Why Was Starbucks Born in Seattle and Not Milan?

In April 2021, two Italian states had a clash of history. In a way, it was a short reminder that for most of history, Italian states were at war with each other. How they ever came to unite under one banner is an incredible achievement. 

Unlike previous arguments, this one centered around an unexpected question: who should get credit for inventing the coffee espresso? Naples (a region in the South) thinks they should get all the credit, while the Northern regions (mostly from Treviso) think the credit should go to the entire country. 

Italy sought world heritage status from UNESCO for their contribution of espresso, which is what sparked the argument. UNESCO smartly avoided getting in the middle and told them to come back in 2022 with a united bid. But, unfortunately, that’s unlikely to happen.

Coffee today isn’t just something Italians fight about. Coffee is a staple globally, and most people are consuming it daily — including myself. However, there’s one company representing coffee culture worldwide, and it isn’t even Italian. That company is Starbucks. 

How did an American company come represent coffee, an Arabic invention that later became part of European culture? Better yet, why was Starbucks born in Seattle and not in Milan (or elsewhere in Europe)? 

The answers may surprise you. In part, it’s culture, but there’s also an element of the right business strategy which propelled Starbucks to global domination. Let’s go back to 1971, where everything started.

It All Starts with the Beans

3 people founded Starbucks: Jerry Baldwin, Zev Siegl, and Gordon Bowker — Howard Schultz will come later in the story. They were inspired by Alfred Peet, who taught them how to roast beans. Alfred created Peet’s Coffee & Tea, which had an exciting history alongside Starbucks. Alfred was born in the Netherlands and worked with his father, who ran a small coffee shop. This is our first connection to the coffee culture in Europe.

In 1971, Starbucks opened its first store in Seattle. Their initial focus was selling whole beans of great quality. This was the same concept that Alfred Peet had started years earlier. Eventually, the first Starbucks store moved to 1912 Pike Place, where it is still today. So if you have ever gone to the “first Starbucks store” in Seattle, you have gone to 1912 Pike Place.

Howard Schultz joined Starbucks in 1982 as the Director of Operations and Marketing, years after selling whole beans. Generally speaking, Starbucks was doing well. Howard Schultz was hired to help the company grow, but he had a renaissance when he visited Milan on a buying trip for Starbucks. He became familiar with Italian “bars” where coffee is served in Italy and what we call coffee shops. He loved them so much that he wanted Starbucks to open one in America and sell drinks like espresso.

It’s important to take a detour here and talk about Italian coffee culture. The word caffe in Italian likely comes from the Arabic word of “Kaffa” and coffee itself is originally from Ethiopia. The Muslims brought coffee to Europe, where it was a hit. 

Italian bars play a central role in the life of Italians. They meet there with friends, sometimes multiple times per day. It can be a quick meeting (15 minutes) while standing, or it could be a longer event, e.g., reading a newspaper. Espresso is the most popular drink, and if you ask for a coffee in Italy, you will get an espresso.

Italian Bar
Italian Bar

Coffee is woven into Italian culture, and your local bar is not just a business but a key part of your community. This is how we perceive coffee shops today in the US and Canada, but that was not the case in the 1980s. In fact, Italians believe that coffee should be available to everyone, which is why it is typically inexpensive (under 2 euros). They also prefer their espresso to be more bitter and strong.

You can also find other styles of coffee drinks in Italy, such as the caffe latte, caffe macchiato, and cappuccino. All of these drinks are nowhere as sweet as their equivalents in America. This was the culture that Howard Schultz came across when he visited Milan. He wanted to bring back that sense of community to Starbucks.

Starbucks agreed to run a pilot which was successful. However, the Starbucks leadership team decided against expanding the pilot for three reasons: the high cost of espresso machines, the expertise needed to run these machines, and American’s lack of familiarity with espresso. 

Schultz disagreed with this assessment, and he decided to leave Starbucks to open his own stores. In 1985, he opened Il Giornale (Italian for The Newspaper), where he served espresso, ice cream, played opera, and had little seating. He famously pitched 242 investors, and 217 said no. 

The story of Starbucks continued in tandem with the story of Il Giornale. In 1987, Starbucks decided to sell the chain of Starbucks to Howard Schultz and focused on Peet’s Coffee — and the whole bean concept. Schultz decided to renamed Il Giornale to Starbucks, and by 1989, he had 46 stores. 

