🥤Frappuccino: The Billion-Dollar Brainfreeze Starbucks Nearly Killed | 29

Summary

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Transcript

[Nick Martell]

Wondery subscribers can listen to the best idea yet, early and ad free. Right now.

[Jack Corvici Kramer]

Join Wondery in the Wondery app or on Apple podcasts.

[Nick Martell]

Wondery.

[Jack Corvici Kramer]

Nick, I gotta come clean before we start the show.

[Nick Martell]

I mean, if there's any place for a confession. Jack, it's a podcast going out to millions of people.

[Jack Corvici Kramer]

I've had three coffees today, and that's not even unusual.

[Nick Martell]

Oh, no.

[Jack Corvici Kramer]

And also, the day's not over yet.

[Nick Martell]

We're like halfway through this thing.

[Jack Corvici Kramer]

Yeah, Mr. Decaf, that must be alarming to you over there.

[Nick Martell]

Yeah, Jack, I roll with a different tribe over here. We call ourselves the Decaffeinated.

[Jack Corvici Kramer]

So I used to order just the largest iced coffee Dunkin Donuts had. Hey, Darlene, two pumps of sweet and.

[Nick Martell]

Low for this guy.

[Jack Corvici Kramer]

But now I'm going with the double espresso latte. I want one scoop of collagen mixed in as the milk is frothing. And then to finish it off, I'm gonna make latte art with Vermont maple syrup.

[Nick Martell]

You struck me as a homemade macadamia milk guy, but we'll leave that to another morning. Because when it comes to coffee, Jack and I have noticed that we build these preferences. And each of these preferences says something about our character. Like your order. It becomes your identity, becomes your signature move. Your own blue steel. But for cappuccinos.

[Jack Corvici Kramer]

But there's one order in particular that's built to express your personal flair.

[Nick Martell]

Absolutely.

[Jack Corvici Kramer]

It's got so many options and extras that no two orders have ever quite looked the same.

[Nick Martell]

This product started as a summertime experiment to boost business in a boutique Boston coffee shop back in the 1970s before.

[Jack Corvici Kramer]

Being discovered by a Seattle based coffee chain you may have heard of who saw this drink's potential to help them conquer the coffee world.

[Nick Martell]

And they took the idea, they refined it, and they gave it a name. Know what could really help you sort.

[Jack Corvici Kramer]

Through these important issues?

[Nick Martell]

What?

[Jack Corvici Kramer]

Orange mocha Frappuccino. Yeah, the Frappuccino. Its name is a combination of frappe, a New England term for milkshake, and cappuccino, evoking Italian espresso perfection.

[Nick Martell]

Drink at its simplest is a blend of ice, milk, coffee, and syrup with a whipped cream flourish to top it all off.

[Jack Corvici Kramer]

But its secret ingredient is customization. Customers can pump, sprinkle, and stir up their own signature order. The Frappuccino took ordering coffee from a simple transaction. I give you three bucks, you give me a cup. To an entirely new vernacular.

[Nick Martell]

Now, the Frappuccino's category, defying innovation is so irresistible, it became the gateway beverage for the caffeine curious and a dynamo for Starbucks entire growth.

[Jack Corvici Kramer]

When the Frappuccino launched in 1995, there were just 700 Starbucks stores all in North America. Now there's over 40,000 across the world.

[Nick Martell]

For the next 45 minutes, we're gonna share with you why Starbucks initially resisted the Frappuccino. Because they considered themselves coffee purists. I mean, Howard Schultz, he himself was disgusted by the frappe.

[Jack Corvici Kramer]

And we're also gonna share how looks are as important as taste when it comes to the Frappuccino's brand domination.

[Nick Martell]

We're even gonna tell you about an east coast versus west coast coffee like Snoop Dogg versus Biggie of lattes. Yetis, for the rest of the episode, we'll slow things down so you don't get brain freeze. Jack, is your green straw ready?

[Jack Corvici Kramer]

My dome is stuffed.

[Nick Martell]

Here's why the Frappuccino is the best idea yet from Wondery and T Boy. I'm Nick Martell.

[Jack Corvici Kramer]

And I'm Jack Corvici Kramer.

[Nick Martell]

And this is the best idea yet. The untold origin stories of the products you're obsessed with and the bold risk.

