Starbucked Page 7
Eventually, Schultz scraped together enough to start. He immediately hired Dawn Pinaud and joined forces with Dave Olsen, an army-man-turned-coffee-house-owner who had been peddling cappuccinos out of a former mortuary garage in Seattle’s University District since 1975. Olsen was another sandal-sporting, frizzy-haired Peet’s devotee, and his Café Allegro was pure counterculture. But crucially, Olsen knew how to run a profitable coffeehouse — a concept that shocked some of his customers. “They would ask, ‘How do you really make your living?’ ” he told me. “And when I said, ‘With this,’ they’d be astonished.” Olsen was even willing to work for cheap: only $12,000 a year. “The synergy was too good to be true,” Schultz wrote of the partnership.
The café the three put together was an over-the-top Italian experience. Where Starbucks and Peet’s were antique and warm, Il Giornale was stark and sleek. Schultz wanted the venture to ooze sophistication. The gleaming espresso machine was front and center, manned by baristas in white dress shirts and bow ties. Nonstop opera blared from the speakers, and newspapers on sticks hung from the walls. Nary a chair nor a stool was in sight. In April 1986, in the ground-floor lobby of a downtown office building, Il Giornale opened for business. Schultz worked like a man possessed to make it click with Seattleites. “He’d go up to customers and ask very seriously, ‘How do you like the coffee?’ ” Pinaud recalled, “and I’d say, ‘Howard, don’t be so serious! Quit furrowing your brow! Smile!’ But he was studying.” When customers complained about the opera, he axed it for lighter fare; the bow ties went as well, after his baristas grumbled about the hassle of tying them. Chairs appeared. Schultz personally approved every detail of the business, and even caused a minor controversy when he got a beloved popcorn vendor kicked out of the building because the buttery scent from his wares was wafting into the hypercontrolled environment of Il Giornale.
He soon opened another store in Seattle, then another in Vancouver, despite the fact that these expansions left him perilously close to not making payroll several times. Schultz himself had never taken a salary, making his pregnant wife the family breadwinner. Once, when her family came out from Ohio for a visit, Schultz’s father-in-law took him on a walk to try to convince him to get a real job and provide for his family; Schultz was only able to pacify him by having one of his investors give his word that he’d personally pull the plug if things got any worse. But Schultz’s vigilance soon paid off: within six months, Il Giornale was drawing a thousand addicted customers per day. By the summer of 1987, there were five Il Giornales. Then one day, thanks to a world-shaking twist of fate, the number leaped to eleven.
The original Starbucks partners wanted out — Bowker to pursue his other projects, and Baldwin to move to Berkeley full-time. To the puzzlement of friends, Baldwin planned to sell off Starbucks and manage Peet’s. When Alfred Peet heard the news, he tracked down Baldwin at a Berkeley hotel early one morning and demanded in his firm brogue, “Let me get this straight: you’re selling your company and keeping mine?” For Schultz, there was never any question that he would acquire Starbucks, the gem that lured him west. Just eighteen months after struggling to fund Il Giornale, Schultz made the rounds once more, this time seeking almost $4 million. Though Il Giornale was still losing money and he had little experience actually running a company, he got it. In the process, Schultz weathered a coup attempt by one of his investors, the local business titan Sam Stroum, whose verbal assault in one meeting was harsh enough to leave Schultz in tears in the lobby afterward. Nevertheless, his other backers stuck with him.
In June 1987, the succession was complete. Baldwin departed for Berkeley to maintain the legacy of Peet’s, leaving his creation to the young man he’d hired and tutored in the ways of the coffee bean five years before. Soon, Baldwin and Schultz’s friendship would fracture irrevocably. But for the time being, Schultz finally had the freedom and the cash to carry out his vision. No one was holding Starbucks back. Since Starbucks was a snappy name with local cachet — while no one could even pronounce Il Giornale — Schultz christened the entire enterprise Starbucks Corporation. * He had Terry Heckler combine the logos, so that a stylized version of the siren hovered inside a green circle, and he charged ahead with his mission of bringing lattes to the masses. He aimed at what most everybody considered a very optimistic goal of 125 stores within five years. But even Schultz couldn’t have predicted how strongly the nation would react.
