Starbucks Coffee Company
Class Year: 2007
Howard Schultz, the oldest of three children, was born in 1952 in Brooklyn, New York. Until he was three, he and his parents lived with his grandmother. In 1956, they moved to the Bayview Projects, which was federally subsidized housing in the Canarsie section of Brooklyn. Their building housed about 150 families who all shared one small elevator. The Schultz family lived in a cramped two-bedroom unit on the seventh floor. Even though his living conditions weren't ideal, Schultz had many happy times throughout his childhood. Living in the Projects taught him how to get along with many different kinds of people and he always had plenty of playmates at hand. "I did not have an unhappy childhood," says Schultz, "but we lived daily with the constant stress of financial issues. There were times when I felt angry and ashamed of our situation. By the time I got to high school, I understood the stigma of living in the Projects and knew I had to escape the struggle my parents lived with every day."
Schultz's father, a World War II veteran, never finished high school. He was undereducated and worked throughout his life in various blue-collar jobs, including cabbie, truck driver, and factory worker. He often worked two or three jobs at a time just to put food on the table. Schultz says of his father, "He was a beaten man and what we now call 'the working poor.' My mother, who also did not graduate from high school, was a strong-willed, powerful woman. Even though she and my father had not achieved the American dream, she felt her children were entitled to a piece of it. Her biggest dream was a college education for all three of her children."
A gifted athlete, Schultz played with neighborhood children from dawn to dusk every day until, at the age of 12, he began working. He started with a paper route and then worked behind the counter at the local luncheonette. At 16, his after-school job was at a furrier in the garment district of Manhattan. Each day, Schultz took the subway to what he has described as a "horrendous job" stretching animal skins and earning only five cents per skin. One hot summer he worked in a sweatshop steaming yarn at a knitting factory. He always gave part of his earnings to his mother, not because she asked for it, but because he felt so bad for his parents' situation.
Howard Schultz's biggest triumph in high school was becoming the football team's quarterback. In a school that included nearly 6,000 students, this was no small accomplishment. A recruiter from Northern Michigan University offered him a scholarship to play for his school, and Schultz was quick to accept. "It felt as good as an invitation to the NFL draft," he says. "I'm not sure I would have gone to college if I hadn't received this opportunity."
In addition to his scholarship, Schultz took out loans and worked part time during the school year and full time during summers to pay for his education. He majored in communications and became the first person in his family to graduate from college. When he returned to New York, he joined the sales division of Xerox Corporation. During his three years there, he learned sales, marketing, and presentation skills. By 1979, he was a successful salesman, but he was becoming restless with his job. He learned a Swedish company, Perstorp, was planning to set up a United States division for its Hammarplast housewares subsidiary. "It seemed like an exciting opportunity to get in on the ground floor of a growing company," says Schultz, who was hired and sent to Sweden for three months of training. Soon, he was promoted to vice president and general manager of Hammarplast in charge of all U. S. operations.
In 1981, Schultz noticed that a company in Seattle called Starbucks Coffee, Tea, and Spice was placing large orders for Hammarplast drip coffeemakers. He visited the company to see why it was ordering more coffeemakers than large department stores. At the time, Starbucks was a 10-year-old retail business that had five stores, 85 employees, a roasting facility, and a wholesale business selling coffee beans to local Seattle businesses. Schultz was immediately enamored with the business and with Seattle. In 1983, he joined Starbucks as head of retail sales and marketing.
Schultz was sent to Italy on a buying trip and while he was there, he noticed that the Italians were passionate about their coffee as well as their coffee bars. At this point in time, Starbucks was only selling coffee by the pound, but Schultz saw huge potential for the company if they turned their stores into coffee and espresso bars. In 1984, Schultz convinced the original Starbucks founders to try the coffee bar concept by opening a store in downtown Seattle. The café proved immensely successful. Even so, the owners were reluctant to pursue and expand the coffee bar business. Frustrated, Schultz left Starbucks in 1986 to pursue a concept he knew would work.
He wrote a business plan for his company, which he would name Il Giornale (Italian for the newspaper), and approached more than 240 potential investors. Two of the Starbucks founders invested, but more than 200 others declined. Schultz persisted and eventually raised more than $1 million to open his first coffee bar. "You have to passionately believe in yourself and in your ideas," he says. "Too many people with great ideas give up on them too early. You have to persevere and refuse to give up."
Il Giornale was successful and Schultz went on to open a second café in Seattle and a third in Vancouver, British Columbia. In 1987, he bought out the Starbucks partners for $4 million. Il Giornale acquired the Seattle assets of Starbucks Coffee Company and became the Starbucks Corporation. Today, Starbucks has 13,000 stores in 40 countries and employs nearly 150,000 people.
Howard Schultz says, "My story is as much one of perseverance and drive as it is of talent and luck. I willed my dreams to come true. I took my life in my hands, learned from anyone I could, and grabbed whatever opportunities came my way."
Schultz has achieved enormous business success with a philosophy that he has adhered to from the beginning. He believes success is best when it is shared. He made Starbucks the first company in America to give stock options and comprehensive health insurance to every employee, even the part-time help. "If there is one accomplishment I am proudest of at Starbucks," says Schultz, "it's the relationship of trust and confidence we've built with the people who work at the company."
When he meets with young people, Schultz says, "Dream big, and then dream bigger. Don't let anyone tell you your dreams can't come true. But to start your dream, you have to put yourself in a position to win and that begins with an education. A good education will give you the insight, the experience, the skill, and the self-esteem to succeed."