All language subtitles for The.Food.That.Built.America.S04E05.Clash.of.the.Coffee.1080p.AMZN.WEB-DL.DDP2.0.H.264-NTb

[Narrator] Today, three
out of four Americans

drink coffee every day,

spending more than
$30 billion a year.

Coffee is undoubtedly

something that flows
through most of our veins.

[Narrator] But it
wasn't always this way.

Just 50 years ago, American
coffee was sinking fast.

Coffee in the United
States is awful.

[Narrator] Until
a revolutionary-

He really wanted to
almost spread the gospel of

what good coffee could be.

[Narrator] Ignites a rivalry
for the soul of American coffee.

Dunkin' is realizing that

there's this other
thing happening

in another part of the
country called Starbucks.

It's perfect.

[Narrator] As the
American franchise giant-

They were threatening

never to go into a
Dunkin' Donuts again.

I expect better.

[Narrator] Now has to
contend with a bold upstart.

Everyone you see will be
holding a Starbucks cup.

He's gonna eliminate
the competition

by acquiring the competition.

They were not going to
back down from Starbucks.

You have two titans
battling it out

for coffee supremacy in America.

[Narrator] The beans,
baristas, and bravado

that turn once-ridiculed
American coffee

into a world-wide phenomenon.

[dramatic music]

[suspenseful music]

[pensive music]

[Narrator] By the
dawn of the 1970s,

American food has reached
new heights of convenience,

but the technology that
makes it cheaper and faster

has taken a toll on flavor,

especially for one
American staple, coffee.

The hard truth of
it is coffee is best

when it's sold 12 to 20
days after it's roasted.

I mean, it's a
really tight window

to get the best flavors
out of that coffee.

Coffee sitting on a grocery
store shelf or in a store

is gonna be there
for a long time.

The technology applied to
making that product last

immediately affects the
quality of the coffee.

[driving music]

[Narrator] For years, major
brands poured their resources

into extending coffee shelf life

through vacuum sealing and
other packaging improvements.

What was available

to most Americans
was pretty gross.

So much of it was
instant coffee.

It was stuff that
had been frozen

that could be
reconstituted with water.

[driving music]

In the 1960s,
coffee in America

is an industrial product.

It's a product of sameness.

It's also associated largely
with older Americans.

If you were young in the '60s,

coffee was what your
dad drank at work.

It was what your mother drank
just to get through her day.

It was a conservative drink.

It wasn't that good

and it was sort of associated
with the establishment.

If you were young in the '60s,
coffee was not where it was at.

[dramatic music]

[Narrator] One
company that feels

the sting of coffee's
decline is Dunkin' Donuts.

By 1973, the company
is almost 20 years old.

It had gone public
a few years earlier

and has 700 locations,
including Hawaii and Japan,

but after years of growth,

the chain is seeing
profits decline

for the first time
in its history,

with stock prices falling
by 50 cents a share.

[driving music]

Blame for the losses fall at
the feet of CEO Bob Rosenberg,

son of Dunkin' Donuts'
founder Bill Rosenberg.

Bob Rosenberg takes
over the company in 1963.

He had gone to Cornell
Hotel Management School

and Harvard Business School.

He's fresh from graduation

and he now is a CEO of
this $10 million company.

He starts to expand the
company very rapidly.

As he sees it, he
single-handedly

changes the mission
of the company

from being a coffee
and donuts company

to being a franchising company.

It becomes more important to
him to grow bigger and bigger.

This creates a
number of problems.

[Narrator] As growth
stalls, stores are failing,

forcing 80 franchise
locations to close.

Bob faces mounting pressure
from the board of directors,

who pay him a visit.

Got a minute?

Yeah, yeah. Have a seat.

Want some coffee?

- I'm fine.
- Alright.

[Director] Bobby, your
father and I go way back.

Okay.

The board has decided
it's time for a change.

They want you to search
for your replacement.

I'm sorry.

The board wants to fire him,

if you can imagine the
pressure of that, and he says,

"Give me one more quarter
that I can prove myself."

[driving music]

[Narrator] The board
agrees to give him six months

to show he can make a change.

If he can't, he'll
lose control of

the company his father founded.

