Howard Schultz on Founding and Origins

Howard Schultz, born in Brooklyn on July 19, 1953, served as Starbucks chairman and chief executive across three distinct eras, from 1986 to 2000, from 2008 to 2017, and as interim chief executive from 2022 to 2023. He joined the original Starbucks Coffee Company in 1982 as director of retail operations and marketing, left to found Il Giornale, and merged that espresso-bar venture back into Starbucks in the late 1980s. Under his leadership the company built a store network that reshaped coffee culture in Seattle, across the United States, and internationally, while large-scale distribution deals made it the largest coffeehouse chain in the world. He took Starbucks public in 1992 at a 271 million dollar valuation and used the proceeds to double the store count, stepped aside for Orin Smith in 2000, then returned during the 2008 financial crisis to dismiss executives, close hundreds of stores, and rebuild the brand. The rapid expansion under Schultz earned him comparison to Ray Kroc, the franchise architect of McDonald's.

Starbucks opened in Seattle on March 30, 1971, founded by business partners Jerry Baldwin, Zev Siegl, and Gordon Bowker, who had met as students at the University of San Francisco and were inspired by roasting entrepreneur Alfred Peet to sell high-quality coffee beans and equipment. For its first decade the business operated as a local coffee bean retailer, with no drinks sold at all. The first store stood at 2000 Western Avenue until 1976, when it moved to 1912 Pike Place, the location that became the brand's shrine. In the first two years the founders bought green coffee beans from Peet's, until Peet stopped supplying them in 1973 and helped train their new roastmaster, Jim Reynolds. Even the name carried the founders' idiosyncratic logic, emerging from a list of words beginning with st and a misreading of a Cascade Range mining town before landing on Starbuck, the chief mate in Moby-Dick.

Schultz grew up in Brooklyn's Canarsie public housing projects, the son of Fred Schultz, a truck driver, and Elaine, a receptionist. He has described the family as poor, though childhood contemporaries recalled a middle-class upbringing, with one calling the development the country club of housing projects. After school he spent his time at the Boys Club of New York, an organization he remained connected to as an alumnus. He graduated from Canarsie High School in 1971 and enrolled at Northern Michigan University, where he joined the Tau Kappa Epsilon fraternity and earned a communications degree in 1975. He had played football hoping for an athletic scholarship, but an injury ended that path and left him to finance his education another way. The distance between his family's economic fragility and the ambition he carried out of Canarsie became a recurring thread in how he later framed Starbucks' employee benefits and ownership programs for hourly workers.

The transformation from retailer to café happened in stages through the 1980s. In 1984 the original owners, led by Jerry Baldwin, purchased Peet's Coffee, tying their identity ever closer to the Bay Area roasting tradition. By 1986 the company operated six Seattle stores and had begun selling espresso coffee. In 1987 the ownership group sold the chain to Howard Schultz, their former marketing director, who put his Il Giornale espresso bars under the Starbucks name and began expanding the company; that same year Starbucks opened its first locations outside Seattle, at Waterfront Station in Vancouver and in Chicago. Growth compounded quickly, and by 1989 there were forty-six stores across the Pacific Northwest and Midwest, with the company roasting more than two million pounds of coffee annually. The decade closed with the espresso-bar concept proven and the machinery of national expansion in place, positioned for the public markets that would arrive three years later.

Schultz began his career in 1976 as a Xerox salesman in New York, learning to sell in the punishing equipment market of the era. In 1979 the French private equity firm PAI Partners recruited him to serve as general manager of the American subsidiary of Hammarplast, a Swedish manufacturer of kitchenware and coffee-making equipment. Running Hammarplast's United States operations put him in the middle of the specialty coffee hardware business, and in 1981 he traveled to Seattle to fulfill an order of plastic cone filters placed by an unusual customer, a small coffee bean retailer called Starbucks. The visit exposed him to a company whose founders had built a devoted following around whole-bean arabica coffee, and it set in motion the recruitment that brought him west a year later. The Xerox and Hammarplast years gave Schultz the sales discipline and product grounding he would apply to coffee retail, and the filter order remains one of the great accidents in American business history.

In 1982, at twenty-nine, Schultz was hired at Starbucks as director of retail operations and marketing, joining owners Jerry Baldwin and Gordon Bowker in a business built on whole-bean coffee, leaf teas, and spices. On a 1983 buying trip to Milan he encountered Italian espresso bar culture for the first time, and he returned convinced the company should serve traditional espresso beverages rather than only sell beans. Baldwin and Bowker allowed a pilot of the café concept, which succeeded, but they declined to roll it out, citing the high cost of espresso machines, the scarcity of American repair expertise, and customers' unfamiliarity with the drinks. The disagreement over whether Starbucks was a retailer of coffee or a place to consume it defined the break that followed. Schultz concluded that the espresso bar idea required a company of its own, and he began planning his exit from the business he had only just joined as an employee.

