consider this riddle some like it cold

while some prefer hot I'm ground

I'm boiled on tamped and I'm shot I'm

mild or bold and a cup or a pot and I'm

willing to bet that you like me a lot as

a nation we are obsessed with coffee and

it seems like it's as American as apple

pie or baseball which is surprising

considering that the US doesn't even

crack the top 10 list of coffee drinking

nations whether it's just love or a full

blown caffeine addiction many of you may

start your day by indulging in your

favorite Starbucks brew as you take

another hit from your venti no foam half

CAF mocha frappe consider the evolution

of coffee and how just a few short years

ago

coffee was once a week and watered-down

beverage which must make you ask how did

starbucks not only dominate an industry

but actually change how Americans think

about coffee to answer that we have to

travel to the rainy City of Seattle and

inside the mind of the man who

single-handedly created our modern

coffee craze so top up your mug with

your favorite roasts as we tell the tale

of how Starbucks and the iconic green

mermaid changed the world this video is

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our story begins in downtown Seattle in

the early 70s when three coffee obsessed

college friends started talking about

the idea of starting a business of the

heavily caffeinated trio Gordon Bowker

was obsessed with premium quality coffee

a foreign concept to Americans at the

time Gordon made regular round trips to

Vancouver to source better beans than

anything he could find at home and as

his reputation grew for mewling superior

coffee from Canada his friends and

colleagues put in orders of their own

aha here was the Eureka moment the idea

they had been looking for the three

could sell high quality coffee beans to

a market that had virtually no

alternatives but lacking the necessary

business acumen

they wisely sought the mentorship of

someone who was doing

exactly what they aim to achieve Batman

was Alfred Peet an entrepreneur who

introduced premium coffee to the states

in essence becoming the forefather of

America's coffee industry Peet ran a

boutique coffee store in Berkeley

California sourcing high-quality beans

and roasting them in his warehouse under

his mentorship bokor Siegel and Baldwin

made valuable connections to

high-quality coffee brokers and learnt

the art of roasting their own Arabica

beans and in 1971 in a small store

located near Seattle's famous Pike Place

Market the three founders pooled their

money and opened the very first

Starbucks selling coffee tea and spices

popular lore has it that the name came

from a character in Moby Dick starbuck

but it evolved into the current name

from a mining camp on nearby Mount

Rainier Camp star beau over the next

decade the three founders would open

another five locations in Seattle as the

name Starbucks became synonymous with

quality surprisingly however you

couldn't actually buy a cup of coffee in

any Starbucks store they only sold the

beans and the brewing equipment to whip

up the Java at home but all that was

about to change when a coffee machine

salesman walked into one of their stores

Howard Schultz at the time

twenty-eight-year-old Schultz worked for

the Swedish based company hammer Plast

which sold high-end European kitchen

appliances to a growing US market but

when he noticed that one of his clients

in Seattle was buying more coffee

machines than Macy's he knew that he had

to check it out for himself and after

walking into Starbucks for the very

first time and being greeted with the

aroma of freshly ground coffee as well

as a tasty sample of French press

Sumatra he realized and he wasn't just

in a coffee store he was home upon

tasting the sample Shultz remarked that

he had never tasted a good cup of coffee

until that very moment perhaps

understandably so as coffee was widely

regarded as weak cheap and bland tasting

there was no such thing as dedicated

coffee houses and the coffee you drank

at home came freeze-dried in a can

realizing that he had stumbled upon

something remarkable Shultz lobbied the

founders asking to be hired onto their

team and although it took a year to

convince them Howard Schultz was made

the Director of Sales and market

for Starbucks in 1982 the following year

the founders sent their new director to

a trade show in Milan Italy the

week-long trip was Shults his first time

in the country and would change his life

forever as he explored the streets of

this Italian city he was taken aback by

the number of cafes on each corner and

square Schultz was captivated by the

theatre of these cafes with baristas

making your coffee in front of you while

you relaxed in an atmosphere of

community here was something unique and

special and Schulz raced back to his

bosses in America that tell them all

about it an idea was brewing in

Schultz's mind maybe Starbucks was in

the wrong part of the coffee business

as soon as Schulz returned to Seattle he

pitched the concept of the

italian-inspired cafe to his bosses

where they were unimpressed their stores

were working they were growing and

people love to buy their beans why fix

something that wasn't broken which

Schulz

a master salesman ground them down

thoroughly convinced of his idea that

the experience was as important as the

drink itself reluctantly his bosses gave

in and tested the concept with a coffee

bar in a new location and although the

Milan style Cafe was a success Schulz

couldn't convince the founders that this

was the future of Starbucks it was a

bitter end and he had given it his best

shot but in 1985 Schulz left Starbucks

in defeat for now at least Howard

