How Starbucks Really Became A Coffee Giant

consider this riddle some like it cold while some prefer hot I'm ground I'm boiled on tamped and I'm shot I'm mild or bold and a cup or a pot and I'm willing to bet that you like me a lot as a nation we are obsessed with coffee and it seems like it's as American as apple pie or baseball which is surprising considering that the US doesn't even crack the top 10 list of coffee drinking nations whether it's just love or a full blown caffeine addiction many of you may start your day by indulging in your favorite Starbucks brew as you take another hit from your venti no foam half CAF mocha frappe consider the evolution of coffee and how just a few short years ago coffee was once a week and watered-down beverage which must make you ask how did starbucks not only dominate an industry but actually change how Americans think about coffee to answer that we have to travel to the rainy City of Seattle and inside the mind of the man who single-handedly created our modern coffee craze so top up your mug with your favorite roasts as we tell the tale of how Starbucks and the iconic green mermaid changed the world this video is proudly brought to you by Squarespace start your 14-day free trial and build a beautiful website today while saving 10% by using the code business-casual and checkout get started now by going to Squarespace calm slash business casual our story begins in downtown Seattle in the early 70s when three coffee obsessed college friends started talking about the idea of starting a business of the heavily caffeinated trio Gordon Bowker was obsessed with premium quality coffee a foreign concept to Americans at the time Gordon made regular round trips to Vancouver to source better beans than anything he could find at home and as his reputation grew for mewling superior coffee from Canada his friends and colleagues put in orders of their own aha here was the Eureka moment the idea they had been looking for the three could sell high quality coffee beans to a market that had virtually no alternatives but lacking the necessary business acumen they wisely sought the mentorship of someone who was doing exactly what they aim to achieve Batman was Alfred Peet an entrepreneur who introduced premium coffee to the states in essence becoming the forefather of America's coffee industry Peet ran a boutique coffee store in Berkeley California sourcing high-quality beans and roasting them in his warehouse under his mentorship bokor Siegel and Baldwin made valuable connections to high-quality coffee brokers and learnt the art of roasting their own Arabica beans and in 1971 in a small store located near Seattle's famous Pike Place Market the three founders pooled their money and opened the very first Starbucks selling coffee tea and spices popular lore has it that the name came from a character in Moby Dick starbuck but it evolved into the current name from a mining camp on nearby Mount Rainier Camp star beau over the next decade the three founders would open another five locations in Seattle as the name Starbucks became synonymous with quality surprisingly however you couldn't actually buy a cup of coffee in any Starbucks store they only sold the beans and the brewing equipment to whip up the Java at home but all that was about to change when a coffee machine salesman walked into one of their stores Howard Schultz at the time twenty-eight-year-old Schultz worked for the Swedish based company hammer Plast which sold high-end European kitchen appliances to a growing US market but when he noticed that one of his clients in Seattle was buying more coffee machines than Macy's he knew that he had to check it out for himself and after walking into Starbucks for the very first time and being greeted with the aroma of freshly ground coffee as well as a tasty sample of French press Sumatra he realized and he wasn't just in a coffee store he was home upon tasting the sample Shultz remarked that he had never tasted a good cup of coffee until that very moment perhaps understandably so as coffee was widely regarded as weak cheap and bland tasting there was no such thing as dedicated coffee houses and the coffee you drank at home came freeze-dried in a can realizing that he had stumbled upon something remarkable Shultz lobbied the founders asking to be hired onto their team and although it took a year to convince them Howard Schultz was made the Director of Sales and market for Starbucks in 1982 the following year the founders sent their new director to a trade show in Milan Italy the week-long trip was Shults his first time in the country and would change his life forever as he explored the streets of this Italian city he was taken aback by the number of cafes on each corner and square Schultz was captivated by the theatre of these cafes with baristas making your coffee in front of you while you relaxed in an atmosphere of community here was something unique and special and Schulz raced back to his bosses in America that tell them all about it an idea was brewing in Schultz's mind maybe Starbucks was in the wrong part of the coffee business as soon as Schulz returned to Seattle he pitched the concept of the italian-inspired cafe to his bosses where they were unimpressed their stores were working they were growing and people love to buy their beans why fix something that wasn't broken which Schulz a master salesman ground them down thoroughly convinced of his idea that the experience was as important as the drink itself reluctantly his bosses gave in and tested the concept with a coffee bar in a new location and although the Milan style Cafe was a success Schulz couldn't convince the founders that this was the future of Starbucks it was a bitter end and he had given it his best shot but in 1985 Schulz left Starbucks in defeat for now at least Howard Schultz knew what it meant to work hard and make sacrifices growing up in the projects of Brooklyn New York he even sold his own blood to get through college but here was his grand vision his dream slipping through his fingers as he turned his back on the Starbucks coffee bean business convinced that