Why king of coffee has problems of his own

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So, who is Howard Schultz? He is Mr Starbucks, the urbane entrepreneur who turned a small Seattle coffee chain into a $10bn-a-year empire and changed the drinking habits of 50 million customers a week by dint of his marketing flair.

Americans, Canadians, Britons and plenty of others sup milky coffee from cardboard sleeves because of Mr Schultz. The corporation’s expansion has been rocked, however.

When the former kitchen gadget salesman visited Milan in the early 1980s, he saw Italians drinking espresso from small white cups. At the time, Americans were drinking stewed robusta bean filter coffee at bargain basement prices. Mr Schultz championed high-quality Arabica beans with a creamy, indulgent twist: masses of milk.

But Starbucks founders rejected his plea to move away from selling coffee equipment and beans for home consumption and become a fully-fledged cafe chain. So Mr Schultz, raised in a public housing project and the first in his family to graduate from university, walked out to found his own short-lived chain, Il Giornale. He returned to buy Starbucks and has turned it into a global force in 44 countries.

At the centre of his vision has been the creation of a “third place”, somewhere neutral yet homely. Why people walk into Starbucks is not left to chance. Everything is in the detail. Starbucks buys the best spots in every mall. The names, the design of the cafes, the logo (now bowdlerised from its raunchy, open-legged original), even the colour and shape of the swirls on the walls are pored over and refined. But Mr Schultz may have overreached himself. The 16,860-outlet Starbucks empire is in retreat, under attack from cheaper outlets run by fast-food companies and pubs. Two weeks ago Mr Schultz, the chairman, CEO and president of the Starbucks Corp, announced there would be 300 more store closures on top of the 600 US closures last year.

Britain, one of the most important outposts in the empire, is in particular trouble. In the US, Starbucks is far bigger than any opposition, a giant among midgets. In the UK, its 713 stores are outsized by Costa Coffee, the Whitbread-owned rival which has proved itself more adept at squeezing itself into workplaces and public buildings.

Mr Schultz’s response has been to try to widen the brand. In November, he flew into Britain to announce that all its espresso-based drinks in the UK and Ireland would become Fairtrade. This week Starbucks released an instant coffee, Via.

50 million

Number of customers served by Starbucks every week.