[intense music]

But as Rosenberg comes to
grips with the trouble he's in,

there is a coffee revolution
percolating on the West Coast.

Its leader is a Dutch immigrant

whose roasted beans are beloved

by college students turned
coffee connoisseurs.

Alfred Peet really was the
pioneer of the gourmet coffee.

He's actually been called

the godfather of specialty
coffee in America.

Alfred Peet was
of Dutch descent.

He was born in Alkmaar

and his father was in
the coffee business.

He grew up smelling the coffee
beans in his dad's pockets.

He would climb over the bags
of beans in the warehouse.

He said he would make a nuisance
of himself in the roastery.

He migrates to San
Francisco and he says,

"I'm in the richest
nation in the world,

and they have the
lousiest coffee."

He wanted to personally
rectify that situation.

[Narrator] Reigniting a love
for coffee is an uphill battle,

but America's
relationship with coffee

is as old as the country itself.

[dramatic music]

As the colonists begin
to resist the British,

one of the ways
that they do this

is through their
beverage choice.

The British were tea drinkers

and many of the
colonists were too,

so they adopted coffee as
their national beverage.

[Narrator] Coffee's popularity
grew with the young nation.

It was a favorite ration
of Civil War soldiers,

coveted by cowboys
and gold prospectors.

Homes had a stovetop coffee
roaster and sort of ball

that you filled up
with the raw beans

that you would turn over a flame

and you would roast
them yourself.

It was this long, arduous,
artisanal process,

but it was always fresh.

[Narrator] That
changed in 1864

when the Arbuckle Brothers
of Philadelphia introduced

the first commercially-available
roasted coffee beans

in a one-pound bag.

Early commercially-available
roasted coffee went bad fast,

two weeks at the most on the
shelf, so there were companies

who created methods that
extended shelf life,

but at great cost.

You can't fight Mother Nature.

So, vacuum-packed,
industrialized coffee

became the American
version of coffee.

Generations of
Americans grew up thinking

that's what coffee
was supposed to taste.

Alfred Peet was chasing a
decidedly darker, rich flavor.

The more you roast coffee,

the more of its
oils can come out.

The roasting process is
a very sensitive one,

so you have to
find that balance.

[Narrator] Peet's mission

to change the course
of coffee history

forges an empire
with 200 locations

and over $17 billion in value,

but, in 1970, Peet's
Coffee, Tea, and Spices

is just a one-store operation

that doesn't even
sell brewed coffee,

only beans and ground coffee.

The very first Peet's
Coffee was so popular

that it resulted in a
following of coffee drinkers

that referred to
themselves as Peetniks.

Three of these Peetniks
happened to be named

Jerry Baldwin, Zev
Siegl, and Gordon Bowker.

It's perfect. I mean,
it smells so fresh.

Gordon Bowker was a
freelance magazine writer.

Zev Siegl was a history teacher.

Jerry Baldwin, an
English teacher.

[Narrator] In 1970,
inspired by Alfred Peet,

the three men want to take what
he's doing out of California

and open a similar shop
selling gourmet coffee beans

in Siegl's hometown of Seattle.

[lively music]

Seattle was going through
a major revitalization.

The Space Needle,
the World's Fair,

all that was creating this
new tourist destination,

and the city had grown

by some 500,000
people in that decade,

so it was ripe for development.

It was ripe for new ideas.

Many of those people were
recent college graduates.

[driving music]

[Narrator] The
commercial hub of Seattle

is Pike Place Market, nine acres

of stores that attract
tourists and locals alike.

The partners chip in $1,300
each to lease a storefront

just a few blocks
from the market,

and it's Alfred Peet

who wants to guide them on
their ambitious journey.

Peet feels that the
guys have the same mission

to bring good coffee to America.

He feels a bond with them.

[Narrator] With little regard
for his own business interests,

Alfred Peet shares his knowledge
with the three friends.

What's kind of amazing
about Alfred Peet,

other than his prodigious
coffee knowledge,

is that he really wanted to

almost spread the gospel of
what good coffee could be.

He really sees himself not
so much as a business person,

but almost as a teacher.

