The following is an article from Uncle John's Slightly Irregular Bathroom Reader.
Does the name Howard Schultz ring a bell? He's the guy who figured out how to get you to pay $4.50 for a 75¢ cup of coffee.
In the early 1980s, a Swedish plastics company called Hammarplast sold plastic coffee filters that fit over a thermos. One day in 1981, one of the company's salesmen, 27-year-old Howard Schultz, happened to notice that a small Seattle coffee roasting company called Starbucks Coffee, Tea, and Spices bought more of the coffee filters than the Macy's department store chain did. Why?, Schultz wondered. And who would bother making coffee using such a tedious method when an automatic drip coffeemaker could do it all at the push of a button?
Schultz was so intrigued that he made a trip out to Seattle just to have a look at the company. He visited Starbucks' retail store in the historic Pike Place Market, where they sold fresh-roasted coffee beans by the pound and coffee-making supplies… but no coffee drinks or any other beverages by the cup. Schultz took a tour of the roasting plant and met the company's co-founders, Jerry Baldwin and Gordon Bowker. He also drank some of the darkest, strongest coffee he'd ever had.
A FRESH START
Schultz decided right then that he wanted to work for Starbucks; but convincing Baldwin and Bowker to hire him took a little more time. It wasn't until about a year later, when they were planning to open the company's sixth store and the first one outside of Seattle, that they agreed to take Schultz on as director of retail operations and marketing. Even then he had a vision of building Starbucks into a regional and later a national chain, but like Baldwin and Bowker, he saw the company as a retailer of coffee beans that people would buy to make coffee in their own homes.
Then in the spring of 1983, Schultz made a trip to Milan, Italy, to attend a housewares convention. He decided to walk from his hotel to the convention center. On the way he passed four coffee bars, each one of them overflowing with people who were lined up to buy espressos, cappuccinos, lattes, mochas, and other exotic drinks.
Schultz had already noticed that customers who were new to premium coffee got intimidated just standing in a Starbucks store -how many people could tell the difference between Sumatra coffee and Arabian mocha java, between Italian roast and French roast? Even Schultz was a newcomer. In the week he spent in Milan he drank his very first espresso and his very first latte.
Schultz came to realize that espresso bars were the means by which he could reach beyond Starbucks' traditional, narrow clientele of coffee connoisseurs to a much larger customer base: people who'd never really tasted really good coffee before and had no idea what they were missing. By serving cups of coffee and giving people a place to drink it, Starbucks stores could become more than just a place to buy coffee beans. They could serve as a "third place," as Schultz like to call it, a place outside of the home and the workplace or school, where people could hang out and enjoy coffee just as if they were in an espresso bar in Italy.
If Schultz had a hard time convincing Baldwin and Bowker to hire him, convincing them to sell coffee by the cup was an even bigger challenge. It took a year just to get them to put a single espresso machine in the company's sixth store when it opened for business in downtown Seattle in April 1984. By June that store was averaging 800 customers a day compared to 250 a day at other Starbucks locations; but even then Baldwin and Bowker refused to sell ready-to-drink coffee from the other stores. "We're coffee roasters," Jerry Baldwin told him. "I don't want to be in the restaurant business."
In late 1985 Schultz quit his job at Starbucks and founded an espresso company called Il Giornale, which he named after an Italian newspaper. The first Il Giornale opened for business in Columbia Center, Seattle's tallest skyscraper, in April 1986.
So why isn't the world's largest espresso bar chain called Il Giornale? Because in 1987 Jerry Baldwin and Gordon Bowker decided to sell Starbucks. Schultz, who by now had opened three Il Giornales of his own, managed to raise the 3.8 million he needed to buy the six Starbucks stores and the roasting plant. He had a decision to make: Should he keep the Il Giornale name, or go back to Starbucks? He asked around for advice. Nobody knew how to pronounce Il Giornale, people told him, and they didn't know how to spell it, either. Starbucks it was.
Starbucks grew exponentially in the years that followed. By 1990 it had grown to 55 locations. The company went public in 1992, and by the end of that year it had 165 locations. Five years later it had 1,412 stores, and by the end of 2002 it had more than 5,800. As of September 2004 Starbucks had 7,569 stores in 31 countries around the world. It made nearly $268 million in profits in 2003.
How fast is the company growing today? Every time a Starbucks barrista finishes working an eight-hour shift, a new Starbucks has opened somewhere in the world. And the rate of growth is increasing. The company hopes to grow to 25,000 locations around the world in the next decade. Is that kind of growth even possible? Here's a clue: Italy has a population of just under 58 million people or about a fifth of the population of the United States. It has more than 200,000 coffee bars.
In 1981 a cup of coffee cost 75¢, tops. Today a Starbucks Venti Java Chip Frappuccino will taste a lot better than that cup of coffee did back in 1981, but it will set you back as much as $4.50.
Now you know who to thank …or who to blame.
[Ed. note: In 2012, Starbucks has 20,366 stores in 61 countries.]
The article above is reprinted with permission from Uncle John's Slightly Irregular Bathroom Reader, a fantastic book by the Bathroom Readers' Institute. The 17th book in this the Bathroom Reader series is filled to the brim with facts, fun, and fascination, including articles about the Origin of Kung Fu, How to Kill a Zombie, Women in Space and more!
Since 1988, the Bathroom Reader Institute had published a series of popular books containing irresistible bits of trivia and obscure yet fascinating facts. If you like Neatorama, you'll love the Bathroom Reader Institute's books - go ahead and check 'em out!