Origins and Ambitions: From Brooklyn to Starbucks

Howard Schultz was born in the housing projects in Brooklyn into a low-income family in 1953. His parents were both immigrants and high school dropouts with only his father working by taking low-wage labor jobs. One day when he was 7, Schultz came home to see his father with a cast from his hip to his ankle. He had suffered an injury from his work resulting in no compensation, no severance, and no health insurance. Schultz felt the hopelessness his parents had to go through and it left a lasting impression, especially on his character and motivation.

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From Scholarships to Coffee Ventures

Schultz’s mother had encouraged him to attend college in order to receive better opportunities. Schultz earned a full-ride on an athletic scholarship to Northern Michigan University for football. However, he decided that football wasn’t what he wanted to do and so his scholarship was never applied. Schultz instead took on debt and worked multiple part-time jobs to pay for college and eventually graduated with a degree in communications. After graduating, Schultz worked at a ski lodge for a year, before becoming a salesperson at Xerox and then general manager for a coffee manufacturing company called Hammarplast in 1979. In 1981, he fulfilled a plastic cone filter order for a small coffee bean company called Starbucks. Starbucks was not in fact founded by Schultz but by 4 students with a love for coffee in 1971. However, they mainly focused on coffee beans rather than being a coffee shop.

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Seeds of Transformation: A Glimpse of Italy

In 1982, Starbucks hired Schultz to serve as its director of marketing and sales and he made it his life’s work. The next year, Schultz took a trip to Milan, Italy, and was captivated by their coffee shops with there being over 1500 just in Milan. He loved the experience of the coffee bars and felt inspired to bring that same experience to America. Schultz saw a vision for Starbucks coffee to expand from just being a small coffee bean store to selling actual coffee, and making premium coffee widely available. However, the owners didn’t agree with Schultz’s vision and weren’t convinced that that future was a reality. So Schultz briefly left the company in 1985 to open his own coffee shop called Il Giornale. 

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A Culture Transformed: The Starbucks Experience

In 1987, Schultz returned to purchase the Starbucks brand and its 17 locations with the help of local investors. He then pulled off one of the greatest expansions in history.

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Just 4 years after becoming CEO, Schultz grew Starbucks from 17 stores to over 100. As Starbucks expanded all over the US, so did his vision. When Starbucks first came to New York, The New York Times had to define what a “Latte” was as most people didn’t know how to even pronounce it, which illustrates the innovative nature of Starbucks. Starbucks also conveyed a fancier feel with even their cup sizes sounding richer with names such as “grande” and “venti” that conveyed the Italian coffee culture. Aspects such as these made Starbucks feel more sophisticated despite being a popular chain and led to people paying more expensive prices. In 1992, Schultz took Starbucks public and used the $271 million increase in value to expand even more while also increasing competition with other coffee brands. By 2000, Starbucks had over 2500 locations in multiple countries and Schultz stepped down as CEO but remained as chairman. In 2008, Starbucks had over 15000 locations and Schultz returned as CEO to help the company recover from financial hardship. Schultz closed down 900 locations and implemented new revenue streams by adding baked goods and new coffee brewing techniques. His actions were successful and by 2012, Starbucks had rebounded financially. Schultz helped Starbucks grow $100 billion in market cap from 2008 to 2017, which was the year he stepped down again as CEO, but maintained an active role as executive chairman. In 2022, he returned once again to Starbucks to serve as Interim CEO and stepped down in early 2023, but remains on the company’s board. Today, Starbucks has more than 34000 locations in 80 countries and reported a net revenue of $26.6 billion in 2022.

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Challenges

Yet, like many global giants, Starbucks has not been without its share of controversies. Over the years, the company has faced criticism and backlash on a range of issues, from racial profiling to allegations of tax evasion. One of the most notable controversies was in 2018 when two black men were arrested in a Philadelphia Starbucks while waiting for a friend. This incident sparked national outrage and accusations of racial profiling, prompting Starbucks to close over 8,000 U.S. stores for an afternoon to conduct "racial-bias education" for its employees. On the environmental front, Starbucks has faced criticism for its single-use cups, which are challenging to recycle due to their plastic lining. Although the company introduced a reusable cup discount and has since made efforts to develop a more sustainable cup, they are yet to fully address this issue. Internationally, Starbucks faced accusations of tax evasion in the UK, leading to protests in 2012. The company responded by committing to pay more tax than required by law for the next two years. Furthermore, Starbucks has been criticized for its labor practices, especially in developing countries. Allegations of underpaid farmers and unsustainable farming practices in their supply chain have occasionally marred the brand's reputation. Each of these controversies highlights the intricate balance Starbucks must strike between profitability and social responsibility.

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Schultz’s expansion of Starbucks from a regional shop to one of the top brands globally goes to show the importance of believing in one's own vision. Despite Starbucks’ controversies over its history, Schultz's responses underscore a commitment to social responsibility and improving as a global brand. 

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