[Narrator] With a
newfound knowledge

of the coffee business,

and Alfred Peet as
their coffee supplier,

Baldwin, Bowker, and Siegl

have everything they
need except a name.

By the way, what are you
guys gonna name this place?

Cargo House.

No?

Keep brainstorming.

So, Baldwin, Siegl, and
Bowker were really smart guys

and they were into
classic literature,

and I think especially
when you're by a city

that has this great
maritime history,

so they figured that
they're gonna use something

from Herman Melville's
"Moby Dick."

At first, they're
thinking of nautical names,

and one of them
remembers Starbuck,

who was Captain Ahab's
first mate from "Moby Dick,"

and they're like, "Hey,
that's a good name."

And so Starbucks kind of hit

for all of the qualities
they were trying to go for.

It sounded a little
bit like a family name,

and it had this "Moby
Dick" nautical tie,

and they immediately
all agreed to it.

[Narrator] Starbucks,
a sophisticated title

for their refined
and cultured coffee.

The logo is inspired by a
16th-century Norse woodcut

that is an image of
a mermaid or a siren,

and these sirens were seductive
creatures in the mythology.

[Narrator] On
March 30th, 1971,

Baldwin, Bowker, and
Siegl open Starbucks,

but this first Starbucks
follows the model of Peet's.

The key thing
to understand is,

in the very first Starbucks,
you couldn't buy a drink.

Essentially, at
the first Starbucks,

the only way you could
really taste the coffee

is if you sort of
annoyed one of the staff

and they might brew some
up for you to taste,

but, generally speaking,

it was a place that treated
coffee like produce.

You'd get a pound of
this, a pound of that.

You'd get turmeric or a
curry or something like that.

[dramatic music]

[Narrator] In the
first nine months,

they sell nearly
$46,000 worth of coffee.

It's the first in a long
line of successful endeavors

for a company that will
go on to change the way

America and the
world drink coffee,

but for the three founders,

it's one of the last
Starbucks successes

they'll be a part of.

[dramatic music]

[pensive music]

[Narrator] Bob
Rosenberg is on a mission

to keep his job as
CEO of Dunkin' Donuts,

the company his father founded.

He wants to really
increase profit margins,

and he realizes that,
in terms of products,

coffee has their
biggest profit margin.

Think about it.

There's virtually no labor
involved, most of it is water,

and the most expensive
element is the cup itself.

[tense music]

Ugh.

Coffee is coffee.
What do you expect?

I expect better.

They've always
had great coffee.

They do a blend of Brazilian,
Colombian and Guatemalan beans

and they would
even do things like

try to get the perfect cream,

engineering it so they
got their cream special

with 18% butter fat.

Very uncommon.

[Narrator] But Rosenberg sees
that coffee quality standards

have become inconsistent
across the franchise

and creates new policies

to get their core
product back on track.

To optimize freshness,

he institutes
corporate-wide rules

to maintain consistency
across the brand.

He wants the coffee
made in small batches.

Coffee cannot be steeped
more than 200 degrees.

He also wants it ground right
in front of the consumer

in order to demonstrate
that freshness to them.

He says brewed coffee can
only sit for 18 minutes,

no longer than that.

[Narrator] The time
limit assures that

the coffee won't scald
as it sits in the kettle.

[driving music]

The additional steps use
more coffee and raise costs,

but it's Rosenberg's
last ditch effort

to keep control of the company,

and Rosenberg isn't done
reinventing Dunkin' Donuts.

Meanwhile, Jerry
Baldwin, Zev Siegl,

and Gordon Bowker's Starbucks

has found a loyal customer base

for their gourmet coffee
beans, allowing them to expand

to six locations in the
Seattle area by 1984.

What they've
succeeded in doing is

bringing specialty
coffee, gourmet coffee

to every neighborhood
in Seattle.

[dramatic music]

[pensive music]

[Narrator] But
there's one employee,

a newly hired
director of marketing,

who thinks Starbucks
can grow faster

than it has over
the past 10 years.

Howard Schultz didn't really
come from any means whatsoever,

and that put a real
fire in his belly.

He worked incredibly hard.

He, in fact, sold his blood
to put himself through school

and eventually started
working for Xerox.