Pandemonium
If you need proof that something about espresso-flavored milk turns otherwise normal people deranged and obsessive, look no further than the nearest specialty-coffee industry trade show, where any element of the coffee experience that can be tweaked, enhanced, or accessorized becomes the subject of intense, almost theological debate.
A few minutes before noon on an overcast October day, several hundred people jammed the entrance to the exhibition hall inside Seattle’s Washington State Convention and Trade Center, waiting for a bank of metal doors to swing open and reveal the caffeinated circus known as Coffee Fest. The room echoed with excited chatter, which fell into two main categories: (1) spirited discussions about the best cup of coffee you’ve ever had, and (2) spirited discussions about how awesome that night’s performance by the convention’s special guest, KC and the Sunshine Band, was going to be. The diversity of the crowd gave living proof of gourmet coffee’s wide appeal: tattooed hipster baristas, businessmen with cell-phone holsters, puffily permed mom-and-pop café owners, aging flower children, and giddy teens all mingled excitedly. With a total attendance of around six thousand, Coffee Fest isn’t the biggest of the industry’s conventions, but it truly excels in the eccentricity department. This was the coffee craze made tangible.
When the doors opened, the mob flooded into the cavernous exhibition hall to hunt among the hundreds of booths for the Next Big Thing in coffee. Free espresso shots and samples of strange new drinks, like the unappetizingly named “Yoguccino,” beckoned from every direction. The room overflowed with coffee-related tchotchkes. For example, there was the “Quff,” from a company called Qumfort Qreations, which was a reusable thermal sleeve for paper cups. (Available designs included “U.S. Army,” “Purrty Kitty,” and “Elephant Party.”) Another booth offered “Cruzin Caps”: colorful stickers used to plug the hole in to-go lids, thereby preventing spillage on the go. Neither would be necessary, of course, if you were using the sealable TimeMug — advertised as “The world’s only dishwasher safe time-telling mug” — which even came in a rhinestone-encrusted version. Also on offer: a mint-flavored postcoffee mouthwash called “Brite Shots”; jewelry made out of coffee beans; “eXtreme Barista” training videos; Joe Bag, “the ultimate new concept in coffee transportation” (basically, a bag that held four coffee cups); tickets for coffee-themed ocean cruises; and “hypercaffeinated” coffee beans, samples of which were handed out by a provocatively dressed woman in front of a bright yellow Humvee. Demand for these trinkets, and many more, was brisk. Among the convention-goers, optimism about the future of the coffee-house business ran sky-high.
And just in case anyone forgot who was responsible for sparking this frenzy, a prominent reminder stood just down the hall from the exhibition area: a Starbucks, one of the company’s nearly three hundred stores in the Seattle area. The store sat mostly empty that day (only a fool would pay for coffee at a coffee trade show — a bit of wisdom that came to me while paying for coffee at this particular Starbucks right before this particular trade show), yet many attendees took note of its symbolic presence. Some looked away in silent protest, others offered a mock respectful bow of the head, and a few just shrugged their shoulders. Regardless of their feelings about the company, however, they all had to acknowledge this: the coffee mania that made their livelihoods possible took root in this very soil, under Howard Schultz’s guidance.
In the late eighties, as the Schultzrun Starbucks was taking its first toddling steps, management started noticing small, peculiar signs that the espresso-bar idea was catching on
. When they spotted people toting around their distinctive white cups, they’d sometimes observe that the logo faced conspicuously outward, broadcasting the customers’ refined tastes to all passersby. Proprietors of breakfast cafés saw patrons show up with their own cups of Starbucks coffee already in hand. At the first Portland, Oregon, Starbucks, employees noted that customers were hovering around outside at six a.m.; the store didn’t open until seven. Some fanatics even adopted a new in-crowd ordering lingo that went well beyond the cute terms Schultz, Pinaud, and a few others invented one day in a conference room (that is, the “tall,” “grande,” “venti” phenomenon, about which more later). If you requested a “short wet harmless cap,” you received a small decaf cappuccino with no foam — assuming the barista had brushed up on espressoese and didn’t think you’d just escaped from the asylum. A “cake in a cup” order got you double cream and sugar. And if you asked for a “schizo unleaded speed ball on a leash,” well, maybe you really did need professional help. *
Needless to say, Starbucks wasn’t the only coffee-house in town — it was just the most prominent, the popularizer of the trend. Coffee-crazed Seattle could claim a slew of roasters and coffee-houses before most Americans had even heard the word espresso, and each one had its disciples. Choosing a bean provider was like becoming a Chevy man or a Ford man in the 1950s; you were either a Starbucks person or a Seattle’s Best person or a Torrefazione Italia person, and this preference spoke volumes about you as an individual. In Seattle, coffee was the new alpha beverage, and the race was on to profit from the citywide addiction.
