Meet the man who turned Starbucks into an iconic brand

by Cathy Rose A. Garcia, ABS-CBNnews.com

Posted at Apr 09 2013 12:10 PM | Updated as of Apr 11 2013 01:20 AM

Packets of Starbucks coffee are seen in a supermarket in Santa Monica, California in this January 27, 2011 file photograph.  Photo by Lucy Nicholson, Reuters

MANILA, Philippines - "I'm not a tycoon," says Starbucks chief executive officer and chairman Howard Schultz.

Never mind if he's 309th in Forbes' list of richest Americans with an estimated net worth of $1.6 billion as of March 2013.

For Schultz, he's just an entrepreneur who happened to help grow a coffee bean shop in Seattle's Pike Place market into the world's most recognizable coffee chain.

In an interview with ANC's Karen Davila, Schultz talked about his inspiration for going into the coffee shop business, his business philosophies and what he thinks is the secret to Starbucks' global success.

"We are in a business where we are romancing coffee and we are creating an experience. Starbucks is one of the most iconic, recognized brands in the world. But we have done it in the most unconventional manner, not through traditional marketing and ads but through the experience in our stores. The equity of the Starbucks brand comes to life by our people and the theater, the romance, the culture has built the brand," he said.

Described by Forbes as "the man who made drinking lattes the American way," Schultz found inspiration from the cafes in Italy. He returned to Seattle with the idea of creating a "community around an extraordinary cup of coffee."

"I saw something in Italy which was the genesis of it all. What I saw was people coming together and human connection over coffee and it was the romance of the beverage that was the genesis of the idea," he said.

Schultz worked for Starbucks, then a coffee bean shop, as director of marketing in 1982. But the owners didn't want to go into the cafe business, so he started his own coffee shop in 1985. He bought Starbucks from its owners for $3.8 million in 1987 and expanded its coffee outlets.

Schultz admitted he didn't know if his venture into coffee shops would become a success.

"I don't think you ever know when you start something that it will ever work. But sometimes the difference between failure and success is perseverance and unbridled belief that something is going to happen, where you can almost will it," he said.

"Our business model is quite different than most companies, especially a start-up. We gave ownership to every single employee. We provided health insurance to everyone in the US. I think we created a culture and a value system that in of itself is the reason why we are successful today," Schultz said.

Why he came back as CEO

Schultz returned as CEO in 2008 after an 8-year hiatus to help the company which he said was "in very bad shape."

Howard Schultz, CEO and chairman of Starbucks Corp.

"A sense of entitlement somehow entered the halls of Starbucks and we were measuring and rewarding the wrong things. I had to remind people and rekindle the heritage and tradition of what Starbucks was about," he said.

Five years later, Starbucks has posted record revenues and profits, but Schultz doesn't take all the credit for it. "It is a team of people and 200,000 people who have really done something together with shared vision, shared values," he said.

A company with a conscience

As CEO of a global company, Schultz said he feels a responsibility to its 200,000 employees and their families to preserve and enhance the Starbucks business.

"We have an aspiration about trying to build a different kind of company and we have a historic opportunity to be one of the most admired, respected companies of our generation," he said.

The 59-year-old businessman is proud of having built a company with a conscience.

"Great companies have to create transparency in everything we do. Why? You want to attract and retain people who believe in the purpose of the company, not necessarily what we do but why we do it. You want to demonstrate to the customers, Wall Street, that we're trying to do something that adds value to every piece of the business. What value and how much pride do we have if we buy coffee in a way that we don't share profits in the success of the company with the people who grow the coffee?" he said, referring to Starbucks' ethical sourcing of coffee.

"It's about wanting to have a company with a conscience. Going back to the original proposition of Starbucks to today, the business model has been a balance of profitability and benevolence. We have to do that in every way."

Why Schultz' family doesn't work at Starbucks

When he started the business, Schultz said he had a rule that no family members, including his children, should be part of the company.

"I felt it would be too much of a burden for (my children) and if something didn't work out, too much of a burden for me... I want them to seek out things and didn't want them to be burdened by their last name," he said.

Schultz said the management are merely "stewards" of Starbucks, which is a public company. "The responsibility that I and the board have is succession has to be judged and given on its own merits and not a family person," he said.

Starbucks to expand in PH

The coffee giant has never franchised in a traditional sense, which Schultz says is aimed at preserving and enhancing the Starbucks culture.

"I've always believed the best way to do that is in a company-owned environment or through a joint venture, like the relationship we have in this market with Rustan," Schultz said.

Starbucks, through local partner Rustan Coffee Corp., opened its first store in the Philippines at 6750 Ayala Avenue in December 1997.

Schultz, who attended the opening of the 200th store in the Philippines, said he is looking forward to opening 100 more stores here in the next four years.

"We never thought we'd have 200 stores in this market. And here we are. Now we just announced we'll open a hundred more in the next four years," he said.

Despite his busy schedule which involves traveling around the world for nearly a third of a year, Schultz says he is still very passionate about the business.

"I'm more inspired, energized today than I have been about the future of the company," he said.

As for his favorite coffee, the Stabucks chairman and CEO says he prefers Sumatra blend. "Because it's full-bodied, rich like a Burgundy wine," he said. Spoken like a true coffee lover.