Letter #28: Howard Schultz (1992)

1992 Starbucks Shareholder Letter

Hi there! I go by KG, and I love studying the history of business and investing. I’ll be sharing some notes from one Investor/Shareholder letter per weekday (mostly from my compilations) here.

Today’s notes are on Howard Schultz’s 1992 Starbucks Shareholder Letter. 1992 was the year Starbucks IPO’ed, making this Howard’s first public Starbucks Shareholder Letter.

You can find this letter in my Howard Schultz Compilation under “Consumer/Retail Operators.” This particular essay starts on page 1.


Every successful business has its competitive advantage.  At Starbucks we have two: Our coffee and our people. 

  • Sounds a bit too simple/cliche to be honest — our product and our people

  • However, often times the best investments are built upon the most simple of theses — we’ll see how they back this claim up

Since our inception in 1971, Starbucks has been based on an unrelenting (some would say fanatical) devotion to providing its customers with the best possible cup of coffeeOne indicator of this passionate commitment is the question we ask ourselves whenever we assess our efforts: are they as good as the coffee? 

  • Focus 1: Provide the best product possible

  • Focus 2: Is our service as good as our product?

    • It’s not just about “product-led growth” — the service provided with the product is just as important

  • I myself am not a coffee drinker — but I enjoy Starbucks’ other drinks

  • Coffee snobs claim Starbucks “isn’t real coffee” or “is burnt coffee” but there’s no denying its popularity and pervasiveness in society

    • In a way, they’ve turned a “trash product” into a beloved commodity

    • For a fun story on the man who became a billionaire by convincing Americans to “trash fish” see this story.

    • Howard Schultz is actually an alchemist — turned lead into gold

Our retail stores are intended to be environments worthy of housing the finest coffees which nature and skilled human labor can provide.  Dedication to quality, in the cup, is what Starbucks is all about.  Many of the specifics that make our company seem unique to others are, to our way of thinking, simply natural, even inevitable, consequences of this core attitude and aspiration.  Quality coffees are grown, roasted, brewed, by quality people, and the welfare of the people, the planet and product are inextricably linked. 

  • Company values: (1) Coffee (2) People (3) Planet

Our “employees” are called partners, and this is literally true, since every individual is offered stock options.  We seek to seamlessly interweave variables that ensure quality for the customer with literal ownership in the company.  We want to be the employer of choice in each market in which we do business.  In order to achieve this goal we pay fairly, provide benefits to all whether part-time or full-time, and encourage individuality and open communication. 

  • “Owner-operators” are extremely powerful — why not make everyone in your organization an owner operator? (Well, according to DHH, giving people equity is a scam but personally I think it’s great)

  • Being the employer of choice is fascinating — Disney supposedly underpays its employees, but because the brand is so powerful, it’s still the employer of choice within the entertainment industry

Our environmental commitment begins with recycling and conserving wherever possible. 

  • I’m glad they included this, but also no details before skipping into the performative philanthropy

  • *Touched upon in an earlier paragraph, but again, no real details

We donate coffee locally in every market, providing homeless shelters and hospices better coffee for free than many of our competitors offer at full price.  We are also entering our second year as the West Coast’s largest corporate donor to CARE, the international aid and development organization.  Starbucks, together with its customers, funds CARE programs in the coffee producing countries of Indonesia, Kenya and Guatemala, with an emphasis on disease prevention and increased literacy for children.  This year has been an exceptionally rewarding one. 

  • lol. shots fired — “better coffee for free than our competitors at full price”

  • I’ve always wondered about the relationship between giving and corporations — obviously for tax purposes and PR — but you have to wonder how they come up with these initiatives (how are disease prevention and child literacy related to coffee making?)

  • Would have liked more details surrounding philanthropy related to THE PLANET

  • You see what Howard and the Starbucks Board values — these causes may not be related (directly) to Starbucks, but they are what the people running Starbucks care about

We achieved sales of $93,078,000 which were up 61.5% from 1991.  We opened 53 new stores, including ones in our newest markets of San Diego, San Francisco and Denver.  Also, we earned $4,104,000 after tax which represented a 70.4% increases versus a year ago. 

  • Awesome growth, new markets concentrated on West Coast slowly moving their way East

  • I’ve always thought about the idea that ideas and people consistently move West (Go West, Young Man) — Starbucks started out in the West and moved East. Outside of Silicon Valley, what are your favorite examples?

Lastly, Starbucks’ entrance into the world of publicly-owned companies this June was profoundly significant, both within the company and for the specialty coffee industry as a whole.  It is an affirmation of our leadership position, but it is first and foremost a powerful demonstration of what can result from the joining together of great people and great coffee.

  • Remember when IPOing was a good thing? A badge of honor? When people actually wanted to do it? (granted it did take them 21 years to IPO lol)

  • Now everyone stays private forever — and the one’s who do are doing direct listings or going through SPACs

  • End with a reaffirmation of competitive advantage — coffee and people.


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