, “Remember, that

making a profit now, we are laying the foundation for our future prosperity.”

From Howard Schultz biography we have found out that while developing Starbucks

at the national level, 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. However, initially, because of the

introduction of subsidies, Howard Schultz was not in a favor among Starbucks

shareholders as they were afraid to see the decrease in shares’ value.

In 1994, the company’s employees in California noticed that in summer there were

rather less 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 Frappucino 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 to Starbucks a long-term licensing agreement

for the production of bottled Frappucino.

Howard Schultz believes that people trust the brand Starbucks. And they trust, not

because they like how they prepare coffee; but they trust the Starbucks, because

they share the values of the company.

Unique Spirit of Starbucks

The popularity of Starbucks inspired not only the consumers but also the competing

companies. There were similar coffee stores rising all over the place; they also

offered a better price. Even fast food restaurants and gas stations got those

“Espresso” ads in order to lure the customers. Despite of these conditions, the

company maintained its main principles of romance, accessible luxury, peace, and

informality.

Pretty soon it became all clear that in order to follow these principles, Starbucks has

to change an entire ideology of its network development. Italian coffee shops, which

served as a model for restaurants of Starbucks, did not fit an American lifestyle.

Italian coffee stores were housed in tiny halls where there was quite a few sits, as

the most of the visitors preferred to spend their time at the bar. In America, such an

approach didn’t work. 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.

The popularity of coffee houses quickly spread, but it also had a backside. Having

such a high rate of sales, it was difficult to combine a variety of items from the

menu while maintaining a high product quality.

At Starbucks, the coffee was brewed out of freshly roasted and ground coffee beans.

The grain was delivered in a special packaging: two-kilogram bags (4.4 lbs.),

equipped with a special valve for releasing carbon dioxide out, but blocking an

access to moisture and oxygen. While this package was enclosed, coffee inside

remained fresh and could be transported thousands of miles away. When the

package is finally open, barista has only seven days to use it all, so the product

doesn’t lose its quality. Sometimes it was about a rare and very expensive variety,

and such an approach could be called an apparent wastefulness. Seeing all the

losses, Howard Schultz decided on another compromise. The company has got the

right to use a new method of preparing soluble coffee extract, which allows to get a

much higher quality of an instant coffee. Eventually, the experts were able to make

Starbucks instant coffee taste naturally, as close as it was possible at that time.

Finally, a new product began to bring a significant percent of the sales.

An important part of this system was the creation of an identity of Starbucks.

Schultz made his team following the uniform standards. According to his plan, not

only every place had to have an equal design, but even the taste of coffee should

be identical. Schulz dreamed to enable a person to feel like he’s at home even in a

foreign town. To enhance the effect, music has to play constantly. Besides this, a

composition, playing in the New York coffee shop, at the same plays in, say, Seattle.

One day, the managers of Starbucks stores from different cities reported to the

headquarters of Starbucks that the visitors often asked where they could buy a CD.

Starbucks immediately signed a contract with Capital Records, and in March 1995

released its own collection of jazz and blues. At the very first day, they sold more

than 75.000 copies. Later, Starbucks has created a subsidiary Hear Music, which

began to release the collections of Blue Note and Blending the Blues annually.
Hear Music is the brand name of Starbucks’ retail music concept and record label.

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 written on the glass would make even the most godforsaken place a

popular place. Starbucks had often been invited to open coffee shops in such

neglected urban areas and Starbucks always agreed. Obviously, they could not fight

a crime but they could easy create a flow of people. The cost of this improvement

was just $1 per year.

Sure thing, not every Starbucks decision was made in the sake of humanity.

Marketers and brand managers know their job and come up with many interesting

tricks to promote their brand. For example, a cover made of paper, which allows

avoiding burning hands. Buying coffee, you can choose if you want to get a free

corrugated cardboard ring or to pay a little extra and get a nice-looking

polyurethane one with the logo of Starbucks. No matter if the next cup of coffee will

be bought at Starbucks or not, the logo will still be on the holder. This innovation let
Starbucks to take care of the environment and get promoted at the same time.

Thermo cup, which are quite popular the coffee stores, is one of those great

solutions. People use the tumblers labeled Starbucks not only for coffee from

Starbucks and it brings an additional promotion.

Howard Schultz Makes Starbucks the World’s Leading

Coffee Business

In 1996, Howard Schultz, as the Chairman of the Member Board, CEO and co-owner

of Starbucks, decided that it’s a high time for the company to go outside the United

States. His first foreign coffee store was opened in Japan. Then, the stores started to

appear in Singapore, Korea, Taiwan, United Kingdom, Netherlands, Sweden, and

Israel.

By April, 2000, there have been more than 2,400 Starbucks stores in the United

States and 350 stores in Europe, Asia, the Middle East and Canada opened. In the

same month, 46-year-old Howard Schultz decided to transfer his duties to the

Executive Director of Starbucks CEO Orin C. Smith. Schultz himself decided to focus

on international expansion. He even set a goal to himself: he had to open 1200 new

stores by the beginning of 2001. The financial position of Starbucks was just superb

– over an entire decade, the sales, net profit and share price were continuously

growing.
One of the Starbucks Coffee Labs, Amsterdam 2012.