[Jack Corvici Kramer]

Takers who made them go viral. I got that feeling again. Something familiar, but new. We got it coming to you. I got that feeling again. They changed the game in one move. It's how they broke all the room. We'd like to thank our presenting sponsor, Amazon Yetis.

[Nick Martell]

Have you come up with your own best idea yet? Well, you're gonna need a notebook to write it down and you can get that on Amazon.

[Jack Corvici Kramer]

Does your idea involve pajamas, energy drinks, toilet paper?

[Nick Martell]

Jack, somehow I've used all those things in one single day.

[Jack Corvici Kramer]

Save the everyday with deals from Amazon. George Howell's eye is twitching as he grips the wheel of his battered old Volvo station Wago. It's day two of an exhausting cross country road trip from Berkeley, California to Boston, Massachusetts in the winter of 1974. In the backseat, his two kids argue and kick his headrest. His pregnant wife needs a pee break. And as for George, George could really use a coffee right now. So when they pass a sign for a diner, George pulls into the parking lot. But when they walk through the door and George smells that stale over roasted diner coffee smell, a little part of him dies inside. They find a table and a waiter takes their order. George asks just for a cup of boiling water. His wife rolls her eyes. When the water arrives, George pulls out his own French press, a coffee grinder and a bag of high Quality roasted coffee beans. He then starts preparing himself a cup of joe solo. Just the way George likes it.

[Nick Martell]

Tell me George is a coffee purist without telling me George is a coffee purist.

[Jack Corvici Kramer]

As George continues his elaborate measuring, plunging and pouring, other diners gather around the table, drawn by the fresh coffee aroma as much as the spectacle. Because in the mid-1970s, very few Americans are into coffee quite the way that George is.

[Nick Martell]

Yeah, we've all got that one friend who loves to give an impromptu TED talk about bean acidity and extraction times from their latest batch of cold brew. But at this point, coffee culture in the United States, it's actually very niche. Most folks are guzzling freeze dried granules, and if they are drinking fresh coffee, it's likely been stewing on the burner for way too long.

[Jack Corvici Kramer]

But for George, coffee is his religion. And back in Berkeley, he had found his tribe. In fact, Berkeley is ground zero for America's artisanal coffee culture. But now George is leaving behind Berkeley and he's leaving behind his job as an art dealer. He's bringing his family to Boston in search of a steadier income. And hey, Boston's gotta have some good coffee, right? After all, Boston is where the Sons of Liberty tossed all that English tea into Boston harbor, which not only laid the groundwork for the Revolutionary War, but also for America's love affair with coffee.

[Nick Martell]

Jack, how do you think Paul Revere rode on his horse all night long to warn about the British?

[Jack Corvici Kramer]

So when George finally gets to Boston after that long drive, all he wants to do is grab his turtleneck and beret, head down to the nearest bohemian bohemian coffee shop and let someone else do the grinding. He finally finds a cafe, orders a strong black cup of joe and takes his first sip of sawdust. At least that's how it tastes to George.

[Nick Martell]

Well, George tries more and more coffee shops in the area, and to his dismay, he finds the tasting notes range from wet dog to, I'm going to say, yard clippings.

[Jack Corvici Kramer]

Boston might be a city of art, culture and academia, but when it comes to coffee, it's a backwater.

[Nick Martell]

This is Dunkin country, baby, isn't it?

[Jack Corvici Kramer]

And Darlene, the lady behind the counter, she's not impressed with your beret.

[Nick Martell]

We shouldn't dunk on Duncan's, Jack. That is a cultural institution.

[Jack Corvici Kramer]

It's not just the west coast coffee taste that George pines for, though. He misses the culture that grew up around coffee in Berkeley.

[Nick Martell]

Yeah, this is an important distinction to make, Jack. In Boston, coffee is a functional product, like a tool. With one purpose. It's to jolt you awake and to get you moving. But on the west coast, oh, they are wrapping a very different battle. They're going to a coffee shop as an experience, an experience to be savored. For George, coffee is more than what's in the cup. It's about the ritual, the craftsmanship, the atmosphere around that cup. The retail is just as important as the product.

[Jack Corvici Kramer]

And it's in this east coast, west coast gap that George spots an arbitrage opportunity here. What if he brought that west coast sensibility to Boston? He imagines a place where baristas aren't just employees, they're artists, passionate about every pore. A space where the smell of freshly brewed coffee invites you to sit down and savor your time.