It didn't really fuel him,

even though he was a
rising star at the company.

He eventually changed
direction in his career.

Howard Schultz is hired as
Starbucks' marketing director,

and, right away, he is
a fish out of water.

I mean, he's this fast-talking,

savvy New Yorker
marketing guy

surrounded by
Seattle hippie types.

[Narrator] Schultz
has recently returned

from Milan, Italy,

where he's discovered what he
believes can be the future.

He discovers the
Italian coffee shop.

He's taken by the sounds,
the smells, the chatter,

the sound of the espresso
machine, its hiss.

[espresso machine hisses]

The steaming of the milk.

The clack of the porcelain cups
into the porcelain saucers.

All of it is beautiful
to him, romantic to him.

When Schultz comes
home from Milan,

he just is like, "I've
seen the future."

That's his light bulb moment
to create a gathering place

where people are reading the
paper, having a cappuccino.

A place where coffee wasn't
just a refueling station,

but something to be savored.

Make coffee a moment
rather than a mouthful.

In America, in those days,

a cup of coffee was not
what we consider it today.

I mean, it was more the domain
of the diners and the delis.

You know, this is
a different time.

This notion of going out

to enjoy a cup of
coffee is alien to them.

That's not something
what Americans do,

and that is what Howard
Schultz is trying to change.

[Narrator] Schultz
works up a full plan

to show his bosses,
the Starbucks founders.

He outlines the new path
he sees for Starbucks

down to the last
detail, even the cups.

Five years from now, when
you walk down the street,

everyone you see will be
holding a Starbucks cup.

[tense music]

He wants to take
the specialty coffee

for which Starbucks
is already known

and combine it with
the cafe culture

and bring them both in
one package to America.

He knows there is
more to be experienced

and he knows that Starbucks
can go to the next level.

I'm sorry, but it's a no.

[tense music]

And they say no.

They are content to sort of
sell their gourmet roasted beans

and they're good to
leave well enough alone.

Howard Schultz isn't.

Baldwin didn't want to be
in the restaurant business,

and what he wanted was

to help people identify and
consume better products.

[suspenseful music]

[Narrator] Unable to
convince the founders

that Starbucks is a cafe rather
than a coffee bean store,

Schultz makes a decision

that will forever alter
the coffee landscape.

Coffee culture
wouldn't be what it is

had Howard Schultz not
decided to take the big risk

and create his own version
of the Italian cafe

and leave Starbucks.

[dramatic music]

[gentle music]

[Narrator] Howard Schultz,

Starbucks' director
of marketing,

has a vision for the
future of the company

that's at odds
with the founders.

Howard Schultz feels Starbucks
is really missing the boat

treating coffee as produce,

so he leaves and decides
to create his own cafe.

[Narrator] But to create a
true Italian cafe experience,

serving espresso and
cappuccino in Seattle,

Schultz needs something
he doesn't have.

Schultz goes out on his own

and he needs to raise about
half a million dollars.

I understand. Bye-bye.

Howard Schultz approached
242 different investors.

Well, you're missing out

on an exciting
business opportunity.

And 217 said no.

All right. Your loss.

You sure?

Okay, well, maybe you can give
me a call back when you-

If you could let Mr. Keller
know that Howard Schultz called.

S-C-H-

Hello?

But, eventually,
he found funding.

I knew I could
count on you guys.

In fact, Bill Gates was one
of his original investors.

You won't regret this. Bye.

[Narrator] With money
from a handful of investors,

Schultz chooses a 700
square foot location

near the entrance of Seattle's

brand new and tallest
building, the Columbia Tower,

and in April of 1986,
he opens Il Giornale.

Il Giornale, which is the
Italian word for the newspaper.

Like he said, he wanted to
recreate the experience.

Specialty coffee and gourmet
roasted coffee drinks

like cafe lattes,
macchiatos, espressos.

[Narrator] At a time
when a cup of coffee

at a diner or Dunkin'
Donuts costs 50 cents,

Schultz's cappuccino
costs $1.10.

The problem is too
much authenticity

is incredibly, well,
foreign to Americans,

and this is already
a new product.

Americans don't know what
half of these drinks are.

