Starbucks and the History of Coffee in the US
For some reason, people in some quarters seem to delight in dissing Starbucks. They complain about things like
being too ubiquitous, too corporate, too whatever. Personally, I think these critics are way off base. Starbucks
figures prominently in the history of coffee in the US and I think all coffee lovers owe a debt of gratitude to
Howard Schultz and the company he developed and promoted.
To discover why, I highly recommend reading Pour Your Heart Into It – Schultz’s autobiography of the history of
Starbucks. Here’s a short version.
It’s hard for us now to remember just what the state of coffee drinking was in the United States pre Starbucks.
Coffee had become a commodity and producers competed mainly on price. Just about everyone used instant coffee at
least some of the time if not all of the time. If they brewed it, they used a percolator (just about the worst way
possible to brew coffee). The coffee came pre-ground in a can from the grocery store. The producers were competing
mainly on price and they responded by gradually using cheaper and cheaper beans, including an increasing percentage
of robusta vs Arabica.
In other words, the coffee scene was pretty grim. Even if people were willing to pay for good coffee there were
very few places to buy it.
But there were some. One was Peet’s coffee in Berkley. Alfred Peet was from the Netherlands and his family
was in the coffee business. Europeans had continued to enjoy great coffee and Peet was appalled by its absence when
he immigrated to San Francisco. His answer (classic American entrepreneurial response) was to open a coffee
roasting and sales shop in Berkley.
That shop succeeded and developed loyal followers (Peetnics, as they proudly called themselves) who appreciated
good coffee. Three of these folks learned the ropes from Peet and opened their own shop in Seattle - Starbucks.
This is where Schultz comes in. Schultz didn’t have an easy time as a kid. He grew up in a tough neighborhood and
his family didn’t have much. He was determined to do better and fortunately was good enough at sports to get a
scholarship to college. He was the first person in his family to go to college.
After graduation, he first worked for Xerox where he got excellent sales training. He subsequently changed jobs and
became the US distribution manager for a Swedish company that produced kitchen implements. This was in the 70’s.
The nascent foodie trend was getting going and these kitchen implements were becoming popular.
In the same way that Roy Croc discovered McDonalds when he noticed that a small hamburger stand was going through
milk shake makers like crazy, Schultz noticed that some small store in Seattle was selling way more drip coffee
makers than any of his big New York accounts. He decided to travel to Seattle to see what was going on. He found
Starbucks’ primary business was roasting and selling quality coffee beans. However, as I indicated above, the sorry
state of coffee making and drinking in America meant that they had to spend time educating people about what good
coffee was and how to brew it. As an adjunct to their main business of selling coffee, they also sold coffee
Schultz fell in love with the original owners’ passion and emphasis on quality. He decided to quit his job and join
them. His family thought he was crazy to do so.
The real change came when Shultz traveled to Italy for the first time on a business conference and witnessed a
European café first hand. He realized that there was more to good coffee than the beverage itself. There was a
whole experience associated with getting a good cup of coffee that was part of the product.
That insight led him to want to shift Starbucks from simply roasting and selling coffee to creating the whole
experience. That wasn’t an easy sell to the original partners. I won’t go into the whole story here but again
recommend that you check out the details in Pour Your Heart In It. There are wonderful lessons there about how
things that seem obvious in retrospect weren’t at all obvious at the time, about how good people can have different
ideas about what to do, that there are sharks in the business world that play hard ball and about how
sometimes you to follow your gut and your higher instincts no matter what.
The conclusion is that Schultz bought out the partners, found the model that worked and successfully expanded
At the time, a cup of coffee at a diner cost maybe a quarter, refills included. No one believed Americans would be
willing to spend a couple of bucks for some coffee. And venti, grandi?!!! What’s with that?
As it turned out, once Americans discovered what good coffee was they readily embraced it along with the whole
Starbucks experience. You know the story from there. Today there are innumerable competitors in the speciality
coffee market. But none of this was inevitable. We have the drive, vision and determination of Howard Schultz and
his Starbucks brand to thank.