The Starbucks Story (5 page)

Its early commitment to quality and
customer service has served Starbucks well

There’s an American story that I like. It’s one of those stories that explode the myth that Americans don’t get irony.

After a baseball game, the coach went up to one of the players who had had a bad game. “What is it about you? You’ve got the makings of a great player. So why don’t you perform at that level? Is it ignorance or apathy?”

The player stared back at the coach and replied: “I don’t know. And I don’t care.”

Howard Schultz

Howard Schultz remembers being instantly impressed by Starbucks and its people when he met them in 1981. A few years later, he might have felt more like the baseball coach, wondering whether it was ignorance or apathy that prevented the founders from seeing the scale of the opportunity that he saw. And Jerry Baldwin might be cast as the star player, appearing to shrug his shoulders, pitching for Seattle Apathetic. But we are jumping ahead of ourselves. We need to introduce Howard Schultz properly.

Howard Schultz was born in Brooklyn, New York in 1954. He lived with his mother, father, brother and sister in the Projects: subsidized public housing. His father was a blue-collar worker, a truck driver among whatever other jobs he could find. Life was hard in the Projects, and the need to survive and cope with his environment no doubt helped shape Howard’s character.

Howard became the first college graduate in his family. To his parents’ amazement and pride, he kept rising, moving from a sales job with Xerox to the head of the US division of Perstorp, a Swedish company that was establishing a housewares subsidiary called Hammarplast. This was 1979, and Howard was 25. He was sent off to Sweden for three months’ training. When he came back, his drive and determination made him highly successful, but he was clearly never fired by a passion for the products he was selling. “Who could relate to plastic extruded parts?” he asked in the autobiographical chapter of his book
Pour your heart into it: How Starbucks built a company one cup at a time.

He was very good at the job, though. Whenever he showed the slightest sign of restlessness, he got promoted. By the age of 27, he was earning a lot of money by any standards, not just by the standards of a boy from the Projects. He married Sheri, a furniture designer with a successful career of her own. To his parents, it was like a dream; he had achieved greater success than they could ever have imagined.

Yet it was not enough. He needed more, but not in material terms. He wanted to do work that would fire his imagination. As a basketball player, he had his own hoop dreams: he wanted drama, excitement and passion in his work. And he was prepared to take risks with his life to achieve it.

Because he was good at his job and noticed such things, Howard became intrigued at the relatively high level of sales that Hammarplast was making with a small retailer in Seattle. Starbucks, with only four small stores, was ordering and selling larger quantities of a drip coffeemaker than a mass retailer like Macy’s. Why was this? He decided to go and find out.

Until then Howard Schultz had never set foot in Seattle. His job took him across large parts of the country, but this north-western region was not really in the mainstream. The fact that Starbucks was Washington State’s largest coffee retailer despite operating just a few stores said a lot in itself. He could justify the visit, but at the same time knew that it was unlikely to lead to much. We can talk about luck, but the truth is that Howard Schultz analyzed sales information, investigated his marketplace in depth and, as a result, discovered something interesting to both himself and his company. On one level, it was simply good customer relations management. At the same time, none of the big coffee merchants showed anything like this initiative; none of them took the slightest interest in the fact that Starbucks was selling more and more coffee beans. They never asked the question “Why?”

Howard Schultz arrived in Seattle in pursuit of the answer to that question. He was asking it about coffee-making equipment that Hammarplast was supplying. Asked to meet him, Starbucks’ retail merchandising manager, Linda Grossman, walked him from his hotel to the Starbucks store in Pike Place Market.

Going there for the first time in 2003, I tried to imagine the impact on Howard Schultz 24 years earlier. Pike Place retains its charm. We have all been to markets, but there is something special about Pike Place. There is still a bustle about the place that comes from the energy of finding, displaying and selling good produce rather than just putting on a show for the tourists. Tourists do flock here, of course, but they buy the marginal goods: the postcards, knickknacks, souvenir aprons. The business of the market is to sell and they do that with vigor.

Fish sellers at Pike Place Market, Seattle

Fish are sent from one end of the counter to the other, flying between the hands of fishmongers. The meatsellers have caught on and, as it is Thanksgiving week, turkeys go flying. The fruit is colorful and exotic, with pomegranates side by side with all the apple varieties of Washington State. This is a market that looks locally for fresh quality, and to all parts of the world for a taste of something different. But this is the edge of the Pacific and out there is the world’s biggest ocean, full of fish. It’s pleasant to sit at a window looking out at Puget Sound, drinking a cup of coffee, imagining the places beyond.

In American terms this is historic, the peeling paint and the chipped veneer adding to the feeling of authenticity, an age before the big chains took over. Starbucks is the only one of the current big chains allowed anywhere near Pike Place Market. That’s because it has been here since 1971, and it certainly was not a big chain then.

