Stories of Entrepreneurs: Howard Schultz

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Biography of Howard Schultz: BS 1975 Northern Michigan University

How the Business Started: Starbucks Coffee, Tea and Spice, as it was first known, roasted its first coffee in 1971. The small coffeehouse in Seattle was the vision of three men — Jerry Baldwin, Zev Siegel, and Gordon Bowker — who shared a common passion for fine coffee and tea. Their determination to provide the best quality coffee helped their business to succeed. With success came growth. A decade later Starbucks opened its fourth store in Seattle.

Enter Howard Schultz. In 1981, Schultz was a vice president at Hammarplast — a Swedish maker of stylish kitchen equipment and housewares. Schulz noticed a small business in Washington state was ordering a large number of a special type of coffee maker. Driven by curiosity, Schultz ventured to the Pacific Northwest from New York City to learn more about Starbucks. He saw the store, and immediately realized the attraction to the coffee bean culture. He eagerly wanted to be a part of that world. Schultz met with Baldwin, Siegel and Bowker and tried to break his way into the Starbucks family. He had a plan to take Starbucks across the country. The founders didn’t share Schultz’s bigger picture approach to roasting coffee, but his persistence paid off. In September 1982, Schultz was hired to head Starbucks marketing and oversee the four Seattle stores.

Schultz later left Starbucks to open a string of specialty coffee stores in Seattle modeled after the typical Italian espresso bar. Schultz quickly raised $400,000 in seed capital and by the end of 1986 he had $1.25 million in equity (including backing by his former Starbucks partners). While Schultz’s stores took off, only a year later in 1987, Schultz bought the original Starbucks franchise. Between 1987 and 1992, Starbucks, under Schultz, opened 150 new stores. In 1990, Starbucks turned a profit, and the company continues to open new stores today.

Outstanding Contributions:

Entrepreneurs make unique contributions to the American economy: Using innovations to grow their businesses, they provide concrete benefits to the national bottom line. These benefits provide an interesting framework in which to view these companies.

Entrepreneurs create innovations that improve our quality of life: Starbucks serves ten million customers a week. The average coffee-loving customer will visit a Starbucks 18 times a month. Rapid expansion has marked Starbuck’s history, but it has remained committed to the value of individuality. Each store has a different lay out with a décor that matches the personality of the neighborhood.

Entrepreneurs create new jobs: With over 3,300 stores around the world, Starbucks employs more than 40,000 people. The Starbucks Corporation’s policy of opening restaurants in office buildings, hotels and outdoor kiosks has invigorated other businesses in surrounding areas.

Entrepreneurs improve our position in global economic competition: Starbucks has rapidly shot beyond the city lines of Seattle and beyond the borders of the United States. More than a dozen countries are home to a Starbucks store. There are over a hundred Starbucks stores in Japan and the United Kingdom alone.

Entrepreneurs reinvest their newly created wealth in the community: Howard Schultz has insisted that Starbucks adopt an environmental mission statement. This pledge commits Starbucks to only buying coffee that has been grown organically. The company also takes an interest in the farming communities that harvest the coffee beans. Starbucks has built schools, health clinics, and safe coffee processing facilities. Locally, Starbucks has worked with stars like Magic Johnson to bring Starbucks stores to poor African American neighborhoods across the country. The Starbucks Foundation sponsors literacy programs, Earth Day clean-ups, and regional AIDS walks.