Howard Schultz Biography: Success Story of Starbucks Former CEO

Howard Schultz Biography

Howard Schultz

In this success story, we will share the biography of Howard Schultz, an American entrepreneur and the chairman, president, and former CEO of Starbucks Coffee Company, which is well-known as one of the largest coffee store chains in the world. The story of his “American dream” coming true is widespread. Still, Howard’s breakthrough was not easy to overachieve: he earned a fortune and reached the hearts of an entire generation of coffee fans.

Howard Schultz’s Childhood Biography

Howard D. Schultz was born on July 19, 1953, in Brooklyn, New York, in a family of a former U.S. Army trooper and later truck driver, Fred Schultz, and his wife, Elaine. The family had three poor kids, even though the parents worked hard to give their children a decent future. Then, they could not even imagine their son becoming one of the wealthiest businesspersons in the United States.

The childhood of the future billionaire was spent in the neighborhood of the houses for low-income families, where there was nothing but the basketball court. Most of the people there were extremely poor, and it is evident that the children from this area were considered quite ordinary. That is why Howard always knew how difficult it would be for him to escape this poverty. However, his dream of becoming successful was more robust than any obstacle.

As a little boy, Howard often watched his father trying to find a job meeting his expectations. When Howard was seven years old, his father broke a leg while being at work. As he had no medical insurance, the subsequent financial difficulties in his family left an indelible mark in the boy’s memory.

“I saw my father losing his sense of dignity and self-respect. I am sure that this was caused mostly by the fact that he has been treated as an ordinary working man.” – Howard Schultz recalls.

Education and Career

At the age of 12, Howard got his first job. First, he sold newspapers and then worked in a local cafe. The boy faced a rather challenging experience when he turned 16. He was working at the fur store, where he had to deal with stretching the leather. This exhausting job only made Howard stronger and firmed his wish to succeed in the future. Being physically strong, Schultz excelled at sports and was awarded an athletic scholarship to Northern Michigan University, where he received his Bachelor’s degree in Communications in 1975.

Howard Schultz grew up in the Bayview Projects in Brooklyn, New York.

After his graduation, Howard Schultz spent three years as a sales manager at Xerox. Then, he started working at a Swedish company, Hamamaplast, where he sold home appliances, including coffee grinders, to businesses like Starbucks. Once Schultz discovered that this little company purchases his coffee machines way more than other popular stores. Howard decided to meet the owners of Starbucks and went to Seattle.

Starbucks Corporation is an American global coffee company and coffeehouse chain based in Seattle, Washington. Three partners who met at a college founded it: English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. These guys adored coffee and decided to share their passion by opening a small coffee shop.

The store opened at a quiet, inconvenient time: at the end of the 60s, Americans ultimately gave up on instant coffee. Moreover, most of them did not even know that there are different types of coffee besides instant. Thus, there were not too many visitors.

The name “Starbucks” comes from the name of one of the characters of Herman Melville’s novel Moby-Dick. A twin-tailed mermaid, or a Siren as she is known in Greek mythology, became the company’s image. She symbolizes that Starbucks’ coffee is delivered from different areas of the world. You can still find the original Starbucks logo at the first store in Seattle.

After tasting Starbucks coffee, Howard immediately fell in love with it, which was much better than everything he had tried before. Later, Schultz recalled, “I went outside whispering to myself: Oh my Gosh, what a wonderful business, what a wonderful city! I want to be a part of this.” It was love at first sight.

The first version of the logo was based on a 16th-century “Norse” woodcut. Starbucks siren was topless and had a double fish tail. The original brown logo was used from 1971–1987.

The company had a philosophy that made its stores famous in Seattle – they taught the customers the art of making coffee. This approach and enthusiasm impressed 29-year-old Schultz, and he was begging for a job at Starbucks and bothering its director, Jerry Baldwin, with phone calls. Schultz was trying to persuade him that the company could open more stores, but Baldwin feared that a rapid expansion might kill the spirit of Starbucks. Once Schultz finished his attempt, he said, “Well, let’s do it all gradually, at your usual pace, but let’s also create something truly significant.” The next day, he was asked to become the marketing director at Starbucks with a salary less than half of what he was getting at Hamamaplast. Howard saw the business’s great potential and wanted to connect his life with Starbucks. Thus, he agreed to work there even under such inconvenient conditions. In 1982, he moved to Seattle.

