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Three partners, Baldwin, Siegl, and Bowker, started a small coffee shop in Seattle in 1971. They had recently apprenticed from the original OG of premium coffee, Alfred Peet of Peet’s Coffee. They wanted to create something similar.
They called it Starbucks.
The coffee and vibe were great, but the founders needed to improve on the business side.
However, lucky for them, they had one big fan named Howard Schultz.
So, in 1987, trying to get rid of what they fought might go bust, they sold the cafe to Howard Schultz. Little did they know that Schultz would grow Starbucks into the iconic $80 billion company it is today.
Schultz realized that Starbucks had potential, even if the accounting books said otherwise. After purchasing the failing coffee shop, he named himself CEO. He got to work on the “Starbooks Experience,” which he had envisioned.
In the early days, Schultz would be remembered for streamlining the Starbucks process.
He rapidly expanded the chain but never lost touch with its quality standards. He refused to serve anything less than the best premium coffee.
He is credited with creating the first premium coffee chain. No matter where you went, you knew you were getting the same awesome cup of joe.
He took Starbucks to a successful IPO and international debut in the 90s.
Seeing things were moving smoothly, he stepped down. Not really knowing the rough waters that lay ahead.
The company continued to grow when Orin C. Smith became its next CEO. However, the economy was hitting a snag in the dot-com era, and competitors were starting to emerge.
Trends were shifting as well.
Consumers were interested in low-carb diet options. Starbucks didn’t really have much to offer at the time.
Let’s just say people were passing up those sugar-loaded Unicorn Frappuccinos. He did start to expand into non-coffee options, with mixed results.
Starbucks continued to chug along under Smith and maintained profitability. It wasn’t all that bad.
When Jim Donald took over Starbucks, they faced much competition from pesky fast-food chains. Think McDonald’s $1 cup of coffee. I guess that’s why they chose Donald?
Jim was best known for expanding quickly. And when I mean fast, he opened stores all over the place, from Buenos Aires to Shanghai.
With growing competition from fast food chains encroaching on Starbucks’ niche, Donald accelerated expansion plans, rapidly opening new stores while boosting innovation efforts to allow customization.
He also came up with the great idea of customization. Where else can you get oat milk-laced gummy bear green tea? This was good and bad. The consumers loved it, but it was Hell for the employees.
Donald’s biggest problem is his obsession with quantity over quality. He oversaturated the market with Starbucks. You couldn’t go out of your house without seeing a Starbucks on every corner. Store-to-store revenue is starting to decline.
Then things started getting ugly. The Great Recession hit, making the problems worse. The CEO couldn’t keep up with rising costs and couldn’t seem to make the changes needed to thrive.
Looking from the sidelines, Schultz was in distress. He was ready to come back and clean up Donald’s mess.
During the financial crisis, Howard Schultz became CEO for the second time in 2008.
Returning as CEO in 2008 amid the global financial crisis, Schultz embarked on an ambitious revitalization to reignite growth, closing underperforming locations and shifting priorities toward customer experience.
His big focus was closing hundreds of stores and firing thousands of employees, which was necessary to make the firm profitable again.
Schultz stuck to his founding vision, taking Starbucks back to its roots and continuing to expand internationally.
Guided by his founding vision, Schultz succeeded in reconnecting Starbucks to its roots while pushing an era of rapid internationalization.
However, it wasn’t all sunshine and lollipops. New rivals started making their mark in the US of A. Think premium brands like Philz and Blue Bottle Coffee.
The only question next. Who could be his successor?
Kevin Johnson was brought in as COO and President of Starbucks in 2015. Recruited by Schultz himself.
Let’s say he made an impression. So Schultz made him CEO in 2017. The retail landscape was changing, and Starbucks needed new blood.
Johnson’s big focus was on making Starbucks’ stores more efficient. Streamlining every little detail and experimenting with new retail formats.
The rise of the smartphone helped develop Starbucks’ famous app. Mobile ordering was a game changer.
With all that streamlining, he wasn’t the best suited to deal with unions. And sadly, sales continued to be stale under his tenure.
Everyone loves a third act. So, in 2022, Schultz was back!
He was tasked with restoring energy and dealing with those pesky unions. Oh, and inflation was starting to heat up.
As always, Howard went back to his founding principles and put an emphasis on employee experience.
It wasn’t all roses. Schultz, being a liberal guy himself, was justn’t ready to unionize his shops. He faced backlash from the media for his anti-union tactics.
He was able to keep sales from sinking further and even make a profit.
However, these were crazy times. He also made some mistakes, such as banning Black Lives Matter apparel.
Laxman Narasimhan was chosen as the next CEO of Starbucks in April of 2023.
His term would be remembered as volatile and brief. He was CEO of Starbucks for 18 months. He even spent six months training as a barista to know the operations inside and out.
However, whatever he was doing was not enough, and he was ousted recently in August of 2024.
Seeing that Schulz just couldn’t seem to find a CEO better than himself, he went out and found a really good turnaround guy: Brian Niccol.
Niccolo is the former CEO of Chipotle. He did great things with burritos, so why not coffee?
He’ll be tasked with turning around Starbucks’s performance. Investors seem happy with the news, as Starbucks’s market value has spiked to $27 billion.
Niccol is no humble Prius driver. He plans to commute to work by private jet from his home in California.
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