Howard Schultz: The Star Of Starbucks

Scott Pelley Meets The Man Behind The Coffee Empire

(CBS) 
Still, Schultz has felt the wrath of anarchists, who trashed a Seattle store in an anti-globalization riot.

"There is a criticism, and you've heard it, that Starbucks is homogenizing the world; you're taking the culture out of places in China and Japan and Americanizing them," Pelley says.

Schultz says he has heard that and is not irritated by such criticism. He says "it's just off base."

"And when people say you're an evil empire bent on world domination, you say?" Pelley asks.

"I hate that. I hate that, but I realize you're always going to have critics," Schultz replies.

The original Starbucks opened in 1971 on Seattle's sea front. It was a small store with no big plans. "Starbuck" is the name of a character in the novel Moby Dick.

Schultz worked as an appliance salesman pushing coffee makers, when he stopped at Starbucks to make a sales call.

"When I walked in this store for the first time, I know this sounds really hokey, I knew I was home," Schultz says.

He quit his job and went to work in the store, which at the time was just selling beans and machines. Adding an espresso bar was his idea. A few years later, he was offered a chance to buy Starbucks, which by then had grown to six Seattle stores. He set out to find investors.

"If I came to you in 1987 and I said to you, 'Even though coffee consumption in America is down, I wanna build a company that was gonna sell coffee not in a porcelain cup, but in a paper cup, with Italian-saying words that no one could pronounce, for $3 a cup of coffee,' would you invest?" Schultz asks.

"Absolutely not," Pelley replies.

Schultz says Pelley would have had a lot of company. But had he invested $10,000 at the start, it would be worth more than $5 million today. How did Schultz do it? With marketing and salesmanship and even, he admits, a little hype.

"But please tell America and the rest of the world why the small drink is called the tall?" Pelley asks.

"Well, I think, you know, when you walk into a store, you don't wanna say, give me a small. You wanna say give me a tall. And, so, there's a little bit of marketing in there," Schultz explains.

Schultz likes to tell people that Starbucks is just a simple coffee company, but behind closed doors, there's a Starbucks laboratory inventing next year's drinks.

"It takes our beverages from the state of ideation to the actual development that you see going on right now," explains Jim Donald, the company's CEO, as he showed the 60 Minutes team around.

What is the state of ideation?

"State of ideation. Beverages have to be created. And they're created by looking at what trend is in say, the fashion industry, what color's hot right now," he explains.

They think green is hot and so they developed something called a "Green Tea Frappuccino." At Starbucks today, there are now 55,000 possible drink combinations.

"Cinnamon dolce latte. Vanilla white chocolate mocha? Caramel macchiato? Where does this stuff come from?" Pelley asks. "You're making this up."

"You walk into a retail store, whatever it is, and if there's a sense of entertainment and excitement and electricity, you wanna be there," Schultz says.

Starbucks is theater. That showmanship and salesmanship have made Schultz something close to a billionaire.

But that is something that he could never have imagined as a boy. Schultz grew up broke living in a public housing project in Brooklyn. There are bullet holes in the door leading to apartment 7G, in the building where he lived.