There are people who are connected to each other, destined to be together and succeed. There is even an Asian belief that speaks of the red thread that unites two beings invisibly.
The same concept can be applied to some companies and certain individuals. At least, it is the case of Howard Schultz who, despite not having founded Starbucks, gave its essence, philosophy and purpose to the most important coffee chain in the world.
His paths crossed one day in 1981 and he decided that he would never "separate" from the firm again. From being a simple store of articles for coffee lovers, it became a cultural fact in itself: people establish an almost personal relationship with both their steaming latte and the brand itself.Schultz was not born in a cradle of gold, but was made from below. He grew up in a social housing, property of the State; their parents had dropped out of high school, so they had trouble getting formal employment.
The businessman always describes an image that still touches him: "At seven years old I found my father with a plaster of the hip to the ankle due to an accident at work. I had no compensation or medical coverage. There I saw the fracture of the American dream and those scars made me the person I am today. "
Thanks to sports, Schultz won a scholarship to study Communication at Northern Michigan University. However, as soon as he arrived, he decided that he would not take it and instead chose to finance his studies through loans and various jobs, from bartender to selling his own blood.
Just received, he settled for a year in a ski center, not only to generate income but also to think about his future. He was also a salesman in Xerox and in the house of plastic household goods Hammarplast, where he became general manager.
Meanwhile, in Seattle, Washington, professors Jerry Baldwin and Zev Siegl and writer Gordon Bowker, who had forged a friendship at the University of San Francisco, opened the first Starbucks store in 1971.His idea was to sell everything from coffee beans to coffee makers, toasters and grinding machines for those who love infusion. They had been inspired by Alfred Peet, owner of Peet's Coffee, Tea & Spices.
The name comes from a character in the book Moby Dick. In Chapter 26, he says that the first Pequod officer (the whaling ship that goes hunting for a sperm whale in size) was called Starbuck. The classic logo is also inspired by the marine tradition: it is a mermaid, who caught the attention of the trio when watching the Nordic ships.
Years passed and they became a modest shop in the region for the coffee fan. By 1981 they had as a supplier for filter coffee makers a particular store ... yes, Hammarplast, managed by Schultz.
The company manager was surprised at the large number of units they requested and traveled to visit them personally. He met them and was amazed, so he undertook a convincing strategy that took him more than a year, until finally he was hired as director of retail and marketing.Transformation
Schultz believed that Starbucks could be something else, he saw her with potential to scale internationally offering a differential. However, his great epiphany happened in 1982 when he traveled to a fair in Milan, Italy, and was amazed by espresso bars and traditional cappuccinos.
He came back with the idea of converting the company and transforming it into a chain of old school cafeterias, something he felt was missing in the United States. The founders let him do some tests although they were never completely convinced.Schultz left in 1983 to create his own venture: Il Giornale. He invested US $ 1.6 million raised from several investors, including the owners of Starbucks.
"The company was on the wrong side of the coffee business," he said. Four years later, Baldwin sought to leave the firm to focus on recently acquired Peet's, and thought of his former employee (Schultz) as the ideal person to buy his share. Bill Gates was key in this operation.
The founder of Microsoft? No, his lawyer father, William Gates Mr. Baldwin had given Schultz 90 days to raise $ 3.8 million for the operation. However, given the low prospect of getting the money, a member of Il Giornale made a surpassing offer.
It was then that the executive went to Gates, through a mutual friend, to help him. The lawyer managed to convince the opponent to lower his proposal and Starbucks and Il Giornale merged to create Starbucks Corporation.Expansion
He wasted no time. That same year he opened coffee shops in Chicago and Vancouver until he reached 17 branches. Under his leadership, the concepts latte, venti and grande began to become more usual in Americans. Generating an intimate environment and a close relationship between employees, customers and brand were some of its main objectives.To finance its growth, Schultz took the company to the Stock Exchange in 1992. On its first day in Nasdaq, it sold 12% of its securities and raised $ 25 million. He already had 165 branches in the United States, but his focus was on planting flag outside that territory.
Before beginning the conquest, he opted for a new drink, frappuccino. He bought The Coffee Connection the rights to sell it and use it in campaigns (today he reports more than $ 2 billion per year). Now I was ready.
