The history of Starbucks

Starbucks: the story of success

Odessa National Economic University

Kan Natalya

27 group DMEP

2011
Seattle, 1971 
The history of Starbucks starts in Seattle in 1971. Three friends, Jerry Baldwin, Zev Siegel, and Gordon Bowker, who all had a passion for fresh coffee, opened a small shop and began selling fresh-roasted, gourmet coffee beans and brewing and roasting accessories. The company did well, but things began to change in the 80s. 
First, Zev Siegl sold out in 1980. Yet at that time, Starbucks was the largest roaster in Washington with six retail outlets. In 1981 a plastics salesman noticed the number of plastic drip-brewing thermoses that Starbucks was buying from Hammarplast, the manufacturer that he represented. Howard Schultz would become to Starbucks what Ray Kroc was to McDonald's, a supporting salesman who saw a great product and a great opportunity. 
Howard Schultz 
In 1982 Baldwin hired Schultz as the new head of marketing and shortly thereafter sent him to Milan to attend an international housewares show in Italy. When he arrived, Schultz found himself infatuated with the exciting coffee culture of Italy. Schultz went to Verona and had his first caffe latte. But he observed something more important than the coffee. The cafe patrons were chatting and otherwise enjoying themselves while sipping their coffees in the elegant surroundings. It was an "aha" moment as inspiration struck. 
A great idea 
Schultz describes that moment as an epiphany, "Why not create community gathering places like the great coffee house of Italy in the United States?" Could the Old World meet the New World? If it succeeded, it would be marketing genius. 
By 1983 the marketing manager had a vision of recreating the magic and romance behind the Italian coffee bar and wanted to test out the concept of selling espresso by the cup. 

Slow down! We just sell beans. 
However, Schultz's idea did not go down well with Baldwin. Baldwin was not ready to get into the restaurant business nor to have anything distract him from his original plan of selling whole beans. But he did let Schultz test a small espresso bar in the corner of one of the stores. 
Il Giornale and Starbucks go their separate ways 
When Starbucks Coffee opened its sixth store in downtown Seattle, the coffee shop was a hit. It was an immediate success. 
Schultz, however, branched out on his own and opened a coffee house named after Italy's largest newspaper, The Daily, or Il Giornale. Two months later, the new store was serving more than 700 customers a day, and it was selling 300 percent more than the Starbucks locations. 
Sell out: This is my company now. 
In 1987 the owners of Starbucks Coffee Company decided to sell their coffee business, along with the name, to a group of local investors for $3.7 million. Schultz raised the money by convincing investors of his vision that they could open 125 outlets in the next five years. He also changed the Il Giornale bare-breasted mermaid logo into a more socially acceptable figure. The company name changed from Il Giornale to Starbucks, and finally he converted the six existing Starbucks roasting shops into elegant, comfortable coffee houses. 
 

The era of growth 
Starbucks coffee history was just was beginning to take shape. Starting from a base of 17 stores in 1987, the company expanded rapidly to other cities: Vancouver, Portland, and Chicago. 
By 1991 Starbucks had also expanded into the mail-order catalog business and licensed airport stores and expanded further into the state of California. 
In 1992 the company went public, and after the initial public offering, Starbucks continued to grow at a phenomenal pace that no one had ever seen in the coffee world before. By 1997 the number of Starbucks Coffee stores grew tenfold, with locations in the United States, Japan, and Singapore. 
Other business extensions 
Not satisfied enough with just a storehouse coffee, Starbucks initiated several other product and brand extensions. 

        Offering Starbucks coffee on United Airlines flights.

        Selling premium teas through Starbucks' own Tazo Tea Company.

        Using the Internet to offer people the option to purchase Starbucks coffee online.

        Distributing whole bean and ground coffee to supermarkets.

        Producing premium coffee ice cream with Dreyer's.

        Selling CDs in Starbucks retail stores.

Starbucks' success was largely through word of mouth advertising, and this turned its name into a household word. In fiscal 2004, Starbucks reached a record 1,344 stores worldwide. 

The history of Starbucks shows how the once small regional roaster, selling coffee beans, became an international corporation with more than 9,000 locations in 34 countries serving 20 million customers or more a week.