Schultz left Starbucks in 1985 to build the espresso-bar business its owners would not pursue. He calculated he needed four hundred thousand dollars to start, and to prepare he visited more than five hundred espresso bars in Milan, studying how the format worked as commerce and as theater. Fundraising was brutal: of the 242 investors he approached, 217 rejected the idea outright. Starbucks itself ultimately invested one hundred fifty thousand dollars in the new venture, with Baldwin taking a board seat and Bowker offering unofficial help, while a local doctor, Ron Margolis, contributed another hundred thousand. Schultz absorbed most of the personal risk of introducing espresso drinks to the American market. The rejection rate became part of the founding mythology he retold for decades, a standing reminder that the concept later valued in the tens of billions of dollars was, at inception, a proposition most professional investors declined to fund.

Two years after Schultz's departure, the original Starbucks management team decided to concentrate on Peet's Coffee and Tea, the Bay Area roaster Baldwin had acquired, and sold the Starbucks retail unit to Schultz and Il Giornale for 3.8 million dollars. The 1987 purchase gave Schultz the name, the roasting operation, and six Seattle stores, which he folded into his espresso-bar company and rebranded under the Starbucks name. Expansion followed quickly across the United States, and the strategy drew a mixed reception: relations with independent coffeehouse chains were strained, while some owners credited Starbucks with educating American customers about coffee. The deal resolved the 1984 argument over the company's identity in Schultz's favor, converting a bean retailer into a beverage-led café chain. It remains one of the defining acquisitions of modern consumer retail, executed at a price that now looks vanishingly small against the global enterprise it ultimately produced.

The company's own history of the split frames it as an experiment that worked too well. In 1984 Schultz, then director of operations and marketing, led Starbucks' first experiment with espresso, and the results were promising, but the founders did not want to distract from the business's primary goal of selling arabica coffee beans at retail. So in 1985 Schultz left and started Il Giornale, a company built on the ritual and romance he had observed in Milan's coffee bars. The break was not total: Starbucks became his first investor, and Il Giornale's coffee and espresso drinks were made from Starbucks beans, with chief coffee buyer Dave Olsen working with the new venture. By 1987 the concept had proven itself in the market, and the path back to the original brand opened when the founders decided to sell. The episode demonstrates how a corporate refusal to cannibalize a core business can hand the adjacent opportunity to someone else.

By March 1987, Schultz and Olsen had opened three Il Giornale locations when the decisive opportunity arrived: Starbucks' founders were ready to sell the company's name, its roasting plant, and its six Seattle stores. Schultz spent the spring raising money, and by August he had assembled the 3.8 million dollars the purchase required. Just two years after its inception, Il Giornale acquired Starbucks' assets and adopted the Starbucks name, folding the espresso-bar concept and the original retailer into a single company that kept the older and more resonant brand. The transaction is the true founding event of the modern Starbucks, marrying the bean merchant's sourcing credibility and roasting infrastructure to Schultz's beverage-led café model. Within months the combined company was opening stores outside Seattle, and within two years it was roasting more than two million pounds of coffee annually for a chain racing to outrun the modest ambitions of its original owners.

The origin story Schultz tells about benefits begins with his father's ankle. His father Fred cycled through poorly paid work as a truck driver and on factory floors, and when he broke his ankle on the job he was fired without medical benefits or compensation, leaving the family to absorb the injury's cost on its own. The experience shaped his son's conviction that a company's obligations to its workers extend beyond wages, a theme he carried directly into business practice at Starbucks with comprehensive health coverage and stock options extended to part-time workers. The policy program that made Starbucks famous as an employer, Bean Stock and health benefits for people working twenty hours a week, is best read as the institutional answer to a specific family memory of what employment without protection does to a household. The through-line from a Brooklyn childhood to partner benefits is the most consistent element of Schultz's public philosophy across four decades in business.

In 1981 Schultz was working as director of retail operations and marketing for Hammarplast, a Swedish housewares company, when he saw that a tiny Seattle coffee bean retailer kept ordering far more product than its size suggested. Curiosity, plus a salesman's instinct for an account behaving anomalously, took him to Seattle to see the customer for himself. The store was Starbucks, and Schultz found himself captivated by the passion and knowledge its founders had for coffee, an intensity of craft he had not encountered in the kitchenware business. He saw growth potential in what he found and joined the company a year later as director of marketing, trading a general manager's title at a European manufacturer's American subsidiary for a marketing role at a six-store coffee retailer. The decision, made on the evidence of an order book and a store visit, is the pivot on which the subsequent history of the company, and of American coffee culture, turned.