Pike Place Market made a big impact on Howard in 1979. He wrote later: “I loved the market at once, and still do. It’s so handcrafted, so authentic, so Old World.” Here was a man who looked back across the Atlantic for authenticity and, in a sense, approval. This feeling was reinforced by the Starbucks store. If we associate modern America with size, slickness and brashness, Starbucks seemed not particularly interested in the association. A busker outside the door played classical music, violin case open to invite small change. The shop itself was small, but inside it seemed like a temple for the worship of coffee. Like a temple it was filled with a sweet aroma – not of incense, but of coffee. There were dark wooden shelves displaying equipment, including Hammarplast coffeemakers in three different colors. And beans, beans, beans from exotic locations around the world: Sumatra, Kenya, Guatemala, Costa Rica, Ethiopia.

Howard asked the question “Why?” Why did they sell so many of those Hammarplast products? Why did they recommend them? Already he was sensing something of the answer, just by being there, absorbing the atmosphere, enjoying the aroma. “Part of the enjoyment is the ritual,” Linda Grossman explained. Howard’s understanding of a coffee ritual at this time probably centered around prising the lid off a can of coffee powder, measuring a spoonful into a cup, pouring on boiling water, and stirring in milk and sugar to taste. This was ritual of a different order. The Starbucks staff explained it in the best way they could, by making him a cup of coffee.

The counterman picked up the metal scoop, dug into the Sumatra beans, and poured them into a grinder. Then he put the grounds in a filter in the cone, and poured hot water over them. Meanwhile, Linda Grossman explained Starbucks’ belief in manual coffee brewing: the need for freshly made coffee rather than the liquid that stood around for hours in a diner’s electric coffeemaker. The sense of ritual embodied in the reverent movements of the counterman intrigued Howard. The taste of the coffee at first repelled, then converted him. It was so strong, so different. “I felt as though I had discovered a whole new continent,” he wrote afterward.

Linda Grossman then drove Howard to the roasting plant to meet Jerry and Gordon. Again, the aroma of the roasting coffee. It is true that without a sense of smell we have little sense of taste. Howard was intoxicated by the smell of the coffee, imagining he was tasting the deepest secrets of arabica. He took an instinctive liking to Jerry and Gordon, too. He liked them for their absorption in their product, for the feeling he got that they were on a mission to convert people to a love of good coffee. Yet they were very different; they had no cultish uniformity in their approach to life. Jerry was quiet and consciously the good host. Gordon was a maverick with an air of eccentricity, contributing lighter comments from the sidelines.

Whatever it was about them, they won Howard over. For him, it was a life-changing meeting. When he got back to his hotel he rang Sheri to tell her he had found God’s own country. And Starbucks was the company where he wanted to work because he wanted to learn, to explore, to discover a passion and to share it with others.

As they carried on talking later that evening over dinner, Jerry and Gordon told the story of Starbucks so far. They explained about Alfred Peet, dark roasting, arabica versus robusta beans; the way dark roasting gives fuller flavor but is shunned by the packaged food companies because longer roasting shrinks the beans, reducing the weight of the coffee. There was a clear choice between higher quality and lower cost. Believing in the intelligence of their customers, Starbucks opted for quality.

Jerry demonstrated his point by picking up a bottle of beer: a Guinness. “Comparing the Full City Roast of coffee to your standard cup of canned supermarket coffee is like comparing Guinness to Budweiser. Most Americans drink light beers like Budweiser. But once you learn to love dark, flavorful beers like Guinness, you can never go back to Bud.”

Howard Schultz’s memory of that day remains vivid. It changed his life, but it also established many of the principles of the business that he was going to grow beyond the imaginings of its founders. Becoming part of Starbucks became an obsession, and when he returned to New York he convinced himself that it was his destiny. But it was not a destiny he could rush into. He had a highly paid job for a big international company. Anyway, why would Starbucks want to take him on?

Howard’s way in was friendship with Jerry Baldwin. They met again with their wives in New York. Howard raised the subject of working for Starbucks. Jerry thought about it. He was interested and willing to put it to his partners, but also wary, perhaps because of the clash of cultures between Seattle and New York, between the laid back and the pushing forward. Would this work? There was agonizing on both sides. Howard seemed to have most to lose but was the keenest, eager to throw up a comfortable life on the east coast with a big company for the small-company benefit of a decent cup of coffee.

So it took time. A year passed. Several meetings were engineered in Seattle, and mutual trust and understanding developed. Jerry started to float the possibility of expanding beyond Seattle, perhaps to Portland, Oregon, the next state down the coast. But he was fearful of the changes that this would bring with it.

We can imagine the way the conversation was starting to go:

Baldwin:
“All I wanna do is make and sell coffee in nice shops.”