Dream, build and customers come – A case

If you build it, they will come. So spoke the voice that actor Kevin Costner heard in the movie Field of Dreams, provoking him to build the baseball field he had dreamed about. The statement also reflects the philosophy of Howard Schultz, restaurant entrepreneur and chairman and CEO of Starbucks, a company that sells premium coffee through 300 retail stores and coffee bars in the United States, Beginning with a dream, Schultz took a business with $ 10 million in sales and built it into the country’s largest roaster and retailer of specialty coffee. In 1992, Starbucks reported more than $ 90 million in sales and a compounded annual growth rate of 80 percent over the past three years.

Named for the first mate in Melville’s Moby Dick Starbucks began in 1971 when three young entrepreneurs – Jerry Baldwin Zev Siegl and Gordon Bowker – began selling whole bean coffee in Seattle’s Pike Place Market. By 1982, it had grown into a thriving Seattle enterprise with five retail stores, a small roasting facility, and a wholesale business that sold coffee to local restaurants. It was then that Schultz was invited to join the business. At the time he was vice president of US operations in New York for Hammarplast, a Swedish house wares company. Anxious to leave New York, Schultz agreed to manage retail sales and marketing for Starbucks and he and his wife packed up and headed west to Seattle.

Shortly after joining Starbucks, Schultz began to feel discontented. After working for the company for only a year, he found himself in Italy on business where he was overwhelmed by a vision: What he saw was the possibility of a caffeinated American culture. He saw the relationship Italian culture has with coffee and the romance of the beverage, he recalled. The Italian starts his day at the coffee bar and sees his friends there later on. It struck me that this was also possible in America. It had never been done – and we could do it because the quality of Starbucks’ coffee is unsurpassed. And so began Schultz’s romanticization of coffee.

Schultz became increasingly frustrated by the disparity between what he was doing at Starbucks and what he wanted to be doing: Hios dream had turned into an obsession. Schultz then left Starbucks. He wrote a business plan for a new company. And even returned to Italy to se again what had first inspired him. He visited coffee bar after coffee bar, watching, thinking, and dreaming all the time.

And so Schultz opened is first coffee bar in April 1986. Named ll Giornale, after the Italian newspaper, the coffee bar was an instant success in Chicago. It served Starbucks coffee. Schultz then opened a second ll Giornale in Seattle and a third in Vancouver. A year later, Schultz bought Starbucks from his former employers for about $4 million. He merged the existing ll Giornale and Starbucks businesses, dropping the ll Giornale name. So began the business of Starbucks as we know it today.

Starbucks today encompasses a range of outlets, from kiosks in airports to small espresso bars to 2,000 square foot flagship stores, as well as a direct mail order business. Between 1991 and 1992, sales climbed 61 percent, to $93 million. As of 1993, the company operated more than 185 retails outlets, and had set a pace of opening a store a week. Most of the stores were sprinkled along the west Coast, but Starbucks had made its East Coast debut in Washington DC.

Schultz’s transformation of Starbucks was about having a dream and taking a chance. Those were scary times recalled his wife. But he knew if he didn’t take a chance he would never be happy.

Schultz’s relentless pursuit of happiness has translated into resounding success. Within a year of going public, A Starbucks stock climbed from $17 per share to $40 per share to $40 per share. Starbucks could easily top a billion dollars in sales by the end of the decade, said Christopher E Vroom a retail analyst with Alex Brown & Sons Inc. Starbucks is single handedly changing the way consumers think about coffee.