Howard Schultz on Acquired podcast
I love the Acquired podcast. One of my favorite episodes is the one with Howard Schultz about Starbucks. A few things I learned:
1. Howard’s Wife Saved Starbucks
In 1983, after Howard returned from Italy and had his inspiration to pioneer what eventually became the Starbucks we know today, he put his head down and started hustling to make it happen. He was trying to raise money from various investors to expand his coffee bars. To keep costs down, he was working as a barista in one of his three stores and taking no salary.
Meanwhile, his wife is seven months pregnant with their first child and working a normal 9-5 job. Howard’s in laws came to visit and his father-in-law asked him to “take a walk.”
Here’s the exact wording from the episode transcript:
Sheri Schultz believed in Howard even when her own family was trying to protect her. She backed her husband up and doubled down. That is badass. Sheri and Howard are still married today after 43 years. Sheri, I’m a big fan.
2. Starbucks holds more money than many banks.
Even casual Starbucks drinkers know the brand is big on gift cards and pre-loading funds onto their mobile app. Customers are incentivized via higher rewards to buy with pre-loaded funds vs. a standard credit or debit card.
This seems like a small detail to most customers, but once I got the whole picture, it made perfect sense. Starbucks isn’t a financial institution, meaning it doesn’t have to deal with any of the regulatory burdens that banks and insurance companies do. And turns out, $10 added to a Starbucks account here and there adds up: Starbucks reported $1.77 billion in cash from customer prepaid funds at the end of fiscal year 2024.
In fact, Starbucks actually counts “breakage” as a revenue stream—money that is preloaded but never actually redeemed. This totals hundreds of millions in free profit. The company can use that money to cover other costs, invest in new locations or equipment, pay bonuses, etc. Incredible.
3. Howard Treated His Employees Incredibly Well
Howard saw his father struggle as a blue collar worker that was never financially secure and never felt truly valued. He wanted to do something different with his own employees to ensure they didn’t have that experience.
Howard did a number of different things to accomplish this, but two of the biggest were Comprehensive Health Insurance and the Starbucks “Bean Stock” program. Starbucks offered full health benefits to its full-time and part-time employees in 1988, the first major retailer to do so. Not only that, but Howard offered 14% of base pay as company stock options the year before IPO. Every single employee. He even duked it out with a couple of the VCs on his board to make it happen.
The initial grants were $6 per share strike price. In total today, after accounting for all stock splits, those shares have 64x’ed in value. A pretty great deal for his employees!