[suspenseful music]

[Narrator] Meanwhile, Dunkin'
Donuts' CEO Bob Rosenberg

is still on thin ice.

The board of directors
approve of his changes so far,

but then he hears new concerns
from New England franchisees.

In the 1980s, two
different franchisees,

one from Natick, Massachusetts,

another from Fairfield, Connecticut,

approach him and say,

"We would like to get rid
of this 20-seat counter

and put in a
self-service counter."

[Narrator] At the time,

Dunkin' Donuts
feels and operates

like an old-school coffee shop.

They sell most of their
coffee in porcelain cups

at their 20-seat
question mark counter.

Very different look in the
stores to what we see today.

[Narrator] And
as he digs deeper,

he notices a
profitable opportunity.

The counter, the seating,

it only accounts for
20% of their profits,

but it takes up 80% of the real
estate of a Dunkin' Donuts.

[Narrator] He makes a decision

to remodel the
Dunkin' Donuts stores

for the first time in
the franchise's history,

all 1,700 of them.

This leads to an ambitious
redesign of their stores.

Bob Rosenberg gets rid
of the porcelain cups

and they shift entirely
to a quick service model.

It was a very scary
move for Bob Rosenberg.

It was a big risk.

At the same time,

there are two massively
different approaches to

how to market coffee.

You've got Schultz in Seattle,
who basically wants to

bring people into
the cafe and linger,

and then on the other
hand, you have Rosenberg

who's changing his model
into a takeout format.

He just wants people to grab
and go, and, at this point,

nobody really knows which
one America is gonna choose.

[tense music]

[Narrator] The renovation
removes the stools and counters

in favor of tables and
a long takeout counter

to process to-go
customers faster.

The change brings Dunkin'
Donuts' coffee to the forefront,

but not everyone is
happy with the change.

The reaction to this
ambitious redesign

was initially polarizing.

Bob Rosenberg was on
a Boston talk show

and he was berated
by irate customers

who were angry that he took
away their counter service

and they were threatening

never to go into a
Dunkin' Donuts again.

[Narrator] With
customers in an uproar,

the Dunkin' Donuts board

wonders if Rosenberg has
made a fatal mistake.

[tense music]

Back on the West Coast,

Schultz's plan to keep
his customers in the cafe

seems to be working.

Within six months,

Il Giornale is serving
1,000 customers a day.

Almost all his customers

are office workers from
the surrounding buildings.

Schultz's coffee
shop fits their vibe,

the getting something

that maybe is a little
bit more expensive

but other people don't have.

One year after opening,

Schultz uses his
profits to expand,

building another two
Seattle locations

and one in Vancouver's
SeaBus terminal,

with each location
grossing nearly $500,000.

Il Giornale is a success,

but it's not
gangbusters success.

Profits aren't rolling in.

Schultz can't grow as
quickly as he wants to.

[phone rings]

What he wants is growth.

This is Howard.

Hey.

Great to hear from you.

[Narrator] He gets a call

from his old bosses,
the Starbucks founders.

Oh, no, I hadn't heard.

Alfred Peet sells Peet's,

and the original
owners of Starbucks

can't resist the temptation,

so they decide to buy Peet's
and put Starbucks up for sale.

[Narrator] With six
locations and a roasting plant,

Starbucks presents an
opportunity for Schultz

to instantly expand his
four-store coffee house concept.

Of course. Absolutely,
I'd be interested.

Starbucks presents the vehicle

that was gonna
take him national,

take this idea of
specialty coffee national,

and would bring him to
be a household name.

[Narrator] It's a
second chance for Schultz

to finally make good on his
original vision for Starbucks.

Sorry, um.

How much?

[Narrator] If he
can find the money.

Let me make some calls
and get right back to you.

All right. Thanks
for letting me know.

They had built Starbucks
up in their own right.

It sort of was synonymous
with gourmet coffee

in the Pacific Northwest
and in the Bay Area,

at the very least.

They wanted a massive
amount of money.

Bear in mind, these are his
former business partners,

his former friends!

Schultz never
doubts his vision,

but these investors are
getting slightly hesitant

in putting up more money.

So, he knows he's gonna
have to go back for more

if he wants to sort
of fulfill his vision,

but, ultimately, he
needs $3.8 million.