Howard Schultz grew Starbucks from 20 to more than 100 stores in four years. The company went public in 1992, and by the end of the decade, it had 2,500 locations in a dozen countries.

Starbucks is one of the world's most successful chains because corporate executives believe their employees and customers are their most valuable resources in global competition. As a result, they make significant investments in employee satisfaction.

Starbucks is a company whose people are its greatest asset. When you manage a business of people, and for people, you must have a soul in it.

In 1983, Howard went to Milan and returned with the recipes of latte and cappuccino, which tripled Starbucks’ sales over the next year. However, the concept of an Italian café amazed Schultz the most – it was not just a store but a place for social meetings and leisure. In the United States, the various fast-food restaurants mostly held the socializing role. Schultz spent a long time thinking of this entirely new concept when, in 1985, he proposed Baldwin focus on creating a network of coffee houses. However, the CEO of Starbucks answered with a categorical refusal. The founders believed such an approach would cause their shop to lose its individuality. They were the men of traditional views, which supposed real coffee to be made at home. But the idea of drinking coffee out elated Schultz, and he, confident in his venture, resigned from the company to open his own business.

Howard Schultz remarks, “Only those who go by unexplored roads, creating new industries and new products, can build a strong, long-lasting company and inspire others to achieve great results.”

Birth of the Modern Starbucks

Howard needed $1.7 million to open his own business. The owners of Starbucks partly borrowed the money, and he lent the rest from a bank. In April 1986, Schultz opened a coffee shop in Seattle. He gave it an Italian name of ‘Il Giornale’ (Italian pronunciation: [eel johr-nah-leh]). This place was a great success, and 300 people visited it during its first working day.

A year later, Howard found out that the owners of Starbucks would sell their stores, the roasting factory, and the brand itself, as they could not manage the functioning of the large company. They announced a price of $4 million, and Schulz immediately went to his creditors, persuading them to give him a new loan. It is interesting to know that one of the early investors of Starbucks was Bill Gates, the founder of Microsoft. Like the McDonald brothers, three coffee fans from Seattle stepped out of their own business for the worthy reward, and Howard Schultz became Starbucks’s only owner and manager.

Every store had a bar counter where professional baristas (experts in coffee preparation) ground coffee beans, brewed, and served fresh coffee. A barista was supposed to know all the regular customers by their names and remember their preferences. When Schultz first visited Italy, he was fascinated by local coffee shops (as we have already mentioned), and, especially, as he called it later, ‘a magnificent theatrical presentation’ given by a barista, who was pouring espresso with one hand, whipping cream by another, while chatting with the customers at the same time. Two years later, Howard went to Italy for the second time. He brought home not only photos and menus but also videotapes documenting the baristas in action. Later, they became a teaching material for practical training of the staff. This is one of many key points that explain the success story of Starbucks.

Unlike hamburgers, coffee is an elegant product. Thus, to get the ordinary Americans “addicted” to it, you must try hard. It seemed unreal to lure any people to a place where they couldn’t smoke, and there was nothing but the smell of freshly brewed coffee. Therefore, Schulz can be called an adventurer at some point, which was sure to be his ultimate success.

Howard Schultz promised his creditors that he would open 125 stores in the United States within five years. In fact, by 1992, he could open many more items than he had planned. He began in New England – with Boston and Chicago – and gradually got to California. Schultz took the franchising system of McDonald’s as an example and managed to create his corporation.

He carefully thought about the strategy, and to tell the truth, it was pretty insane. To turn over the minds of Americans, Schultz decided to make accents on the quantity, quality, and publicity. The marketing team of Starbucks constantly told Americans that drinking the proper coffee at Starbucks is romantic. Advertising slogans were easy to memorize, causing a smile and the thought of a cup of this flavored drink. The head of the company made sure that this advertising was not different from reality.