“Many entrepreneurs make the same mistake. When they are tired of delegating,

they surround themselves with loyal assistants. They are afraid to put in leadership

positions really smart, successful people.” – Howard Schultz stated.

At the end of 2005, Howard Schultz announced that Starbucks was going to expand

its size up to ten thousand coffee shops. Howard stated that they had to expend

very quickly, otherwise their competitors would just throw them away from the

market. However, it was rather the statement of the ambitious businessman, as at

that time Starbucks competitors trailed far behind.

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.

Howard Schultz at one of the Seattle SuperSonics games.

With the international recognition of the company, the team of Starbucks created

new ideas and requests. Howard Schultz decided to master the fast-food niche and

then Starbucks team began an experiment of inclusion sandwiches into the menu. It

is interesting to know that such a decision was pushed by a relative failure when he

was trying to expand to the markets of China and Taiwan, where consumers are

used to treating hot drinks only as a supplement to the food in these countries.

Gradually, all the international coffee stores came to this market and have started

offering pastries, snacks, sandwiches, and other food. Starbucks fought to the last,
but it was forced to a compromise. Finally, they started to sell food in their coffee

stores.

When Schultz found that the company has reached prosperity and stability, he

decided to plunge into the sports business. He bought the NBA’s Seattle

SuperSonics, the famous basketball team and temporary left the direct

management of the company.

Howards is Back in Game

In 2007, the situation began to disturb Howard Schultz: the visitors of Starbucks

complained about the loss of the spirit of romance. Schultz knew that it was

happening, and often drawn the attention of top managers on these issues:

 New coffee brewing machines were taller than the previous ones, and it didn’t

allow customers to monitor the process of preparing a beverage;

 New packs preserved the grain just fine, but deprived that delicate smell,

which was so attractive for the coffee connoisseurs.

In addition, the economic crisis of 2008 made some adjustments. In early 2008,

Howard returned to the Starbucks leadership in order to restore the company’s

image.

Starbucks never really competed with anyone. Being quite relaxed, the company

has overlooked what is happening around. Different companies started to notice

that the coffee business is very profitable. On the one hand, there were giant

McDonald’s and Dunkin’ Donuts. They were always willing to do anything to entice

visitors: free coffee, coupons, etc. On the other hand, there were independent

players who learned from Starbucks’ experience. They were promoting themselves

under the slogan: “Support local businesses!” Starbucks was trapped in the middle.
In order to save Starbucks, Schultz had to make a number of strict measures. To

optimize the costs, the company closed 600 stores in 2008 and another 300 – in

2009. Today, all the efforts of the company aimed at overcoming the crisis and

improving services.

In March, 2008, Starbucks launched a rather interesting project in the Internet. Any

person, whether he is an employee of a company or a customer can share his idea

of improving the coffee stores. Each idea will be discussed, and some may even be

implemented. In fact, before the ideas reach the company, they are actively

discussed by the visitors of the website, and, obviously, Starbucks considers only

the most popular.

Family Life of Howard Schultz

It goes without saying that Howard Schultz is proud of his achievements. However,

he was always trying to talk more about the company than about himself. As his

parents dreamt, Howard became a good family man, a father of two children, who

often talked about his life in Brooklyn. A couple of times, he even took his kids on a

tour, although he didn’t feel secure on his native streets. A fresh bullet hole, which

he saw on the wall of some house, was a wonderful confirmation that he made a

right thing by choosing this pathway.

Howard Schultz, CEO of Starbucks with his wife, Sheri Schultz.

Today, Howard Schultz net worth is of about US$2.2 billion. He travels a lot with his

children; also, he wrote two books where told the story of his own life. Not forgetting

his roots, he often visits Israel, and in 1998, he even won “the Israel 50th

Anniversary Tribute Award” from the Jerusalem Fund of Aish Ha-Torah for using his

influence to establish the ties between Israel and the United States.

His caring attitude toward his subordinates, even the low-level ones, amazes many

people. If Schultz is in the business – he is an aggressor, if he is with employees – he

is a fair and tender leader. An increase in profit could not bring him peace of mind, if

the employees of the company didn’t feel right.

Howard Schultz currently lives in Seattle, Washington, with his wife, Sheri (Kersch)

Schultz. They have two children Jordan and Addison.

Once Schultz 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”.

In 2014, the company’s revenue was US$ 16.45 billion, net income – US$

2.07 billion. The total headcount network comprised over 149 thousand people.

According to the data of 2014, there were 20737 Starbucks stores opened in 62

countries.

We hope you have enjoyed reading Howard Schultz biography and amazing success

story of Starbucks and it has inspired you to new inventions and discoveries.

Cite This Article

APA Style

Howard Schultz Biography: Success Story of Starbucks CEO. (2016). Astrum People
website. Retrieved 12:03, Jan 15, 2016, from http://astrumpeople.com/howard-
schultz-biography-success-story-of-starbucks-ceo/.