Schultz takes a third shot
The man who turned a small Seattle concern into a global coffee chain is back at the helm to revive its fortunes. Can he overcome market scepticism? Jane Lewis reports
Earlier this month, Howard Schultz reprised a familiar role. The coffee aficionado who built Starbucks from a small Seattle concern into a global Frappuccino machine is back behind the counter – “for the third time”, says The Wall Street Journal. They got him cheap. Schultz, 68, returns as “interim CEO” on a base salary of a dollar, and is charged with finding a permanent chief by the autumn. That leaves plenty of time to plan his own “reimagination”. Taking the floor at a town-hall meeting – of the sort he pioneered in a previous incarnation – he pledged to restore the heart of the coffee chain as a “third place” (somewhere between the home and the office) where humans can huddle. “We are longing for love, to be embraced, to be valued, to be cared for… Over a cup of coffee, we bring people together,” he said. It was classic Schultz schmaltz.
A champion for change
As it happens, many Starbucks baristas are feeling rather “unloved” themselves, says the Financial Times – part of a broader army of discontented employees who want better pay and conditions, including Amazon workers in New York who have just voted to unionise. Schultz hopes to head off a similar wave by suspending Starbucks’ $20bn share buyback programme and spending the cash on pay rises, benefits, and remodelled cafes, alongside a move into non-fungible tokens (NFTs) to capitalise on the company’s “rich heritage”. At a time of unprecedented cost inflation and uncertainty in key markets such as China, shareholders greeted these plans sceptically, sending the stock on “an 11% skid”. But the Starbucks boss retains some influential fans. As one analyst noted: these moves underscore his “long-serving stance as a champion for change”.
Schultz once hoped to exercise his influence on the national stage. In 2018, there were rumours he might run for the Democratic ticket to challenge Donald Trump in the 2020 presidential election. Some Democrats relished the prospect of Schultz making his “rags-to-riches stump speech – in contrast to Trump’s riches-toriches story”. But it was never to be.
Schultz’s father was a truck driver who struggled to provide for his family. Born in 1953, in Brooklyn, New York, young Howard turned to sport, winning a football scholarship to Northern Michigan University in 1971. But he was an unmotivated student who only really found his feet when he took a sales job at Xerox. It was a later position, with housewares company Hammarplast, that introduced him to Starbucks in 1981, when the tiny chain sold only coffee beans and coffee-making kit. Schultz was so smitten by the founders’ passion that he offered his services to head retail operations and marketing, and moved to Seattle.
The McD’s of coffee
But it was a buying trip to Italy in 1983 that set Starbucks on the path that would spawn “a business so huge that it has become as much a symbol of corporate America as McDonald’s”, says The Sunday Times. Schultz fell in love with Italian cafe culture in Milan. And when he failed to persuade Starbucks’ founders that the future lay in espresso bars, he quit and founded his own Seattle cafe chain, Il Giornale. Still, by 1987, he was gunning to buy Starbucks too.
“Bill Gates is the reason I’m here today,” Schultz later observed. Bill Gates Snr, that is. Then a top lawyer in Seattle, he offered to fight for Schultz when a rival cash buyer emerged. After preliminary investigations he said, “Howard we’re going to take a walk”. They pitched up at the rival’s office. Gates, who was 6ft 7in tall, loomed over his desk and said: “Here’s what’s going to happen. You’re going to stand down. Howard is going to buy the company. We are never going to hear from you again”. On leaving, he turned to Schultz and said: “I think I’ll invest with my son.”
“We are longing for love, to be embraced, to be valued, to be cared for… Over a cup of coffee, we bring people together”