Howard Schultz offered a democratic coffee house that worked on the principle of self-service. Here, the customer had a freedom of choice: the type of a drink (not just coffee, but latte, cappuccino, espresso, mocha, macchiato, and other alternatives), the size of a cup, and the type of milk (regular or fat-free) entirely depended on a choice of the visitor. This approach has allowed their customers to order a wholly individual drink. At some point, it also caused the emergence of a new slang: one’s order may sound very floridly, like ‘double tall skinny decaf latte.’

The coffee shop’s principle of self-service rules did not scare the customers. At Starbucks, one person takes an order, and another staff member prepares the drink. It makes the system relatively fast, especially if compared to some fast-food restaurants since a significant portion of orders in the U.S. (and in some other countries) is still takeaway coffee (in the U.S., it makes about 75% of all orders), even a large number of customers do not lead to overcrowding of the coffee stores.

In 1992, Schultz decided to make Starbucks a public company. In June of the same year, he put its shares on the New York Stock Exchange at $14 per share. In just one day, the cost rose to $33.

Enthusiasm and Professionalism of Starbucks’ Employees

Two years before starting the incorporation process, Howard Schultz developed a set of rules for Starbucks, which later evolved into the corporate code. It pointed to the benefits of well-organized teamwork and the need to improve coffee quality continuously. Its final statement was, “Remember that by making a profit now, we are laying the foundation for our future prosperity.”

From Howard Schultz biography, we have found out that while developing Starbucks at the national level, Howard Schultz paid excessive attention to the human factor. But Howard himself calls it the most intelligent and far-sighted model of acting. He stated that if people are associated with the employing business, they form an emotional relationship; they dream of it and put their hearts into its prosperity.

Schultz truly cared about Starbucks’ team spirit. All employees who have worked at least 20 hours a week were provided with general medical insurance. Then, he introduced a system of stock options, which went up to awarding the best employees with the shares. However, because of the introduction of subsidies, Howard Schultz did not favor Starbucks shareholders as they were afraid to see a decrease in the value of their shares.

In 1994, the company’s employees in California noticed that during the summer season, there were somewhat fewer customers, as Starbucks did not offer any refreshing drinks. Schulz did not want to deviate from his “pure coffee” concept but decided to try it. In April 1995, Frappucino was first offered in all 550 Starbucks stores. The drink became popular, bringing a tenth of Starbucks’ total profit in the same year. In 1996, PepsiCo offered Starbucks a long-term licensing agreement to produce bottled Frappucino.

Howard Schultz believes that people trust the Starbucks brand. Moreover, they trust it not because they like the way it prepares coffee; but they trust Starbucks, because they share the values of the company.

Unique Spirit of Starbucks

The popularity of Starbucks inspired not only the consumers but also the competing companies. Similar coffee stores were rising everywhere; they also offered better prices. Even fast food restaurants and gas stations got those “Espresso” ads to lure customers. Despite these conditions, the company maintained its essential principles of romance, accessible luxury, peace, and informality.

It soon became apparent that to follow these principles, Starbucks had to change the entire ideology of its network development. Italian coffee shops, which served as a model for restaurants like Starbucks, did not fit an American lifestyle. Italian coffee stores were housed in tiny halls with quite a few seats, as most visitors preferred to spend their time at the bar. In America, such an approach didn’t work. As Starbucks wanted to be a socializing place, it had to change the format of its coffee houses, turning them into the best place for conversation. The areas of the stores have been increased tenfold; tall bar stools at the counter have been switched to cozy tables and chairs. Having an opportunity to sit separately from the other visitors, Americans started to arrange meetings at Starbucks.

The popularity of coffee houses quickly spread, but it also had a backside. With such a high sales rate, combining various menu items while maintaining a high product quality was hard.