[Nick Martell]

I mean, honestly, Jack, it seems like you're describing a place where everybody knows your name.

[Jack Corvici Kramer]

Kind of.

[Nick Martell]

Yeah, that's what you're getting at. Well, Yeti's George. He wants to start a coffee revolution in the city where revolutions began. He wants Bostonian to wake up and smell his 100% Arabica single origin beans and then tossed the large regular that they bought at Duncan's out into the Charles River.

[Jack Corvici Kramer]

Meanwhile, back on the west coast in Seattle, another group of coffee aficionados are just starting to gain traction with a specialty outlet called Starbucks. The shop is the brainchild of three coffee nerds, Gerald Baldwin, Gordon Bowker, and Zev Siegel. They started Starbucks in 1971 because they wanted Seattle to experience the delicious, dark roasted coffee they loved but couldn't find in the city.

[Nick Martell]

But you can't just walk up and order a flat white quite yet because this first ever Starbucks, it isn't a cafe, it's actually a wholesaler. There are no tables and no chairs, no bathroom door codes to remember. It's just a counter and shelves displaying more than 30 different varieties of coffee beans sourced from around the world. You don't walk out of here with a steaming cup of joe. You come away with the 12 pound paper bag full of freshly roasted beans. You gotta lift with your legs, not your back, to carry that thing.

[Jack Corvici Kramer]

Well, the smell of roasting coffee beans is like a siren's call to every budding barista in Seattle. But it won't be until the early 80s that Starbucks sells their first cup of brewed coffee to a consumer. Which means back in Boston, George Howell is actually way ahead of them. You hear those bells? Those are the historic Lowell House bells at Harvard. That means we're back in Cambridge, just outside Boston. Back at the coffee Connection, George Howell's very own slice of coffee heaven, which he opens in Harvard Square in 1975. Look at the distressed wood paneling, the carefully crafted art on the walls, the cushioned benches that are just begging you to sit down and stay a while.

[Nick Martell]

Jack, look, there's someone in the corner wearing a turtleneck, reading the letter leaves of grass, sipping a mocha, probably writing the next great American novel.

[Jack Corvici Kramer]

George has done it. He has brought bohemian, artisanal coffee culture to Boston.

[Nick Martell]

Wicked.

[Jack Corvici Kramer]

George's revolutionary approach is to import high quality beans and roast them lightly, letting their delicate, nuanced flavor shine.

[Nick Martell]

A stark contrast to the dark, more bitter roasts that were very popular at the time.

[Jack Corvici Kramer]

George is also pioneering single origin source, meaning he buys beans from specific farms rather than from entire countries. By highlighting unique flavor profiles shaped by soil, altitude and climate, or terroir, he's mirroring the wine industry. The beans may look and taste alike to most, and economists may call it a commodity, but George is building in layers, tiers and levels to justify higher prices. And the response from Boston consumers? I'd say strong to quite strong, especially from the students. They're loving this. They become top customers of George's premium differentiated coffee. That painfully long road trip and the decision to uproot the entire family. It looks like it's paying off for George.

[Nick Martell]

By the mid-1980s, George is doing so well, he opens a few more branches across the whole area. For George, Boston really is beantown.

[Jack Corvici Kramer]

But there's one cash flow problem that threatens his entire mini empire.

[Nick Martell]

College students make up a huge part of Georgia's business, and these coeds are skipping town for summer break. That's almost three months a quarter of the year where George's primary customers are just leaving them hanging. And the rest of Georgia's patrons, they're not exactly lining up for a steaming hot coffee when the weather's sweltering. No one's ordering 12 ounces of dark roast at the Sox game.

[Jack Corvici Kramer]

Surviving those long summer months is tough. To keep his caffeine dreams alive, George needs to find a way to keep his customers coming in, no matter what the calendar says.

[Nick Martell]

Yetis this episode is brought to you by our presenting sponsor, Amazon.

[Jack Corvici Kramer]

On this show, we glorify risk takers who had an idea and pursued it relentlessly.

[Nick Martell]

They brought their best idea yet into reality, and it wasn't easy to do that.

