In 1987, Howard Schultz, a former housewares industry executive, acquired an obscure Seattle coffee roaster named Starbucks Coffee Co. Under his direction, Starbucks has grown from 17 stores into a chain with nearly $1 billion a year in sales--the McDonald's of coffee.
Intent on expansion, Schultz continues to open outlets in new territories and has guided Starbucks into other business lines. Its ice cream is sold in supermarkets, as is a bottled drink, Frappuccino. Its coffee is served on United Airlines flights. It is testing the sale of coffee in supermarkets--pitting itself against deep-pocketed giants such as Procter & Gamble.
Schultz, the 43-year-old son of a truck driver, grew up in the projects in Brooklyn, N.Y., and is now among the nation's most successful entrepreneurs. He earned $493,654 in salary in 1996; his stock holdings are worth $194.3 million.
Starbucks, no longer a small upstart, faces challenges. It is struggling with keeping a small, personal feeling even though it is a huge chain. Prototype stores have colorful murals, leather couches and even fireplaces--homey touches that contrast with the chrome and wood now found in most Starbucks outlets. Starbucks recently switched advertising agencies, selecting BBDO West in Los Angeles, saying it's had trouble finding its creative voice. And employees in Canada recently joined a union, a blow to Starbucks' highly touted commitment to its workers.
Times staff writer Greg Johnson talked to Schultz last week in Westwood, where Schultz was promoting his just-published autobiography, "Pour Your Heart Into It." What follows is an edited transcript.
Q: You have compared Starbucks to Nike. Why?
A: Who would have thought 20 years ago, when we were all wearing Chuck Taylor Converse sneakers, that a company would start making high-performance tennis shoes that people would spend lots of money on? Nike has built a brand in a commodity business, and Starbucks has done it as well. But while they've done it through marketing and mass distribution, we've done it with no advertising. Over the last 10 years, the company has spent more money on training than on advertising. And Starbucks is now beginning to leverage its brand. We've introduced Starbucks ice cream, which is now the No. 1 coffee ice cream in America. We have bottled Frappuccino and we're now testing Starbucks coffee on grocery store shelves in Illinois after a successful test in Oregon.