Which leads us to a question: why, out of the nation’s many chic culinary hubs, should America’s frenzy for espresso drinks have first taken shape in this specific Pacific Northwest city? † Schultz’s ambition surely influenced the fad, but Seattle also had several inherent advantages going for it. First, there was the damp and gloomy weather; going a month without any sight of the sun would make anyone want to huddle around something warm. Then there was the city’s water, which had the perfect hardness for brewing espresso. And coffee had another secret weapon in Seattle as well: in the early 1900s, droves of Scandinavians immigrated to the city to work in the fishing industry, and Northern Europeans drink more coffee than anyone else on the planet. Years later, their cultural predilection for coffee hadn’t faded. Add young tech workers with disposable income to the mix, and it becomes obvious why Seattleites took so strongly to the brew.
As customer devotion soared to cultish heights, casual observers had to wonder: was this level of fanaticism about a beverage healthy or even rational? Starbucks had always radiated a hint of exclusivity, but this seemed like something else entirely — almost like a religion. The intensity of customer need stunned Dave Olsen, for one. “I sometimes feel like I’m operating a public utility,” he told Seattle Weekly in 1989. “If we’re ever closed, people can’t understand how we could do that to them.” According to Robert Thompson, a professor of popular culture at Syracuse University, the Starbucks cult of the time occupied a privileged spot in the geek pantheon. “Starbucks fans were once nearly as passionate as Star Trek fans,” he explained. “They couldn’t imagine life without Starbucks. They’d get on the mountaintop and evangelize about it. People used to say to each other, ‘How can you live there? That’s not a Starbucks town.’ ”
While the public showed impressive enthusiasm about Starbucks, the people behind the counter put them to shame; the first employees to don the green apron lived and breathed the Starbucks ethos. As Dawn Pinaud told me, “Our blood was brown.” Part of their zeal sprang from the coffee itself: the product is, technically speaking, a powerful, mood-boosting psychotropic drug. But an equal share of this dedication to the company was due to its charismatic leader. Shortly after he took control of Starbucks, Schultz decided to give all employees who worked more than twenty hours a week both health insurance and stock options, an unheard-of scheme in a time when few full-time retail employees, let alone part-timers, enjoyed any benefits at all. Schultz made plenty of public relations hay with the plan, and the company’s employees (or “partners,” as Starbucks now called them) responded so favorably that annual turnover fell to 60 percent, compared to an industry average of 200 percent. But it wasn’t just the financial incentives that enthralled employees; it was Schultz himself. His workforce considered him the quintessential benevolent boss. At one early town hall–style company meeting, an employee from the roasting plant stood up and yelled, “Howard, for you, we’d put a store on the moon!”
Not that it was a total lovefest for Starbucks in the early days. Many found the company’s coffee bitter and overroasted, and some customers chafed at the haughty attitude they got from baristas. (Schultz himself even boasted in a 1993 Seattle Times story, “We do have a bit of arrogance. We feel we deserve it.”) Starbucks also got a tiny, comical taste of the controversy that would dog it in later years. When the company unveiled a print ad featuring a picture of a schoolteacher, it drew complaints from actual schoolteachers, who grumbled that the woman in the photo looked “too schoolmarmish.” And thanks to protests from angry mothers, the logo’s siren had to go under the knife once more. As Terry Heckler explained, she was still hardly the image of chastity: “She was kind of split in the middle, holding her fins up. The feminists called up and said, ‘My kids asked me why her legs were spread. I refuse to buy your coffee until you fix this.’ Howard was sick of it.” In 1991, Heckler redrew the logo once and for all, rendering it in its current inoffensive form. “I don’t even know if anyone knows it’s a mermaid anymore,” he said, exasperated. “It looks more like a queen for a day with baking mittens on.”