So he was a nervous
wreck at this point

and was really sort of
painted into a corner.

It's overwhelming.

His decision can
really determine

the culinary fate and
fortune of coffee in America.

[dramatic music]

[tense music]

[Narrator] Howard Schultz
has a one-time opportunity

to buy out Starbucks,
but to do it,

he needs to raise $3.8 million

before the founders put the
stores on the open market.

Here's what you
have to understand,

Howard Schultz is
the scorekeeper,

and the score that
he really cared about

was not authenticity,

was not fidelity to a vision
of a Milanese coffee shop.

It was more customers,

more stores, more
profit, more investment.

He saw buying Starbucks

as the vehicle that was
gonna take him national.

[Narrator] Hoping to
convince the original investors

in his Il Giornale cafe,

he pitches this new opportunity
as a make or break moment,

not just for him, but for
the future of coffee as well.

He tells them, "If
you stick with me,

we can build something
incredibly special

and I will make sure
you see your returns.

I will remain loyal to you
if we can do this together."

They help him raise

this massive amount of
capital that he needs.

Best of luck.

[Narrator] Once the
purchase is complete,

Schultz converts his three
Il Giornale locations and each

of his seven newly acquired
Starbucks locations

into all-new
European-inspired cafes

under the Starbucks moniker.

The menu borrows
from Il Giornale,

offering cappuccino,
espresso, and drip coffee,

regular and decaffeinated,

as well as teas
and hot chocolate.

Anybody who has been
to Starbucks knows that

small, medium, and large is
not something that they sell.

They sell a tall, a grande,
and a venti, now a trenta.

Nobody knew what that meant.

People still don't know
what that necessarily means,

and a lot of people saw
that as really pretentious.

Starbucks even named
its sizes differently,

and I think that's
really special

both because it was a brand

that created its own
language around consumption,

so you had to kind
of know to be in it,

but also it sounds
fancy and Italian,

and so it made people, I think,
feel a little bit better

about paying a higher price
for that cup of coffee,

'cause they're getting
something, you know,

Italian and special.

[Narrator] As Schultz
attempts to grow Starbucks

into more than just a
West Coast sensation,

Bill Rosenberg is reaping
the rewards of his redesign.

In the '90s, coffee sales
become 60% of the business

and it only grows from there.

They have grown to
nearly 1,800 stores.

Their profit has grown
by a whopping 700%.

[Narrator] But
despite the turnaround,

his West Coast franchisees are
noticing a troubling trend.

Dunkin' is realizing that

there's this other
thing happening

in another part of the
country called Starbucks.

Dunkin' and Starbucks actually
don't begin as competitors.

They are on two different coasts

that are serving a completely
different demographic.

Dunkin' seeks for that
on-the-go consumer.

They are looking at
working class America,

blue collar America,

and they're trying to offer
something quick and affordable,

but they're still watching
each other very closely.

[Narrator] The coffee giant
is about to come face to face

with the Starbucks phenomenon.

[dramatic music]

[tense music]

[Narrator] Despite overall
coffee consumption in America

continuing to fall, Howard
Schultz has grown Starbucks

into 165 locations
around America,

and there are no signs
of him slowing down.

[suspenseful music]

Now, in 1993, the
40-year-old Schultz's

success in creating a specialty
coffee market in America

is celebrated on the
cover of Fortune magazine.

Dunkin' sort of just had

their great,
reliable house roast,

and they now are realizing,

"Okay, now that we see
what these guys are doing.

we've gotta maybe be
even more nimble."

And so they say,

"Okay, maybe just our
classic roast isn't enough,"

and they start leaning
into coffee in other ways.

Well now, with the
rise of Starbucks

and other sort of
gourmet coffee chains,

you now need beverages
on this coffee menu

to compete with
the coffee chains.

[Narrator] Even though
they have yet to crack

the major markets in the east,

Rosenberg looks to get out
ahead of the Starbucks threat

by bolstering their menu
with new flavored coffees

for the first time, French
vanilla and hazelnut.

They wanna stay
in the coffee game.

They were not going to
back down from Starbucks.