his idea would work he opened his own cafe iljin alley at his cafe Schulz used Starbucks supplied beans to marry the idea of great coffee with a comfortable atmosphere to drink it a third place between home and work but as time passed Schultz his love for Starbucks didn't diminish there was something about that green siren that kept calling him back and as fate would have it Starbucks founders began experiencing financial problems two years after acquiring Pete's coffee in late 1984 perhaps realizing they'd bitten off more than they could they decided to focus their energies on Petes coffee over Starbucks by 1986 the founders set out to sell off their remaining interests in the Starbucks brand they couldn't think of anyone else they'd rather see take the helm than their former employee Howard Schultz Schultz jumped at the opportunity but when he counted his beans he was far from being able to afford the 3.8 million dollar price tag that they wanted for the company after being granted a 60-day exclusivity period to raise the financing Schultz began his road show seeking out ambitious investors who believed as much as he did in transforming America's coffee culture but even for Schultz it would be a difficult pitch at the time US coffee consumption had been on the decline for over two decades as soft drinks rose in popularity on top of declining coffee consumption Schultz wanted customers ordering their beverages in a foreign Starbuck Ian's language introducing new words to the American vocabulary like cafe latte and grande cappuccino his trip to Italy also helped inspire other ideas like substituting small medium and large for tall Grande and venti in his most bold move Schultz his pitch to investors included a plan to sell his high-quality coffee at the steep price tag of $3 to come perhaps prompting some customers to remark $3 are you frappe a kidding me this was a particularly daring move considering most Americans only paid 50 cents for a cup of coffee assuming they drank it at all but in the summer of 1987 Schultz pulled off the seemingly impossible and successfully raised that 3.8 million that he needed to acquire Starbucks upon taking over and merging with iljin Olli Schultz is daring and robust vision started to take shape intuitively Schultz knew just the way to get coffee back into the mind of America expansion under his visionary leadership Starbucks hired top-tier managers and pushed to grow into new markets as quickly as possible within five years Starbucks had grown to 140 locations and filed paperwork to go public in 1992 on the day of its IPO Starbucks priced its shares at $17 a piece successfully raising 25 million dollars while offering just 12 percent of the company the infusion of cash allowed Schultz to accelerate his already rapid expansion and within just two years of going public the company's store count had already tripled by 1996 Starbucks had opened its 1000th store and debuted its first international location in Japan three years later Starbucks had doubled yet again with a total store count of nearly 2,500 to understand the strategy of Howard Schultz you have to imagine the buzz around the launch of so many Starbucks it seemed as if they were popping up on every corner and perhaps that was precisely the objective as it prompted onlookers to see what all the fuss was about while opening new stores at breakneck speed another key to Schultz's grand strategy was maintaining consistency if you walked into a starbucks with her was in tokyo or seattle you could expect the same predictable great tasting coffee served by your familiar green apron barista and as it turns out this was a recipe for success after a tough grind for 13 years Schultz had introduced America to the cafe culture born from his first trip to Italy even more impressively Schultz had successfully changed how Americans think about coffee when Starbucks initially debuted many customers complained that their coffee was too strong but Schultz persisted eventually convincing America that this was how coffee was supposed to taste after realizing his vision of bringing high quality coffee to the masses Schultz stepped down from his CEO position On June 1st 2000 with the company financially strong and heading in the right direction with over twenty eight hundred stores Schultz stepped back into a hands-off role while still remaining on the company's board as its chief global strategist with under new management the mermaid of Starbucks would get lost at sea as its executives charted a new course towards even faster expansion from 2000 to 2007 the growth of Starbucks more than quadrupled and over the course of those 7 years Starbucks added an average of 1,500 stores a year or over four locations a day but the company's expansion didn't come without growing pains on one infamous occasion Starbucks made the costly mistake of opening a store inside Beijing's 600 year old forbidden city the Chinese media attacked Starbucks accusing the company of diminishing Chinese culture going as far as to describe the incident as an invasion at the very heart of China's history some even compared the incident to opening a Starbucks inside the White House amid protests and demands Starbucks was forced to close the controversial outlet in 2007 at its peak Starbucks was growing at the astonishing rate of one new location every four hours on the surface things never looked better for the Coffee Company as Wall Street rewarded Starbucks for its year-over-year record revenues and profits but as it turns out all that hyper growth was masking an insidious problem which was quietly eroding the company's very foundation and as management pushed onward disaster soon followed as the new executives were about to learn adding more water to a coffee makes it bigger but it doesn't make it better and although the company's top and bottom line figures were increasing its same store sales were slowing as Starbucks cannibalized its own market share with oversaturation but worst of all management had been cutting corners for years prioritizing profits over product quality and customer experience sacrificing