If one thing is clear, it is that I am a coffee lover. Wonderful, that smell and that taste. It always takes my energy and mood to the next level. I usually go for the cups and have my preferences when it comes to brands. You probably guessed it, Starbucks is one of them and I asked how they ever got started. When did they become successful and what can we learn from them? Starbucks, get inspired!
Facts and facts
First I'm going to give you some facts and surprising facts (more on the timeline on the Starbucks website):
- The very first store opened in 1971 in Seattle, Washington state.
- Starbucks now has more than 36,000 locations worldwide across 80 countries.
- Starbucks is known for its extensive menu, but what you may not know is that it also has a secret menu. These are unofficial drinks that customers can order, such as the 'Butterbeer Latte' or the 'Cotton Candy Frappuccino'.
- Starbucks was one of the first major chains to offer customers free Wi-Fi in their stores.
- Howard Schultz has returned to Starbucks twice to take over again (temporarily). In total, he has been CEO of Starbucks three times.
- From 2024, Starbucks will be the only coffee house in the US to offer customers the option to use their own cup when placing a mobile order.
The name: Starbucks
It was 1971 when three friends - Jerry Baldwin, Zev Siegl, and Gordon Bowker - decided to start a business focused on selling high-quality coffee beans and equipment.
Initially they wanted to call the company 'Pequod', after the ship from Herman Melville's classic 'Moby-Dick'. As they continued brainstorming, they came up with one of the most famous landmarks in the Seattle area, “Starbo.” Funny, because this idea brought this trio back to where they started. In “Moby-Dick,” the name of the first mate on the Pequod was…Starbuck!
From local community to global coffee chain
We start with the 70s, the time of flared jeans and disco balls. Jerry, Zev and Gordon had had enough of the boring, mundane coffee. With a dream of taking coffee to new heights, they opened the very first Starbucks store in Seattle in 1971, in the historic Pike Place Market. But Starbucks really took off in the 1980s. Howard Schultz, responsible for marketing, went to Milan on business in 1983 and saw 'the light'. Schultz fell in love with Italian coffee culture, especially the espresso bars where people met almost every day. He wanted to bring this to the United States, but Jerry Baldwin and Gordon Bowker didn't believe in it. After some time, Schultz left Starbucks. He started his dream and his own coffee shop Il Gornale. When the Starbucks founders wanted to get rid of the coffee house in 1987, Schultz didn't hesitate for a moment and took it over. And with success. In the 1990s, Starbucks grew explosively. Within 10 years there were 100 times as many branches and another 10 years later even almost 1,000 times.
The secret of success
Much of Starbucks' success is due to Howard Schultz. Schultz transformed drinking coffee into a social event, a break from the daily grind and where you can enjoy your favorite coffee while you work or have a nice chat. The concept of coffee shops in living room style with music in the background and later (as the first major chain) free WiFi, became a success. It is a home between your work and home ('the third place') where the baristas help you like family, where you meet and make friends.
Schultz also managed to convey his vision to employees in a fascinating and plain language. Everyone was on the same page and employees felt connected to the company and its ambitions. Connecting people through communication is one thing, but Schultz went further than that. Starbucks was one of the first to offer its employees company health insurance. Later, an option plan followed that motivated employees to think along with Starbucks based on their own sense of responsibility. Howard Schultz: “If you take good care of your people, give them individual attention, then these people will also take good care of you and your customers.”
Furthermore, Starbucks has shown the ability to (often be one of the first) to keep up with technological trends. Mobile convenience and service for more customer loyalty. What started as a savings program grew into ordering, paying and no longer waiting in line. The app is a successful total system with gamification and rewards that managed to replace price competition.
The shadow side
But Starbucks' success also has a dark side. In 2000, Schultz stepped down as CEO to lead international expansion. Eight years later, Schultz returns as CEO, because, according to him, Jim Donald (then CEO) had made a mess of things. The company had lost its soul, Schultz writes in his book 'Onward'.
What had happened? To maintain the strong growth, Kevin Donald continued to expand the range. You could now also have breakfast, lunch and soft drinks at Starbucks. It had little to do with making artisanal espressos or creamy lattes. Starbucks had become a mass producer and 'ordinary'. However, you still paid the same price, even though the ultimate coffee experience was nowhere to be found. Branches were opened everywhere without investigation. At that time, Starbucks lost many customers to chains such as McDonald's. They had great coffee and one at a better price.
When Schultz takes over in 2008, he carries out a mega reorganization. There were significant cuts in staff positions and quite a few branches were eliminated. In the United States, no fewer than 7,000 (!) branches were temporarily closed to retrain baristas. But… it worked. Two years after his return, profits had tripled. In addition, Schultz focused on fair trade coffee and corporate social responsibility became an important pillar.
How is Starbucks doing now?
Things were stable for a long time with Schultz and later Kevin Johnson at the helm. But I already wrote it, Schultz has been CEO 3 times. When Johnson indicated that he wanted to leave, the then 68-year-old Schultz returned one more time in 2022 until he handed over to Laxman Narasimhan in March 2023. In the previous months, Narasimhan could be found on the work floor as a barista. When he was permanently appointed, he promised the staff to continue working in the stores for half a day a month. Narasimhan considers employees as the most important asset. They make the difference for customer satisfaction and quality in products and services. In his first end-of-year letter in December 2023, he wrote, among other things: “I am inspired by you. You are special. You care. You give. You give as partners to other partners. You give to customers. You give to farmers. You care about the environment. You give to the communities you serve. And because you are givers, you create a community of givers — a community that contributes positively around the world. A community we call Starbucks”.
More …
The Starbucks story is of course much more than this blog. Would you like to read more? Then Howard Schultz's book 'Onward' might be something for you.
Sources: Starbucks, MT/Sprout, Emerce, Trouw, US Today, Management Model Site
