it garners its share of negative publicity, there is no doubt that
Starbucks is one of the great business stories of the past 20 years.
Since 1987, Starbucks has grown from a handful of stores to one of the
world’s most recognisable brands, serving more than 850 million litres
of coffee each day and having a market capitalisation of more than
US$27 billion.

Business Sundaythis week aired a profile of Starbucks and the company’s chairman and
chief global strategist, Howard Schultz, originally produced by CBS’ 60 Minutes
program in the United States. While most Australians have heard of
Starbucks, fewer would be familiar with Schultz.

Schultz’s story is
almost the perfect rags-to-riches tale.Growing up in “the projects”, a
rough, housing commission development in Brooklyn, Schultz managed to
attend college on the back of a football scholarship. After completing
his degree, Schultz initially worked in sales but later turned his back
on a relatively stable life, moving from the east coast of the United
States to Seattle to work for a tiny coffee machine and coffee bean
establishment known as Starbucks. A few years later, after visiting
Italy and being captivated by the romance of real coffee houses,
Schultz sought to emulate the formula in the US. Unable to convince
Starbucks’ then owners of his idea, Schultz left Starbucks to create
his own coffee shop business, known as Il Giornale. After three years
Schultz merged his three Il Giornale stores with Starbucks’ six stores
to create Starbucks in its current form.

Since taking the
reins in 1987, Schultz’s Starbucks exploded. From only nine stores in
1987, it has grown to a staggering 11,000 company owned and licensed
outlets. The market values Starbucks at US$27.3 billion, eclipsing
nearest coffee rival Tim Hortons (which is capped at only US$5 billion)
and valuing the business at almost double that of the $14.5 billion Yum
Brands (owner of KFC, Taco Bell and Pizza Hut). Despite being 32 years
younger, Starbucks isn’t that much smaller than the granddaddy of
retail food businesses, Illinois-based McDonalds (which is valued at
around US$44 billion).

What makes Schultz and Starbucks such a
great business story is not merely Schultz’s rough beginning, but the
company’s apparent genuine care for employees and customers. Starbucks
famously spends more on employee health plans than it does on the beans
to go in its coffee. And only a year after taking the reins, and while
still a privately held-company, Schultz introduced an employee stock
plan for all staff (not just senior executives).

Like any
successful business, Starbucks has its critics, including
anti-globalisation groups and publicity-seeking unions. However, it is
hard to find many companies which have literally created an industry
like Starbucks did in the space of a decade. It is also hard to find
guys like Howard Schultz, who never forgot where they came from, even
when they have a billion dollars in the bank.