the core values that Howard Schultz had instituted gone were the days when baristas manually pressed coffee as management opted instead for fully automatic espresso machines to pump out lattes like an assembly line and as drive throughs replaced the feeling of community it seemed as if Starbucks had lost her soul during this time of rapid growth Starbucks his stock price had tripled helped by the booming economy of the time but the global financial crisis of await was not kind to the coffee chain as consumers lost their jobs and saw their 401ks halved wallets began to tighten and suddenly the luxury of an $8 drink no longer made sense in a leaked memo Schultz complained to Starbucks senior management that they had removed the romance and theater it was essential to their brand bagged coffee removed the distinct aroma when he walked in automatic machines saved time but sacrificed experience and what now seems like deja brew the company turned to Howard Schultz to save the day with the company's stock price tanking Howard Schultz returned as the CEO of Starbucks on January 8th 2008 his first tasks included firing top executives shuttering hundreds of stores and restoring the company to its founding principles of product quality and customer experience to show the public that Starbucks was serious about its returning to quality Schultz closed every American store for an entire afternoon On February 26th 2008 and for three hours baristas were retrained on how to craft their signature drinks it's estimated this move costs Starbucks six million dollars in sales but in the eyes of Schultz it was essential for returning Starbucks to her former glory the new CEO also brought back the fresh ground coffee beans and the original llama zoko manual espresso machines restoring the romance and spectacle of watching baristas make your coffee with amazing foresight Starbucks also hired its first chief technical officer and launched the Starbucks loyalty card the new focus on digital eventually paved the way for Starbucks to release its own app which is now responsible for a remarkable 30% of the company's total sales under Schultz's new direction for the second time Starbucks thrived with its stock price climbing almost 1,600 percent in nine years with quality back on track Schultz resumed the company's expansion one of their key target markets was China a country where they now open a store every 15 hours in December of 2016 confident that Starbucks founding principles were now permanently ingrained in the company's culture Howard Schultz resigned again a CEO leaving the reins to then Starbucks chief operating officer Kevin Johnson under Schultz's vision and guidance Starbucks has grown from a small retail outlet for brewing equipment and beans to a multinational 100 billion dollar behemoth but most inspiring of all Starbucks has stayed true to a philosophy of corporate social responsibility a belief that profits should always come second to people it's a philosophy born out of Schultz's own struggles which he endured growing up in the projects of Brooklyn New York Schultz was deeply affected on one particular occasion when he was 7 returning home to find his father lying down on a couch with his leg in a cast earlier that day his dad had been fired from his job as a delivery truck driver after breaking his hip and ankle at work with his dad as the breadwinner of the family it was devastating for the young Howard Schultz Howard later remarked but he set out to build the company that his father never had the chance to work for ultimately he stayed true to that promise today Starbucks pays more in health care costs than it does for coffee beans in its North American stores in pursuit of building an honorable company Schultz also wanted to create a place where employees felt like family so Schultz doesn't call his baristas employees but rather partners impressively Starbucks also covers college tuition for its partners while also providing stock options for every individual including its baristas of course staying true to that social responsibility and the values of customer service quality and a better experience has taken Starbucks from darker times to where it stands today we hope that the story of Starbucks inspires you to stay true to what matters most in the face of opposition and those voices that would tell you otherwise before we wrap up this video we want to give a special thank you to the sponsor of today's episode Squarespace using Squarespace we created a beautiful website specifically for this video which you can check out by going to be CDOT coffee on the site you can learn even more about how Starbucks grew from its humble Seattle roots to the global coffee giant that it is today so be sure to check it out and if you like what you see you can create your own website with Squarespace start your 14 day free trial while saving 10% on your subscription by going to squarespace.com slash business casual and using the promo code business casual at checkout and lastly but not least today's giveaway in this episode we'll be giving away a signed copy of Howard Schultz's memoir onward to one lucky business casual fan and business casual merchandise to 10 other lucky fans to enter the giveaway simply follow us on instagram at business casual dot io and like the post which is linked in the video description below and thank you for watching if you enjoyed click the like button and subscribe for more videos just like and if you want to be notified of new uploads as soon as they go live click the bell icon and then the all option from the drop down menu as seen on screen and until next time stay smart

Channel: Business Casual

Views: 371,715

Keywords: starbucks history, starbucks founders, starbucks documentary, howard schultz, howard schultz documentary, how starbucks started, the rise and fall of starbucks, coffee documentary, coffee history, the history of starbucks, starbucks business casual, peets coffee, history of peets coffee, coffee shop history, coffee shop documentary, starbucks, bc

Id: 6yXcx_eQ8Fo

Length: 17min 56sec (1076 seconds)

Published: Fri May 01 2020