Howard Schultz Childhood Biography

Howard D. Schultz was born on July 19, 1953, in Brooklyn, New York, in a family of a former US
Army trooper and later truck driver Fred Schultz, and his wife, Elaine. The family had three kids
and was poor, even though the parents worked hard to give a decent future to their children.
Then they could not even imagine that their son would become one of the wealthiest
businesspersons of 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 over
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 break out
of this poverty. However, his dream of becoming successful was stronger than any obstacle.

Being a little boy, Howard often watched his father trying to find a job, which would meet 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 family financial difficulties left an indelible mark
in the boys 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 was selling newspapers and then working in a
local cafe. The boy faced rather hard 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 future. Being physically strong, Schultz excelled at
sports and was awarded an athletic scholarship to Northern Michigan University where he
received his Bachelors degree in Communications in 1975.

After his graduation, Howard Schultz spent three years as a sales manager at Xerox, and then
he started working at a Swedish company Hamamaplast, where he was selling home
appliances, including coffee grinders to the businesses like Starbucks. Once Schultz discovered,
that this little company purchases his coffee machines way more than some 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 in a quiet inconvenient time: at the end of the 60s, the Americans completely
gave up on instant coffee. Moreover, the majority of them did not even know that there is
some different type of coffee, which is other than instant. Thus, there were not too much of the
visitors.

The name Starbucks comes from the name of one of the characters of Herman Melvilles
novel Moby-Dick. A twin-tailed mermaid or a Siren as she is known in Greek mythology
became the image of the company. She symbolizes that Starbucks coffee is delivered from the
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, as it was something
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 company had a credo, which made its stores popular in Seattle they actually taught the
customers the art of making coffee. This approach and the enthusiasm impressed 29-year-old
Schultz, and he was literally begging for a job at Starbucks and bothering its director, Jerry
Baldwin, with the phone calls. Schultz was trying to persuade him that the company is capable
of opening more stores but Baldwin feared that a rapid expansion might kill the spirit of
Starbucks. Once, Schultz finished his attempt with the words, Well, lets do it all gradually, in
your usual pace, but lets also create something truly significant. 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 a great potential of the business and realized that he wanted to
connect his life with Starbucks. Thus, he agreed to work there even under such inconvenient
conditions. In 1982, he moved to Seattle.

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 Italian caf amazed Schultz
the most it was not just a store but a place for social meetings and leisure. In the United
States, the socializing role was mostly held by the various fast-food restaurants. Schultz spent a
long time thinking of this entirely new concept when in 1985 he proposed Baldwin to make a
focus on creating a network of coffee houses. However, the CEO of Starbucks answered with a
categorical refusal. The founders believed that such 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 literally elated Schultz, and he, being 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 for opening his own business. The owners of Starbucks partly
borrowed the money and the rest of the money he lent in 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 were going to sell their stores, the
roasting factory, and 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 McDonald brothers, three coffee fans
from Seattle stepped out of their own business for the worthy reward, and Howard Schultz
became the only owner and manager at Starbucks.

There was a bar counter in every single store where professional baristas (experts in coffee
preparation) were grounding coffee beans, brewing and serving fresh coffee. Barista was
supposed to know all the regular customers by their names, and, also, to 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 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 the one of many key points that explain the success story of Starbucks.

Unlike hamburgers, coffee is an elegant product. Thus, in order to get the ordinary Americans
addicted to it, you have to try really hard. It seemed unreal to lure any people to a place
where they werent allowed to smoke, and there was nothing but the smell of freshly brewed
coffee. Therefore, Schulz can be called an adventurer at some point, which was certain to his
own ultimate success.
Howard Schultz promised to his creditors that within five years he would open about 125 stores
in the United States. In fact, by 1992 he was able to open much more items than it was
planned. He began in New England with Boston and Chicago and gradually got to California.
Schultz took the franchising system of McDonalds as an example and managed to create his
own corporation.

He carefully thought about the strategy and to tell the truth, it was quite insane. To turn over
the minds of Americans, Schultz decided to make accents on the quantity, quality, and publicity.
The marketing team of Starbucks were constantly telling Americans that drinking the right
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 is not different from reality.

Howard Schultz offered a democratic coffee house, which 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) completely depended on a choice of the visitor. This
approach has given their customers an opportunity to order an entirely individual drink. At
some point, it also caused the emergence of a new slang: ones order may sound very floridly,
like double tall skinny decaf latte.

The fact that the coffee shop is ruled by the principle of self-service did not scare the
customers. At Starbucks, an order is taken by one person, and another staff member prepares
the drink. It makes the system quite fast, especially if to compare it with 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 a price of $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 came up with a set of
rules of Starbucks, which later evolved into the corporate code. It was pointing to the benefits
given by a well-organized teamwork, and the need of continuous improvement of coffee
quality. Its final statement was, Remember, that 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 an 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 are forming an emotional relationship; they
dream with it and put their hearts in its prosperity.

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

In 1994, the companys employees in California noticed that during the summer season there
were rather fewer customers, as Starbucks did not offer any refreshing drinks. Schulz did not
really want to deviate from his pure coffee concept, but he still decided to give it a try. In
April 1995, in all 550 Starbucks stores Frappucino was first offered. The drink became popular,
and in the same year, it brought a tenth of the total profit of Starbucks. In 1996, PepsiCo
offered Starbucks a long-term licensing agreement for the production of bottled Frappucino.