These were nothing more than speed bumps on the highway to hegemony, however. Everyone wanted in on Starbucks. “The first thing out of a client’s mouth was, ‘Can I get a sign?’ — ‘Proudly Featuring Starbucks Coffee,’ ” recalled Jana Oppenheimer, who worked in restaurant and wholesale accounts at Starbucks. “They’d ask, ‘Do you have any cups I can use?’ People wanted a piece of the action.” The exponential growth commenced: Schultz added eleven stores in 1988, twenty in 1989, thirty in 1990, thirty-two in 1991. Everything was going according to plan.
But the chaos of Starbucks’s expansion did take its toll, even putting the company briefly on the brink of ruin. In 1987, the ever-ambitious Schultz had decided to prove that Starbucks would work outside the Northwest. Because of its thriving downtown and cold climate, which he supposed would drive customers in for hot lattes, Schultz targeted Chicago. The move was a catastrophe from the outset. The first Windy City Starbucks opened on October 19, 1987 — also known as Black Monday, the date of the second-largest one-day stock market drop in U.S. history. Despite the ill omen, Schultz quickly plowed ahead with more stores. Knowing little about Chicago, he picked sites with entrances fronting the street, when they should have been in lobbies; people didn’t want to brave the bitter cold just to get coffee. And when they did drink it, many spat the ultradark brew out. “I remember in Chicago, one coffee roaster said to me, ‘You guys are the most arrogant sons of bitches — your coffee tastes here just like it does in Seattle, and these people are used to Folgers,’ ” said Kevin Knox, an early Starbucks roaster. “No one there had ever tasted coffee that strong.” What’s more, Schultz had far higher rents and labor costs to pay. The company was losing money, and investors were losing faith. It was a disaster.
“No question, Chicago was the closest Starbucks came to failure,” said Harry Roberts, a Starbucks marketing ace who had known Schultz since his Hammarplast days. “We were really tanking. It was expensive to do everything; there was the time zone difference to manage, and Chicago didn’t even like the coffee.” To turn things around, the company needed a savior.
In the history of Starbucks, there is only one man who can rival Schultz in the cult of personality department: Howard Behar. A bearded and bespectacled retail expert with the lewd vocabulary of a dockworker, Behar was something of an oddity at Starbucks. He had
no college degree, he was a decade older than most of the other employees, and he had some peculiar tendencies: for some time, he would wear only black clothing, and he was such a fount of nervous energy that he’d often tear pieces of paper into little strips during conversations. But Behar was a wizard with people. Employees adored him for gestures like sending personally signed birthday cards to everyone in the company, even when they numbered in the tens of thousands. He was also fiercely loyal. “What used to piss me off was when they’d say ‘Charbucks,’ ” Behar told me. “That’s like walking into a gallery and saying, ‘Your art is shitty.’ ” (Incidentally, he also matches Schultz in output of sanctimonious catchphrases; for example, “We’re not filling bellies; we’re filling souls.”) Behar made it his mission to eliminate the storied Starbucks haughtiness. When Schultz dispatched him to Chicago in 1990, Behar infused the local stores with rambunctious friendliness, and they soon turned profitable.
Back in Seattle, though, Starbucks was locked in a constant state of disorder; the company was nearly doubling in size every year, and no one knew how to cope with it. Consider Brooke McCurdy, a designer and architect who joined the company in 1990. When she reported for duty at Starbucks’s brand-new headquarters on Airport Way — which Schultz had figured would be large enough to last a decade — there was no room for her or for the other store designers. So they worked in the lobby. “Every time the door opened, our papers would go flying in the air,” McCurdy told me. Then there were the fire drills. “We were on one side of the building and the roasters were on the other,” she recalled. “The chaff from the coffee accumulates, and at some point it combusts. So every time it caught fire, we’d all have to run out of the building. French roast was the longest roast, so French roast day — Friday — was always exciting. You never knew what would happen on Fridays.” Before long, McCurdy and the designers claimed a space next to the cupping room, where Dave Olsen sampled coffees; thus, their meetings were often punctuated by thunderous slurping sounds from the other side of the wall. But the comforts of the new space were short lived. “I’d say every six months we had to move,” McCurdy said.