14. Howard Schultz

Starbucks CEO

Benjamin Wachenje
"The companies we dream of and build from scratch are part of us and intensely personal. They are our families. Our lives."

Chairman and CEO, Starbucks
Born: July 9, 1953, Brooklyn, N.Y.
Education: Bachelor's in communications, Northern Michigan University

Howard Schultz is the Ray Kroc of his generation. He took an American standard, a cup of coffee, and like Kroc with hamburgers, made it uniform and ubiquitous — standardized fast food consumed in reassuringly familiar surroundings. But whereas Kroc sought to make McDonald's burgers a cheap eat, Schultz saw that Starbucks' coffee could be sold at a premium if staged with the right experience. That insight was instrumental in creating a $15 billion market for specialty coffee in the U.S. alone.

The cultural impact of Starbucks shops has been immense. His American repackaging of the Italian café has become more than a symbol of American consumerism (to add to McDonald's and Coke) but arguably the first international symbol of globalized consumerism

It succeeds by what Temple University social historian Bryant Simon calls selling comfort in an anonymous, often dislocating world. Every week, millions of parents, couples, teenagers, telecommuters, students and shoppers enter a Starbucks for refreshment, social connection or communal solitude.

The formula has made the former Xerox salesman rich, with a fortune that Forbes estimates at $2.1 billion. Schultz started in coffee in 1979, working as a general manager in the U.S. for a Swedish housewares manufacturer. Among customers for drip filters was an independent coffee-bean roaster in Seattle called Starbucks Coffee—specialty coffee being a bright spot in that decade's generally stagnant coffee market. Schultz joined Starbucks in 1982 as director of operations and marketing.

On a buying trip to Italy the following year he saw espresso bars for the first time, and was impressed by their ubiquity and role as social hubs.

With his employers unenthusiastic about running espresso bars in the U.S., Schultz struck out on his own. He opened his first Il Giornale coffee shop in Seattle in 1986; a year later, Starbucks sold him its retail business, including the name, for $3.8 million. (Kroc, coincidentally, was a milkshake-mixer salesman; the McDonald brothers were customers, and he subsequently joined their company before buying them out.)

Schultz expanded the chain across the U.S., eschewing franchising for company-owned locations. Believing that fast growth was essential if Starbucks was to establish itself as the national brand leader, he wanted to head off independent coffee roasters in other cities that were starting to expand, as well as any restaurant chain that noticed the growing market for specialty coffee.

Within nine years, a combination of word-of-mouth customer recommendations and mail order sales that spread brand awareness (and provided intelligence on which cities and neighborhoods were fertile ground for outlets) had made Starbucks the largest specialty coffee retailer in North America. It had expanded from 11 outlets in the U.S. and Canada in 1987 to 1,000 by 1996.

Starbucks had turned profitable in 1990, and sales tripled between 1990 and 1992, to $103 million. Schultz brought in experienced management to handle the increasingly complex enterprise. In 1992, the company raised $29 million in an initial public offering to sustain its breakneck expansion.

Four years later, Starbucks opened in Tokyo, its first outlet outside North America. Stores elsewhere in Asia, and in Europe and the Middle East, followed. By 2000, with a widening range of distribution outlets and products—notably the Frappuccino—Starbucks had 3,500 outlets, 500 of them outside North America,12 million customers a week and annual revenue of $2.2 billion.

Schultz stepped down as CEO in 2000 and returned in 2008. Starbucks' stock price was plunging. McDonald's and Dunkin' Donuts were providing stiff competition, and customers were abandoning Starbucks as what had been affordable indulgences before the recession became outright luxuries. The contradictions of a multinational corporation posing as a local hangout eroded loyalty, as well. Schultz closed stores and cut costs. While deleting "coffee" from the logo, he also set about re-establishing the experience that justifies the premium he charges for a cup of joe.

Howard Schultz: Lifelong highlights

  • Grew up in public housing in the Canarsie section of Brooklyn, N.Y.
  • Won a football scholarship to college
  • Starbucks named for the first mate in "Moby-Dick"
  • Owned the Seattle SuperSonics pro basketball team, which moved to Oklahoma in 2006 when he sold it after the city of Seattle refused public funding for a new arena
  • Favors aged Sumatra coffee, reputedly the coffee he drank on his first visit to Starbucks
  • Ensnared in controversy in 2013 over use of licensing and supply agreements with Dutch and Swiss arms to move British profits to lower-tax jurisdictions


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