Unique Spirit of Starbucks

The popularity of Starbucks inspired not only the consumers but also the competing companies.
Similar coffee stores were rising all over the place; they also offered a better price. Even fast
food restaurants and gas stations got those Espresso ads in order to lure the customers.
Despite these conditions, the company maintained its most important principles of romance,
accessible luxury, peace, and informality.

Pretty soon it became all clear that in order to follow these principles, Starbucks has to change
an entire ideology of its network development. Italian coffee shops, which served as a model
for restaurants of Starbucks, did not fit an American lifestyle. Italian coffee stores were housed
in tiny halls where there were quite a few seats, as the most of the visitors preferred to spend
their time at the bar. In America, such an approach didnt 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 having a conversation. The areas of the stores have been increased tenfold; tall bar
stools at the counter have been switched for 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. Having such a high
rate of sales, it was hard to combine a variety of items from the menu while maintaining a high
product quality.
At Starbucks, the coffee was brewed out of freshly roasted and ground coffee beans. The grain
was delivered in a special packaging: two-kilogram bags (4.4 lbs.), equipped with a special valve
for releasing carbon dioxide out, but blocking access to moisture and oxygen. While this
package was enclosed, coffee inside remained fresh and could be transported thousands of
miles away. When the package is finally open, a barista has only seven days to use it all, so the
product doesnt lose its quality. Sometimes it was about a rare and very expensive variety, and
such an approach could be called an apparent wastefulness. Seeing all the losses, Howard
Schultz decided on another compromise. The company has got 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 close as it was possible at that time. Finally, a new product began to bring a
significant percent of the sales.

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

One day, the managers of Starbucks stores from different cities reported to the headquarters of
Starbucks 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 own collection of jazz
and blues. At the very first day, they sold more than 75.000 copies. Later, Starbucks has created
a subsidiary Hear Music, which began to release the collections of Blue Note and Blending the
Blues annually.

One of the companys specialties is that they pay property owners exactly one dollar per year in
many Starbucks stores. No one threatens them; Starbucks just knows that the visitors will
come. Everybody knew that the atmosphere, the coffee, the name is written on the glass would
make even the most godforsaken place a popular place. Starbucks had often been invited to
open coffee shops in such neglected urban areas, and Starbucks always agreed. Apparently,
they could not fight crime but they could easy 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 come up with many interesting tricks to promote their
brand. For example, a cover made of paper, which allows avoiding burning hands. Buying
coffee, you can choose if you want to get a free corrugated cardboard ring or to pay a little
extra and get a nice-looking polyurethane one with the logo of Starbucks. No matter if the next
cup of coffee will be bought at Starbucks or not, the logo will still be on the holder. This
innovation led Starbucks take care of the environment and get promoted at the same time.
Thermo cups, which are quite popular the coffee stores, is one of those great solutions. People
use the tumblers labeled Starbucks not only for coffee from Starbucks, and it brings an
additional promotion.

Howard Schultz Makes Starbucks the Worlds Leading Coffee Business

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

By April 2000, there have been 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 decided to focus on international expansion. He even set a goal to
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 was going to expand its size up
to ten thousand coffee shops. Howard stated that they had to expand very quickly. Otherwise
their competitors would just throw them away from the market. However, it was rather the
statement of the ambitious businessman, as at that time Starbucks competitors trailed far
behind.

The popularity of the company 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 restaurant of the company.

With the international recognition of the company, the team of Starbucks created new ideas
and requests. Howard Schultz decided to master the fast-food niche and then Starbucks team
began an experiment of inclusion sandwiches into 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
had started offering pastries, snacks, sandwiches, and other food. Starbucks fought to the last,
but it was forced to a compromise. Finally, they started to sell food in their coffee stores.

When Schultz found that the company has reached prosperity and stability, he decided to
plunge into the sports business. He bought the NBAs Seattle SuperSonics, the famous
basketball team, and temporary left the direct management of the company.

Howard is Back in 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 drawn
the attention of top managers on these issues:

New coffee brewing machines were taller than the previous ones, and it didnt allow customers
to monitor the process of preparing a beverage;

New packs preserved the grain just fine but deprived that delicate smell, which was so
attractive for the coffee connoisseurs.

In addition, the economic crisis of 2008 made some adjustments. In early 2008, Howard
returned to the Starbucks leadership in order to restore the companys image.

Starbucks never actually competed with anyone. Being quite relaxed, the company has
overlooked what is happening around. Different companies started to notice that the coffee
business is very profitable. On the one hand, there were giant McDonalds and Dunkin Donuts.
They were always willing to do anything to entice visitors: free coffee, coupons, etc. On the
other hand, there were independent players who learned from Starbucks experience. They
were promoting themselves under the slogan: Support local businesses! Starbucks was
trapped in the middle.

In order to save Starbucks, Schultz had to make a number of strict measures. To optimize the
costs, the company closed 600 stores in 2008 and another 300 in 2009. Today, all the efforts
of the company aimed at overcoming the crisis and improving services.

In March 2008, Starbucks launched a rather interesting project on the Internet. Any person,
whether he is an employee of a company or a customer can share his idea of improving the
coffee stores. Each idea will be discussed, and some may even be implemented. In fact, before
the ideas reach the company, they are actively discussed by the visitors of the website, and,
obviously, Starbucks considers only the most popular.
On December 01, 2016, CEO Howard Schultz announced that he would step down next year.

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