Did you know Starbucks nearly collapsed after only one year in operation when Howard Schultz was confronted by his Father-in-Law? Did you know Starbucks was almost out of business in 2007? Did you know Schultz refused to go into the Italian market until 2017 out of respect for the country’s coffee heritage? Here are some things you may have never heard about Starbucks and its leader.
Starbucks is a coffee brewing powerhouse and beverage conglomerate. Starbucks Coffee Company includes Tazo Tea Co., Seattle’s Best Coffee, Torrefazione Italia, Hear Music and Ethos Water. Starbucks has more than 22,000 stores and expects to grow to 50,000 stores by 2020, trumping even McDonalds. They add an average of three stores per day. They have more than 150,000 employees, or “partners” as they call them, twice the population of Greenland. They hire 250 people a day.
At $300 million, Starbucks spends more on healthcare insurance for employees than on coffee beans. The average customer visits the store six times per month, while the loyal 20% of customers go to their stores 16 times per month. Finally, at 12 times the cost of gasoline, Starbucks coffee sells for an average of $12.88 per gallon. Remember that the next time you are complaining at the pump and craving a latte!
So how did Starbucks Chairman and CEO Howard Schultz go from almost shuttering his coffeehouse to building an iconic world-class brand and business empire? Beyond hard work and perseverance, there are four key takeaways from Howard Schultz’ story that can help any entrepreneur stay the course.
1. FIND WHAT YOU LOVE TO DO
Howard Schultz was making cold calls for Xerox out of college. Although he loathed the job, he was able to send money back home to his Mother to help make ends meet. Family factors strongly in Schultz’ life.
He left Xerox to work with a Swedish company selling high-end commercial dishware. The company sent him to Italy for a trade show where he noticed how coffee shops and cafes were social meetup destinations in the Italian lifestyle. He was intrigued, and soon Schultz met the owners of Starbucks Coffee Distributors in Seattle. He loved the company, begged for a job and they hired him.
Then, in 1986, the owners of Starbucks decided to concentrate on their Pete’s Coffee brand instead. Schultz rallied friends, family, and business contacts to lend him the $3+ million to purchase Starbucks from its owners. It worked and Schultz was the new owner of Starbucks.
2. FAMILY CAN HAVE A BIG IMPACT
Early on the company suffered. With a pregnant, working wife and no salary, Schultz was confronted by his Father-in-Law about their future. He choked up as his Father-in-Law told him it was not working out and he had to think about what was best for his growing family.
He choked up as his Father-in-Law told him it was not working out and he had to think about what was best for his growing family.
But when Schultz discussed the conversation with his wife, she immediately said that he must continue on with the business. To this day, Schultz says that if his wife would have agreed with her Father and asked him to give up the business, he would have done so.
3. LOSING FOCUS CAN LEAD TO BAD DECISIONS
In 2001, with Starbucks already successful, Schultz quit to buy the Seattle Supersonics basketball team. He knew he could bring his ideas of unity and one-for-all using the techniques that had helped make Starbucks successful. It was a colossal failure. Not only did the team not respond to his management approach, but Starbucks started to suffer without him, losing nearly $30 million in market cap.
He knew he could bring his ideas of unity and one-for-all using the techniques that had helped make Starbucks successful. It was a colossal failure.
Schultz returned to run Starbucks in 2007 after the interim CEO nearly lost the company. He closed almost a thousand stores fired thousands of employees, but the company rebounded and is now a beverage powerhouse.
4. KEEPING YOUR FOCUS KEEPS YOU ON TRACK
Schultz admits he is constantly offered deals to get into the food business on a larger scale. But to date, he has refused, citing that he cannot find a good example where food is any better than coffee as an expandable product.
Schultz finds the Shake Shack model interesting and respects the In and Out Burger chain, but he’s keeping his focus on beverages – for now. In fact, he has refused franchising offers altogether. Starbucks has partnered with Target, and airports for location placement, but most are corporately owned. This laser focus has kept Starbucks strong and successful.
Want more from Howard? Here he talks business.