Schultz knew what it meant to work hard

and make sacrifices growing up in the

projects of Brooklyn New York

he even sold his own blood to get

through college but here was his grand

vision his dream slipping through his

fingers as he turned his back on the

Starbucks coffee bean business convinced

that his idea would work he opened his

own cafe iljin alley at his cafe Schulz

used Starbucks supplied beans to marry

the idea of great coffee with a

comfortable atmosphere to drink it a

third place between home and work but as

time passed Schultz his love for

Starbucks didn't diminish there was

something about that green siren that

kept calling him back and as fate would

have it

Starbucks founders began experiencing

financial problems two years after

acquiring Pete's coffee in late 1984

perhaps realizing they'd bitten off more

than they could

they decided to focus their energies on

Petes coffee over Starbucks by 1986 the

founders set out to sell off their

remaining interests in the Starbucks

brand they couldn't think of anyone else

they'd rather see take the helm than

their former employee Howard Schultz

Schultz jumped at the opportunity but

when he counted his beans he was far

from being able to afford the 3.8

million dollar price tag that they

wanted for the company after being

granted a 60-day exclusivity period to

raise the financing Schultz began his

road show seeking out ambitious

investors who believed as much as he did

in transforming America's coffee culture

but even for Schultz it would be a

difficult pitch at the time US coffee

consumption had been on the decline for

over two decades as soft drinks rose in

popularity on top of declining coffee

consumption Schultz wanted customers

ordering their beverages in a foreign

Starbuck Ian's language introducing new

words to the American vocabulary like

cafe latte and grande cappuccino his

trip to Italy also helped inspire other

ideas like substituting small medium and

large for tall Grande and venti in his

most bold move Schultz his pitch to

investors included a plan to sell his

high-quality coffee at the steep price

tag of $3 to come perhaps prompting some

customers to remark $3 are you frappe a

kidding me this was a particularly

daring move considering most Americans

only paid 50 cents for a cup of coffee

assuming they drank it at all but in the

summer of 1987 Schultz pulled off the

seemingly impossible and successfully

raised that 3.8 million that he needed

to acquire Starbucks upon taking over

and merging with iljin Olli

Schultz is daring and robust vision

started to take shape intuitively

Schultz knew just the way to get coffee

back into the mind of America expansion

under his visionary leadership Starbucks

hired top-tier managers and pushed to

grow into new markets as quickly as

possible

within five years Starbucks had grown to

140 locations and filed paperwork to go

public in 1992 on the day of its IPO

Starbucks priced its shares at $17 a

piece successfully raising 25 million

dollars while offering just 12 percent

of the company the infusion of cash

allowed Schultz to accelerate his

already rapid expansion and within just

two years of going public the company's

store count had already tripled by 1996

Starbucks had opened its 1000th store

and debuted its first international

location in Japan three years later

Starbucks had doubled yet again with a

total store count of nearly 2,500 to

understand the strategy of Howard

Schultz you have to imagine the buzz

around the launch of so many Starbucks

it seemed as if they were popping up on

every corner and perhaps that was

precisely the objective as it prompted

onlookers to see what all the fuss was

about while opening new stores at

breakneck speed another key to Schultz's

grand strategy was maintaining

consistency if you walked into a

starbucks with her was in tokyo or

seattle you could expect the same

predictable great tasting coffee served

by your familiar green apron barista and

as it turns out this was a recipe for

success after a tough grind for 13 years

Schultz had introduced America to the

cafe culture born from his first trip to

Italy even more impressively Schultz had

successfully changed how Americans think

about coffee when Starbucks initially

debuted many customers complained that

their coffee was too strong but Schultz

persisted eventually convincing America

that this was how coffee was supposed to

taste after realizing his vision of

bringing high quality coffee to the

masses Schultz stepped down from his CEO

position On June 1st 2000 with the

company financially strong and heading

in the right direction with over twenty

eight hundred stores Schultz stepped

back into a hands-off role while still

remaining on the company's board as its

chief global strategist with under new

management the mermaid of Starbucks

would get lost at sea as its executives

charted a new course towards even faster

expansion from 2000 to 2007 the growth

of Starbucks more than quadrupled and

over the course of those 7 years

Starbucks added an average of 1,500

stores a year or over four locations a

day but the company's expansion didn't

come without growing pains on one

infamous occasion Starbucks made the

costly mistake of opening a store inside

Beijing's

600 year old forbidden

city the Chinese media attacked

Starbucks accusing the company of

diminishing Chinese culture going as far

as to describe the incident as an

invasion at the very heart of China's

history some even compared the incident

to opening a Starbucks inside the White

House amid protests and demands

Starbucks was forced to close the

controversial outlet in 2007 at its peak

Starbucks was growing at the astonishing