They were going to find a
way to stay in that game

and try to find
ways to elevate it.

[pensive music]

[Narrator] By 1994, Howard
Schultz has finally managed to

expand Starbucks into
nearly every major US market

except one, Boston.

Despite Dunkin' Donuts'
stranglehold on the city,

there's a small Boston
gourmet coffee chain

that is similar to Starbucks
called Coffee Connection.

George Howell owns
Coffee Connection

and he had seen this
trend on the West Coast.

Boston's Coffee Connection,
much like Starbucks,

was using their gourmet roasted
coffee to their advantage.

So, now, they have
a little bit of

a greater foothold
in the community,

and Howard Schultz sees this
as an incredible opportunity.

So he figures he's gonna
eliminate the competition

by acquiring the competition.

[Narrator] To finally break
into Dunkin's territory,

Schultz buys Coffee
Connection for $23 million.

He converts their 22 storefronts

to Starbucks' newest
East Coast locations,

but beyond the company's real
estate, Schultz sees promise

in one of Coffee
Connection's unique drinks.

Here's a drink that
immediately appeals to

non-coffee likers,
non-coffee lovers.

It appeals to teens

and helps them become
lifelong consumers.

I get you hooked as a
teenager, I got you forever,

so it creates a broader
audience for my drinks.

[Narrator] While his
espresso and cappuccino

have a growing following
among coffee lovers,

Schultz believes this drink

could be a way into
an untapped market,

one that Dunkin' Donuts
has so far neglected.

Its name combines cappuccino

and the local Bostonian slang
word for milkshake, frappe.

The Frappuccino is
essentially a coffee milkshake.

You can try to spin this any
way you want, but, essentially,

it is a thicker, sweeter
version of iced coffee.

What's brilliant about
the Frappuccino is that

they acclimate kids
to the taste of coffee

from a young age.

Heavily sweetened, they are
basically dessert in a cup,

and they hook this
whole generation

onto becoming future
coffee drinkers.

[Narrator] Schultz believes
the drink is Starbucks' ticket

to not only crack
the Boston market,

but also become the largest
coffee chain in America

and wants to launch it
nationwide by summer,

but there's a problem.

To make a Frappuccino,
The Coffee Connection

used these soft serve
ice cream machines.

They're big, they're expensive,

and they didn't really fit the
Starbucks model at the time.

I mean, Starbucks is still
this elevated sort of place.

It didn't want
these big, you know,

it didn't wanna look like
a Dairy Queen basically.

[Narrator] Schultz
charges Dina Campion,

a trusted California
regional manager,

to reformulate the drink.

[blender whirs]

The goal is to create something

that can be made in
a countertop blender,

a piece of equipment

that he can easily
place in all 677 stores.

So, she begins experimenting,

and she lands on a
recipe for something

that is not quite as
thick as a milkshake,

a bit of sweetness,
but still allows

that wonderful, gourmet,
roasted coffee flavor

for which Starbucks has
become known to shine through.

[Narrator] Released in 1995,
the Starbucks Frappuccino

is the definition of
an instant sensation.

[lively music]

In its first year,
it takes in $52 million

and it accounts for 7% of
all of Starbucks' sales.

[lively music]

Business Week calls it one
of the products of the year.

[Narrator] And now
Starbucks has planted its flag

right in Dunkin'
Donuts' backyard.

Dunkin' was willing
to swing the bat.

They have different
flavors, right?

But they're gonna
need something more.

So, Starbucks, they were
bringing a lot of new ideas

and they sort of blew up
the category of coffee,

which provided an opportunity

for someone like Dunkin'
Donuts as much as a threat.

[Narrator] Rosenberg
will need something

to combat Starbucks' assault.

Hi. What can I get for you?

[Rosenberg] I'll have
one of your Frappuccinos.

Okay.

Can I get a name for the order?

[Rosenberg] Robert.

[intense music]

[Narrator] And
what he comes up with

will redefine Dunkin'
Donuts and the industry.

[dramatic music]

[Narrator] In 1998,
Starbucks has 1,886 stores,

while Dunkin' Donuts
opens its 2,500th,

but it's only taken Starbucks

a fraction of the
time to get there

and they are not slowing down.

