Starbucks Success Story
Starbucks Coffee Traditional Story
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| Starbucks Success Story |
Almost every entrepreneur has read the Starbucks coffee success story to learn from it and get inspired, but to be inspired, you need to read the underlying wisdom behind the owner(s) story that led to the success of that business rather than the business expansion itself.
In this article, we focus on the key subjects and turning points in Howard Schultz's life which made out Starbucks coffee a successful story. We will also differentiate between two successes in Starbucks story: One is the foundation success and another one is the growth success, and there is a big difference between the two from an entrepreneurship point of view, which will also be highlighted here.
By doing a little search on the internet, we can notice that Howard was hired in Starbucks store, Seattle branch, as a salesman for coffee beans in 1982. At that time, the owners of Starbucks were Zef Siegl, Jerry Baldwin, and Gordon Bowker who opened the first branch of Starbucks in 1971, inside the Pike Place Market, who was a strategic business location to attract customers.
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| First Starbucks Store in 1971 |
In 1981, five branches of Starbucks were opened in Seattle to sell the coffee beans, and Howard was working in a coffee filters manufacturer company.
He met the three owners of Starbucks who were his major client and offered to work for them. They accepted his offer in 1982.
In 1983, he traveled to Milan, Italy to explore the market for coffee machines, and saw that people are drinking coffee in public places. So he traveled back to US trying to convince Starbucks owners to do the same but the owners rejected his idea.
In 1985, and after several trials, they accepted to implement his idea only in the new sixth store in Seattle, and from there, the first Starbucks coffee cup was served and Howard continued trying to convince Starbucks owners to apply the same idea on all branches, and they rejected again, although the sixth branch was generating income almost equal to the other five branches.
In late 1985, Howard resigned and launched his own coffee brand named Il Giornale with the help of little funds and opened three stores.
After few years, and in 1987, Starbucks went bankrupt and the three owners approached Howard, as their first option, to buy their company for US $3.8M. Using some local funds, Howard managed to purchase their company and started developing the business in his own passion.
Starbucks Coffee Statistics
Let's start with few statistics about what we call success behind this story. Today, you cannot walk around a city without seeing a branch or two of Starbucks where the coffee smell attracts you to jump in and take a cup of your desired drink from Starbucks.
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| Starbucks Stores Growth |
Today in 2020, Starbucks have more than 31,000 branches around the world.
In 2019, Starbucks's income reached US $26 billions.
Starbucks dominates the coffee market with a market share higher than 57%.
Howard Schultz's net worth is approximately US $3.9 billions.
In 2017, the market value of Starbucks reached US $85.3 billions.
Starbucks serves 87,000 coffee flavor mixes, among which 36,000 are for Frappucino.
Starbucks consumes more than 4 billion cups worldwide.
One big-size cup of Starbucks contains 320 mg of caffeine, exceeding the Redbull can by four times.
Howard Schultz Biography
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| Howard Schultz |
- Born in 1953 in Brooklyn, New York
- Neither of his parents completed high school
- His father worked for several low paid jobs after returning from World War II
- His mother was a strong believer in the American dream and inspired him to dream about a better life
- He played basketball as an escape from family chaos, and played football to get a scholarship at Northern Michigan University but failed. So, he used to pay his education expenses through student loans and part time jobs. He sold his blood for living when things went very tough
- He worked for an office equipment company as door-to-door sales and succeeded at it, than moved to a European company that made housewares, where he used to sell filters for Starbucks
- Half of all his paychecks was sent to his parents
- He met the love of his life Sheri and married her in 1982
- He started his career at Starbucks in 1982, and from there we know the rest of the story
- He was the CEO of Starbucks from 1986 to 2000 and again from 2008 to 2017
Starbucks Foundation Success
It all started with a vision. This vision continued with Howard even when he left Starbucks in 2000 to come back and continue his vision's achievement in 2008, and during the financial crisis tough situation. This is just to inform all readers, willing to become entrepreneurs, that vision realization does not stop under any circumstances. Howard knew WHY he should achieve his idea and he thought about obstacles as milestones with different level of difficulties waiting for him to remove them from his way.
When Howard traveled to Italy, he was impressed by the way an Italian coffee served the Espresso in a romantic atmosphere and the barista that made the coffee.
Wisdom: Dreams can be built starting with an impression while at work. If you got impressed by something related to your business, start following it and dream big about it.
He started imagining the future of coffee stores in US and believed that he could be a successful entrepreneur by applying the same concept in US. Howard created the concept of the "Third Place", where an individual stays most of his time at home or at work, so Howard added a third preferred place for coffee lovers where they can stay comfortably and spend time.
This third place concept became a culture for millions of people who prefer to try and retry the Starbucks experience, and Howard achieved this for them by believing that this is the future consumer behavior about coffee. This was an incredibly successful marketing strategy that succeeded and was the norm until today, even under the Covid-19 pandemic.
He followed his dream and bypassed all obstacles that faced him during his career, starting from convincing Starbucks owners about the idea, going through resignation and new business foundation while keeping the vision still active, than by locating funds to acquire Starbucks and start from there the growth success.
Wisdom: Never stop chasing your dreams, once formulated by your passion, until you realize it.
The second vision achievement milestone was in 2008. Howard was promoted to be the chairman of Starbucks in 2000 but stepped again to be the CEO in 2008 when the financial crisis started. The stock price had fallen 75% over the previous two years and competitors, and the company was about to lose the coffee experience that Howard created along his leadership period.
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| Howard Schultz Transformation Meeting in 2008 |
Howard jumped back and declared his responsibility together with the executives about the failure, fired almost all the executives, closed under-performing stores and hired his former leadership team.
Howard shut down all the branches for three and a half hours to retrain them on the Starbucks experience, and to regain the company core values, which he could never sacrifice, aiming that the company regains its position in the consumer mind. He also invited 10,000 store managers to New Orleans just to remind them about the company core values and main practices. That was an investment in his people, in innovation and in regaining the company culture.
Gaining the company core values meant a lot for Howard because this was the main reason of financial success. He always put the customer first and builds his strategies upon that.
Wisdom: Customer is always first and right.
His strategy succeeded and the Starbucks stock price recovered its 143% gain in 2019.
Starbucks Growth Success
A company like Starbucks having core values instilled in every employee's mind, having known the main reason of their existence from day one, and having a consistency in its brand will never be shaken by challenges arising during its growth.
Growth is nothing but a challenge that your company will undertake, either you succeed or you fail to succeed after it. Your success will depend on how much you will be equipped when you address the growth potential.
Starbucks went through many growth initiatives since foundation and succeeded in almost every initiative by putting team efforts under a clear and concise leadership vision. That vision was the light at the end of every tunnel the company entered, but it existed from the first day that growth initiative was put on table for discussion.
Some of the growth initiatives that was facing Starbucks are:
- Challenge of going global in countries like Japan and China: It was extremely difficult to change the eastern coffee culture of a complete nation like the eastern nation but Howard saw it before doing it, since he believed in it
- Acquisitions of several companies contributing to Starbucks supply chain cycle
- Facing the media chaos and rumors
- Adding new flavors, mixes, and products to their menu
- Going IPO in 1992
- Corporate social responsibility initiatives and marketing campaigns
All these initiatives presented a tremendous challenge to the company but again, because there was a great team working under a great leadership, they were able to succeed and become a entrepreneurship symbol for millions of others.
