Original subtitles

[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]