Starbucks IPO in 1992 with 140 stores, $73.5 million in revenue, and a valuation of $271 million. The rest is history.

Why Starbucks is American, Not Italian

Despite the Italian’s love of coffee, Starbucks was not born on their lands. I believe that there are 3 reasons why this is the case. It’s also important to note that this isn’t the first time an Italian product is taken to America, where it becomes something else. For example, gelato becomes Ben & Jerry, Pizza becomes Dominos, and espresso became Starbucks.

American corporate culture is unique because of multiple factors. It is home to a massive and high-end consumer market. Launching something in American means accessing 300 million potential consumers. Entrepreneurs are also encouraged throughout the country, and it is more acceptable to start a business here than elsewhere (generally speaking). 

Finally, the individualism bias of the culture, I think, makes it more likely for someone to dream of global ambitions. This was the culture Howard Schultz grew up in. He saw an opportunity in bringing Italian bars to America, and he was motivated to see it through. 

The 3 reasons why Starbucks was born in America are culture, global ambitions, and a consumer-driven approach. 

Reason #1: Culture

Italians didn’t have a strong desire to share coffee with the rest of the world. Coffee was something that they drank with friends and family and not something to be exported to the rest of the world. In Italy, coffee has a “purist” quality to it. There’s one way to drink it and one way to make it. The local bar can make an amazing espresso for a couple of euros. How could that ever be replicated on a global scale?

Italian coffee is unique and local
Italian coffee is unique and local

Margaret Thatcher said that its history shapes Europe while America is shaped by philosophy. I interpret that as meaning that Italians saw the history of coffee but not the future. Coffee wasn’t something to be carried in white containers as a status symbol as it is today. Howard Schultz saw that vision.

Reason #2: Global Ambitions

Italian coffee bars aren’t thinking about global domination. That’s a uniquely American idea that Howard Schultz successfully executed. Starbucks created a new market of coffee drinkers across the entire world. It was no longer just about the local community coming to meet friends and family. It was about doing that across thousands of cities and countries.

Not everyone believed in these global ambitions. Investors didn’t believe that American’s wanted to drink espresso and other coffee drinks outside of their homes. The Italian concept worked in Italy, but it would require a significant amount of education outside of their country. Howard Schultz had difficulty securing the money he needed for his first Il Giornale store, which would eventually morph into Starbucks. In classic entrepreneurial fashion, Howard Schultz continued despite the obstacles.

Reason #3: Consumer-Driven Approach

In Italy, coffee is espresso. If you want to get fancy, get a cappuccino or caffe latte. Even then, don’t go heavy on the sugar as that ruins the taste of coffee. Any drink that you get will be small. Howard Schultz discovered that Americans wanted other forms of coffee. Drinks needed to be bigger, sweeter, and more colorful. Italians wouldn’t have ever considered the Frappuccino, but Starbucks did (after it was created in America).

Starbucks was open to what consumers wanted. They weren’t constrained by the history of coffee or what it is supposed to be. Coffee might mean different things to different cultures, and Starbucks was willing to experiment with different formats and styles. Instead of forcing consumers into a philosophy, Starbucks would morph to match expectations.

Strategy Lessons from Starbucks

For other companies, Starbucks is full of strategic lessons. 

First, don’t assume that sacred things are natural laws. Coffee is sacred in Italy, and morphing into Starbucks seems absurd. However, there are different customer segments in the marketplace, and not everyone might share the same feelings as Italians. Starbucks focused on what the customer wanted and not what tradition said was possible.

Second, stop breathing your own exhaust. Howard Schultz discovered the idea of Starbucks by walking through Milan. He was exposed to different ideas instead of being surrounded by the same limitations and constraints.

Third, Howard Schultz was fearless. He left a great job in Starbucks to pursue his idea of bringing Italian bars to America. There are decisions where no data can tell you what to do. You have to take a risk and jump off the cliff.

Next time you’re drinking a coffee, remember the complex history that allowed you to be there. From the honing of the espresso to the spread of coffee culture globally by companies like Starbucks. Perhaps the North and Southern states in Italy will come to recognize their impact and join forces in taking credit for their role in our coffee.

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