Competition was
fierce in the 1990s,

and not just between
one or two chains,

but across the board,

so every one of these CEOs

had to be constantly thinking
about new innovations.

Dunkin' Donuts is watching
the Frappuccino very closely

and it leads to a lot of
research and development.

[Narrator] Despite Dunkin'
Donuts' coffee innovations,

Bob Rosenberg is
now on the defensive

in the face of
Schultz's meteoric rise.

Rosenberg realizes he has
to take on the Frappuccino.

I mean, after all,

it's making millions
and millions of dollars

in sales every single year
and it's destroying them.

[Narrator] But Rosenberg
doesn't just see competition.

He sees opportunity.

Dunkin' Donuts realizes,
"Oh, we can do that,

and do it better, faster,
quicker, and cheaper."

And that's what they do.

[tense music]

They immediately realize

this is what's gonna
take on the Frappuccino.

It's got the creaminess, the
sweetness. It's got the coffee.

So what's going to be
the Frappuccino killer?

A slushy made with
2% milk or cream.

It comes in mocha,

hazelnut, French vanilla,
or original flavor.

$4 buys a 32-ounce cup
containing 860 calories.

An awesome new drink
called the Coolatta.

They launch their Coolatta
series, and almost overnight,

it becomes a $200 million
revenue item for Dunkin' Donuts.

[Narrator]
Although the Coolatta

never matches the success
of the Frappuccino,

it launches a new trend

of pre-sweetened drinks
for Dunkin' Donuts.

I mean, Dunkin' Donuts,
they really found their niche

serving these kind of like

giant-sized iced
coffee beverages.

You're really getting, like,

a really sweet, sugary,
caffeinated beverage.

I mean, you're definitely
gonna make more money

selling that drink
than selling a donut.

[Narrator] Schultz sees
the Coolatta's success

not as a threat,

but as an indication
that the sky's the limit

for frosty pre-sweetened drinks.

Perfect. Thank you.

So, supermarkets present
one of those opportunities,

extending it to this kind
of larger mass market.

That attracts more people.

[Narrator] Schultz rolls
out the bottled Frappuccino

in grocery stores
across America.

So he partners with Pepsi

so they can bottle it
and sell it in stores,

and they hook this
whole generation

onto becoming future
coffee drinkers.

It's a great example

about how Starbucks and Dunkin'
actually benefit each other

because they're growing

the overall coffee
consumption market.

[Narrator] Today,
cold drinks account for

almost three quarters
of Starbucks' sales,

and they now have over
30 such concoctions.

[solemn music]

The number of Starbucks
would eventually surpass

the number of Dunkin' Donuts,

but not on Bob
Rosenberg's watch.

In 1998, Rosenberg
resigns as CEO

from the company
his father founded,

ending 48 years
of family control.

Oh, I'm gonna miss that smell.

[Narrator] This
time, it's voluntary.

Bob Rosenberg described
what life was like as a CEO

as being the life of
a sailboat captain.

Lots of moments of calm,
punctuated by sheer terror.

It's at those critical junctures
like in the early 1970s

when he's faced with the
most difficult challenges

that defines his success.

Bob Rosenberg certainly
retires on top.

[Narrator] Two
years later, in 2000,

as Starbucks grows
to 3,500 stores,

Schultz steps down as CEO,

though he helps guide the
company in various capacities

over the next 20 years.

As someone who considers
themselves a coffee lover,

maybe even a little bit
of a coffee aficionado,

I have to admit that

I wouldn't be either
one of those things

if it weren't for Starbucks

and even Dunkin' Donuts
elevating coffee.

[Narrator] By the early 2000s,

coffee consumption
rises significantly.

Starbucks' and Dunkin' Donuts'
competition and innovation

helps rekindle America's
love of coffee.

Today, the only thing Americans
drink more of is water.

If you have a coffee
grinder in your house,

if you order anything
like a cortado,

a macchiato, a
latte, a flat white,

that coffee culture would
not, could not exist

without Starbucks
and Dunkin' Donuts.

No matter where you're from, no
matter what your price point,

no matter what experience
you're looking for,

there is a great cup
of coffee for you.

[dramatic music]