rate of one new location every four

hours on the surface things never looked

better for the Coffee Company as Wall

Street rewarded Starbucks for its

year-over-year record revenues and

profits but as it turns out all that

hyper growth was masking an insidious

problem which was quietly eroding the

company's very foundation and as

management pushed onward disaster soon

followed as the new executives were

about to learn adding more water to a

coffee makes it bigger but it doesn't

make it better

and although the company's top and

bottom line figures were increasing its

same store sales were slowing as

Starbucks cannibalized its own market

share with oversaturation

but worst of all management had been

cutting corners for years

prioritizing profits over product

quality and customer experience

sacrificing the core values that Howard

Schultz had instituted gone were the

days when baristas manually pressed

coffee as management opted instead for

fully automatic espresso machines to

pump out lattes like an assembly line

and as drive throughs replaced the

feeling of community it seemed as if

Starbucks had lost her soul during this

time of rapid growth Starbucks his stock

price had tripled helped by the booming

economy of the time but the global

financial crisis of await was not kind

to the coffee chain as consumers lost

their jobs and saw their 401ks halved

wallets began to tighten and suddenly

the luxury of an $8 drink no longer made

sense in a leaked memo Schultz

complained to Starbucks senior

management that they had removed the

romance and theater it was essential to

their brand bagged coffee removed the

distinct aroma when he walked in

automatic machines saved time but

sacrificed experience and what now seems

like deja brew the company turned to

Howard Schultz to save the day with the

company's stock price tanking

Howard Schultz returned as the CEO of

Starbucks on January 8th 2008 his first

tasks included firing top executives

shuttering hundreds of stores and

restoring the company to its founding

principles of product quality and

customer experience to show the public

that Starbucks was serious about its

returning to quality Schultz closed

every American store for an entire

afternoon On February 26th 2008 and for

three hours

baristas were retrained on how to craft

their signature drinks it's estimated

this move costs Starbucks six million

dollars in sales but in the eyes of

Schultz it was essential for returning

Starbucks to her former glory

the new CEO also brought back the fresh

ground coffee beans and the original

llama zoko manual espresso machines

restoring the romance and spectacle of

watching baristas make your coffee with

amazing foresight Starbucks also hired

its first chief technical officer and

launched the Starbucks loyalty card the

new focus on digital eventually paved

the way for Starbucks to release its own

app which is now responsible for a

remarkable 30% of the company's total

sales under Schultz's new direction for

the second time

Starbucks thrived with its stock price

climbing almost 1,600 percent in nine

years with quality back on track

Schultz resumed the company's expansion

one of their key target markets was

China a country where they now open a

store every 15 hours in December of 2016

confident that Starbucks founding

principles were now permanently

ingrained in the company's culture

Howard Schultz resigned again a CEO

leaving the reins to then Starbucks

chief operating officer Kevin Johnson

under Schultz's vision and guidance

Starbucks has grown from a small retail

outlet for brewing equipment and beans

to a multinational 100 billion dollar

behemoth but most inspiring of all

Starbucks has stayed true to a

philosophy of corporate social

responsibility a belief that profits

should always come second to people it's

a philosophy born out of Schultz's own

struggles which he endured growing up in

the projects of Brooklyn New York

Schultz was deeply affected on one

particular occasion when he was 7

returning home to find his father lying

down on a couch with his leg in a cast

earlier that day his dad had been fired

from his job as a delivery truck driver

after breaking his hip and ankle at work

with his dad as the breadwinner of the

family it was devastating for the young

Howard Schultz Howard later remarked but

he set out to build the company that his

father never had the chance to work for

ultimately he stayed true to that

promise today

Starbucks pays more in health care costs

than it does for coffee beans in its

North American stores in pursuit of

building an honorable company Schultz

also wanted to create a place where

employees felt like family so Schultz

doesn't call his baristas employees but

rather partners impressively Starbucks

also covers college tuition for its

partners while also providing stock

options for every individual including

its baristas of course staying true to

that social responsibility and the

values of customer service quality and a

better experience has taken Starbucks

from darker times to where it stands

today we hope that the story of

Starbucks inspires you to stay true to

what matters most in the face of

opposition and those voices that would

tell you otherwise before we wrap up

this video we want to give a special

thank you to the sponsor of today's

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you can learn even more about how

Starbucks grew from its humble Seattle

roots to the global coffee giant that it

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today's giveaway in this episode we'll

be giving away a signed copy of Howard

Schultz's memoir onward to one lucky

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