Starbucks’s coffee was brewed out of freshly roasted and ground coffee beans. The grain was delivered in special packaging: two-kilogram bags (4.4 lbs.) equipped with a special valve for releasing carbon dioxide but blocking access to moisture and oxygen. While this package was enclosed, the coffee inside remained fresh and could be transported thousands of miles away. When the package is opened, a barista has only seven days to use it so the product doesn’t lose its quality. Sometimes, it was about a rare and costly variety, and such an approach could be wasteful. Seeing all the losses, Howard Schultz decided on another compromise. The company has the right to use a new method of preparing the soluble coffee extract, which allows getting a much higher quality of the instant coffee. Eventually, the experts were able to make Starbucks instant coffee taste naturally, as closely as possible at that time. Finally, a new product began to bring a significant percentage of the sales.

An essential part of this system was the creation of an identity for Starbucks. Schultz made his team follow the uniform standards. According to his plan, not only did every place have to have a similar design, but even the taste of coffee had to be identical. Schulz dreamed of enabling a person to feel at home even in a foreign town. To enhance the effect, music has to play continuously. Besides this, a composition playing in a New York coffee shop at the same plays in, say, Seattle.

One day, the managers of Starbucks stores from different cities reported to Starbucks headquarters that the visitors often asked where they could buy a CD. Starbucks immediately signed a contract with Capital Records and, in March 1995, released its collection of jazz and blues. On the very first day, they sold more than 75,000 copies. Later, Starbucks created a subsidiary, Hear Music, which began to release the collections of Blue Note and Blending the Blues annually.

One of the company’s specialties is paying property owners precisely one dollar per year in many Starbucks stores. No one threatens them; Starbucks knows that the visitors will come. Everybody knew that the atmosphere, the coffee, and the name written on the glass would make even the most godforsaken place popular. Starbucks had often been invited to open coffee shops in neglected urban areas and always agreed. They could not fight crime but could easily create a flow of people. The cost of this improvement was just $1 per year.

Sure thing, not every Starbucks decision was made for the sake of humanity. Marketers and brand managers know their job and develop many exciting tricks to promote their brand—for example, a cover made of paper, which allows for avoiding burning hands. When buying coffee, you can choose a free corrugated cardboard ring, pay a little extra, and get a nice-looking polyurethane with the Starbucks logo. The logo will still be on the holder whether the next cup of coffee will be bought at Starbucks. This innovation led Starbucks to take care of the environment and get promoted simultaneously. Thermo cups, popular in coffee stores, are one of those great solutions. People use the tumblers labeled Starbucks not only for coffee from Starbucks but also for additional promotion.

Howard Schultz Makes Starbucks the World’s Leading Coffee Business

In 1996, as the Chairman of the Member Board, CEO, and co-owner of Starbucks, Howard Schultz decided it was high time for the company to go outside the United States. His first foreign coffee store was opened in Japan. Then, the stores appeared in Singapore, Korea, Taiwan, the United Kingdom, the Netherlands, Sweden, and Israel.

By April 2000, more than 2,400 Starbucks stores in the United States and 350 stores in Europe, Asia, the Middle East, and Canada opened. In the same month, 46-year-old Howard Schultz decided to transfer his duties to the Executive Director of Starbucks CEO Orin C. Smith. Schultz himself chose to focus on international expansion. He even set a goal for himself: he had to open 1200 new stores by the beginning of 2001. The financial position of Starbucks was just superb – over an entire decade, the sales, net profit, and share price were continuously growing.

“Many entrepreneurs make the same mistake. When they are tired of delegating, they surround themselves with loyal assistants. They are afraid to put in leadership positions really smart, successful people.” – Howard Schultz stated.

At the end of 2005, Howard Schultz announced that Starbucks would expand its size to ten thousand coffee shops. Howard stated that they had to grow very quickly. Otherwise, their competitors would throw them away from the market. However, it was instead the statement of the ambitious businessman, as Starbucks competitors trailed far behind at that time.

The company’s popularity has reached such a high level that The Economist magazine created the Starbucks Index – an indicator of the economic situation in the country, which is defined as the price for a standard cup of coffee in the company’s restaurant.

With the company’s international recognition, the Starbucks team created new ideas and requests. Howard Schultz decided to master the fast-food niche, and then the Starbucks team began experimenting with sandwiches on the menu. It is interesting to know that such a decision was pushed by a relative failure when he was trying to expand to the markets of China and Taiwan, where consumers are used to treating hot drinks only as a supplement to the food in these countries. Gradually, all the international coffee stores came to this market and started offering pastries, snacks, sandwiches, and other food. Starbucks fought to the last, but it was forced to a compromise. Finally, they began to sell food in their coffee stores.