In 1996 he faced his international landing with branches in Japan and Singapore. He also opened roasting plants in Kent, Washington, to which he would later add one in Carson Valley and another in Amsterdam, the Netherlands.
The famous written glasses were transformed into something everyday in the street. Having one with your name became something of fashion and stopped being simply a coffee to become a cultural fact.
From coffee it went to tea with the acquisition of the Tazo brand for $ 8.1 million. Later, branches arrived in Malaysia, New Zealand, Taiwan, Thailand, United Kingdom and a space in American supermarkets.
Schultz served as CEO between 1987 and 2000, when he left his place to Orin Smith, who was replaced by Jim Donald in 2005. The executive moved to the position of chairman until he returned to executive management in 2008.
However, with his return the crisis also appeared. The financial collapse brought consequences for Starbucks, whose sales fell by 28%, which resulted in the closure of 900 stores and 6,700 layoffs.
This slip did not prevent, once the crisis ended, resume its path of prosperity. It expanded in Latin America and Asia and continued to attach brands to its portfolio, for example the purchase of Teavana tea stores in 2012 in exchange for US $ 620 million.Ironically, it took Schultz 31 years to open a store in the city that inspired him. Only in September 2018 was the inauguration of the cafeteria announced in the center of Milan.Markets
The United States continues to be the main market for Starbucks. Of the US $ 26,508 million invoiced in fiscal year 2019 (ended last September), the "Americas" segment represented more than 60%. On the other hand, revenues from the International branch exceeded US $ 5.2 billion in the last year.
This has to do with the fact that most stores are in that territory. In total, it has 31,256 branches, of which 18,067 belong to Americas. In turn, the company gives priority to its own premises over graduates or those belonging to other brands of the holding, and even bought joint ventures of subsidiaries abroad.At the end of 2017, he disbursed US $ 1.3 billion to keep the other half of the stores in China, while years before he had taken control of all Starbucks Japan for US $ 915 million.
By 2020 it plans to expand outside the US with 600 openings in the Americas and 1,400 in other places. The objective? Going out to compete in markets where strong players are emerging that grow by leaps and bounds.
This is the case of the British chain Costa (which was acquired by Coca-Cola in 2018 in exchange for US $ 5.1 billion and is already the second player in the sector) and the Chinese Luckin (who was born in 2017 and intends to snatch Starbucks his leadership in the Asian territory).
They also point out that Peet's, now in the hands of JAB Holding, could become an opponent as it negotiates to merge with the Dutch beverage company Jacob Douwe Egberts.
Focusing on coffee is also part of the strategy. In that plan, tea has no place. At the end of 2017 he sold Tazo to Unilever for $ 384 million, and since 2018 he began the total closure of the Teavana stores, 313 that year and another 12 more in the first quarter of 2019.What's coming
Baldwin, Bowker and Siegl left the coffee business after selling Peet's in 2012. Little is known about Bowker, but Siegl continues in the entrepreneurial ecosystem scene: he is dedicated to giving seminars on how to start projects and mentoring startups. Meanwhile, Baldwin opted for viticulture and founded his own wine brand: J Baldwin Wines.A similar path was undertaken by Schultz from 2016, when he announced that he would cede Starbucks executive direction to Kevin Johnson, current CEO. He went even further in June 2018 to report that he also resigned his chair as president of the firm he had promoted since 1987.
His intention was to devote most of his time to philanthropy and social actions, although he was surprised to point out that he did not rule out presenting himself as a presidential candidate, outside the Democrats and Republicans, by 2020.
However, the dream of sitting in the White House was short-lived. In September 2019 he confirmed that he would not compete: "My certainty about the need to reform our bipartisan system did not change, but I came to the conclusion that an independent campaign by the White House was not the best way to serve the country at this time." .
With Johnson as executive director and Myron Ullman III in the position of president, Starbucks is in the process of internal restructuring. Leadership changes, positions that will disappear and several dismissals at the door.
The post Schultz era did not begin in 2019, but the first metamorphosis without the man who gave life to the company is expected to begin to produce results in the coming years.