The Coffee Company That Acquired Starbucks In The '80s
Most people need little introduction to Starbucks, the world's leading coffee company with more than 30,000 stores and $29.1 billion of sales revenue in 2021 alone, according to Investopedia. And it's not just a Western phenomenon; Starbucks stores thrive in 80 diverse countries, fulfilling the company's mantra of "one person, one cup, and one neighborhood at a time." It's hard to imagine the current coffee titan as a tiny, struggling startup scrambling for investors, many unwilling to toss their hats in the dubious ring of craft coffee and specialty roasting.
But that's exactly what happened in the 1980s when a small coffee shop with ties to Starbucks set out to acquire the Starbucks roastery and small collection of retail stores. After expanding to six outlets, the hometown Seattle coffee roasters were ready to sell — at a steep price. That's where the story gets interesting, involving an entrepreneurial dreamer and one-time Starbucks employee named Howard Schultz, who had by then started his own group of three coffeehouses with former Starbucks coffee roaster Dave Olsen, notes the Starbucks archives.
With Starbucks unexpectedly for sale, Schultz made a move that eventually changed the face of global coffee culture –- though that story almost went unwritten.
Il Giornale steps up
Now a larger-than-life icon in coffee lore, Howard Schultz back then had little clout as a small-time owner of the three Il Giornale coffeehouses in Seattle and Vancouver, B.C. Fashioned after his romantic vision of Italian coffee rituals, Il Giornale was a personal endeavor not shared by his former employer, Starbucks, which clung to its coffee-roasting roots, per the Starbucks timeline. However, the owners believed in Schultz's vision, even serving as the first investors in Il Giornale.
Just a few years later, Starbucks founder Jerry Baldwin offered Il Giornale and Schultz a three-month exclusive deal to purchase the six existing Starbucks stores — for $3.9 million, reveals CNBC. That's a lot of money for a man in his early 30s, even one with an unlimited passion for making the deal a reality. Schultz managed to raise about half of the money, but his dreams shattered on the discovery that one of his other Il Giornale investors had made a higher offer with no strings attached. The story had seemingly come to an unhappy end.
The Starbucks story evolves
In reality, as we all know now, that story was just beginning. As it so happens, another big name on the Seattle scene intervened. Schultz tells NPR's "How I Built This" podcast that he had all but given up hope when his friend and lawyer unexpectedly introduced him to a senior partner in his law firm — who happened to be Bill Gates, Sr., father of "the other Bill Gates," founder of Microsoft. Gates Sr. asked for the whole story, asked if it was true, then immediately walked the more-than-anxious young Shultz over to confront the competing investor attempting to usurp the Starbucks purchase.
As CNBC relates the progression, Gates Sr., towering at six-foot-seven, shamed the would-be investor for attempting to steal a young man's dream — telling him in no uncertain terms that it was not going to happen and "this kid's buying the company." And that was that. The dreamer who had originally implored 242 people to fund his Il Giornale coffeeshop venture, with 217 of them saying no, per Business Insider, became the new owner of Starbucks.
Schultz merged the six Starbucks coffee-roasting stores with the three Il Giornale coffeeshops, operating under the Starbucks name. A company memorandum posted in the Starbucks archives, dated August 10, 1987, offered continued work for existing Starbucks employees in their present positions with present pay and benefits. They did not, however, assume the collective bargaining agreement.