When Schultz found that the company had reached prosperity and stability, he decided to plunge into the sports business. He bought the famous basketball team, the NBA’s Seattle SuperSonics, and temporarily left the company’s direct management.

Howard is Back in the Game

In 2007, the situation began to disturb Howard Schultz: the visitors of Starbucks complained about the loss of the spirit of romance. Schultz knew that it was happening and often drew the attention of top managers on these issues:

  • New coffee brewing machines were taller than the previous ones, and they didn’t allow customers to monitor the process of preparing a beverage;
  • New packs preserved the grain just fine but deprived the coffee connoisseurs of that delicate smell that was so attractive.

In addition, the economic crisis of 2008 made some adjustments. In early 2008, Howard returned to the Starbucks leadership to restore the company’s image.

Starbucks never actually competed with anyone. Being quite relaxed, the company has overlooked what is happening around it. Different companies started to notice that the coffee business is very profitable. On the one hand, there were giant McDonald’s and Dunkin’ Donuts. They were always willing to do anything to entice visitors: free coffee, coupons, etc.

On the other hand, some independent players learned from Starbucks’ experience. They were promoting themselves under the slogan: “Support local businesses!” Starbucks was trapped in the middle. To save Starbucks, Schultz had to take several strict measures. The company closed 600 stores in 2008 and another 300 – in 2009 to optimize the costs. Today, all the company’s efforts aim to overcome the crisis and improve services.

In March 2008, Starbucks launched a rather exciting project on the Internet. Any person, whether an employee of a company or a customer, can share his idea of improving the coffee stores. Each concept will be discussed, and some may even be implemented. Before the ideas reach the company, they are actively addressed by the website visitors, and Starbucks considers only the most popular.

On December 01, 2016, CEO Howard Schultz announced that he would step down next year. Howard retired from the company in 2018 but returned to Starbucks as interim CEO and a member of the Board of Directors on April 4, 2022. In 2023, he transitioned to chairman emeritus and resigned from the Board of Directors.

He will serve as the Executive Chairman and Kevin Johnson, the company’s current President and COO, will be appointed CEO on April 03, 2017.

Family Life of Howard Schultz

Howard Schultz is proud of his achievements. However, he always tried to talk more about the company than himself. As his parents dreamt, Howard became a good family man, a father of two children, who often spoke about his life in Brooklyn. He even took his kids on tour several times, although he didn’t feel secure on his native streets. A fresh bullet hole, which he saw on the wall of some house, was an excellent confirmation that he did the right thing by choosing this pathway.

As of October 2023, Howard Schultz’s net worth is about US$3.7 billion. He regularly traveled with his children and wrote two books that told the story of his own life. Not forgetting his roots, he often visits Israel. In 1998, he even won “the Israel 50th Anniversary Tribute Award” from the Jerusalem Fund of Aish Ha-Torah for using his influence to establish the ties between Israel and the United States.

His caring attitude toward his subordinates, even the low-level ones, amazes many people. If Schultz is in business – he is an aggressor; if he is with employees – he is a fair and tender leader. An increase in profit could not bring him peace of mind if the company employees didn’t feel right.

Howard Schultz lives in Seattle, Washington, with his wife, Sheri (Kersch) Schultz. They have two children, Jordan and Addison.

Once Schultz said, “I cannot offer you any specific secret recipe for success, the perfect plan, how to reach the pinnacle of success in the business. But my own experience suggests that starting from scratch and achieving much more than what I dream about is quite possible”.

In 2022, the company’s revenue was US$32.25 billion, and its net income was US$3.28 billion. The total headcount network comprised over 402,000 people as of 2022. As of November 2022, 35,711 Starbucks stores are operating in 80 countries.

We hope you have enjoyed reading Howard Schultz’s biography and the fantastic success story of Starbucks, and it has inspired you to make new inventions and discoveries.

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