[Jack Corvici Kramer]

To simplify our lives and let us focus on what really matters, we use Amazon. It saves us time and saves brain space, too.

[Nick Martell]

The bane of every high producer's existence is a to do list. Well, one way to eliminate a to do list. You have an Amazon app on your phone.

[Jack Corvici Kramer]

When you realize you need something, don't add it to your list, just add it to your cart. Boom.

[Nick Martell]

You just cleared mental mind space because that thing you need is already in the cart.

[Jack Corvici Kramer]

Out of detergent. Add it to the cart. Son's grown out of his shoes. Add a pair of size tens to the cart. It's growing fast, man short on TP. Add a 24 pack to the cart before it's too late.

[Nick Martell]

At the end of the week, we push order and it's consolidated into one single delivery.

[Jack Corvici Kramer]

Our mental mind space is scarce. Put your mind at ease by letting Amazon handle your shopping.

[Nick Martell]

Don't add it to your list, add it to your cart. That way you can come up with your own best idea yet.

[Jack Corvici Kramer]

Save the everyday with deals from Amazon. Chicago is America's hot dog capital. New York is its pizza hq.

[Nick Martell]

Sorry, New Haven.

[Jack Corvici Kramer]

Kansas City is the city of ribs. But in 1989, Seattle is wearing the coffee crown. Thanks to the Starbucks effect, an entire industry of specialist coffee roasters and makers has sprung up in the Emerald City. In coffee shops across town, young people take a load off their Birkenstocks, roll up their flannel sleeves, and kick back with steaming mugs of dark roast. Maybe while listening to the debut album of a local band, Nirvana.

[Nick Martell]

But our guy, George Howell. He isn't here right now for the music or the fashion. He's on the west coast for a working holiday. He's trading stories with fellow coffee connoisseurs, researching the latest roast and seeking inspiration. Because even though his coffee connection has become a chain of 10 cafes in and around Boston, he is still stumped by this summer drop off in the coffee business.

[Jack Corvici Kramer]

George steps into one of Seattle's preeminent coffee shops, Torfalzioni Italia, and something grabs his attention. A barista is making a frozen cappuccino in a granita machine.

[Nick Martell]

Technical term there for slushy maker, by the way.

[Jack Corvici Kramer]

George asks the barista to mix up one for him and he takes a sip. Wow.

[Nick Martell]

Yeah, this gelato y coffee. This is unlike any brew he's ever tasted in a good way. Like, even better. It's cold, it's refreshing, it still has a rich coffee taste that shows off the quality of the beans. Jack, could this be the solution to his summertime sales slump?

[Jack Corvici Kramer]

George inquires about the recipe, but it's so basic he doesn't even need to write it down. It's just strong coffee, sugar, milk and ice. As soon as he's back in Boston, he rushes to his kitchen and tries to mix up one for himself. But it comes out a slushy mess. He soon realizes the art's not so much in the ingredients, but in how to combine them.

[Nick Martell]

So George calls up his right hand man, Andrew Frank, to get him on the case. Andrew's official title is marketing director, but he's actually a lot more to George. Jack, would you call this guy a fixer? A trusted fixer and just as nuts about coffee as George happens to be. So George hands Andrew the challenge of transforming this recipe he discovered in Seattle into something transcendent, something memorable, something scalable.

[Jack Corvici Kramer]

Even though the ingredients are simple, Andrew thinks the texture just isn't right. The ice isn't blended enough. The drink is more like a coffee snow cone than a smooth, refreshing beverage.

[Nick Martell]

And honestly, Jack, it reminds me of something we've talked about that Steve Jobs has mentioned before, which is the simpler something is, the harder it is to do. In fact, Andrew spends years tinkering with ingredients, trying different methods of making the ice and brewing a whole lot of coffee until it hits him. The problem is the granita machine. It just doesn't chop up the ice finely enough.

[Jack Corvici Kramer]

So he reaches instead for a frozen yogurt maker and the results are immediate. The new drink has a smoother, velvety texture. Andrew gives George a taste. And that's it. Love at first sip.

[Nick Martell]

But Jack, we are not out of the woods yet. Because this new creation, it needs a name. So Andrew draws upon his skills as a marketing guru and finds inspiration in his New England roots. Because in New England, a milkshake is actually called. You know what, Jack, you're from New England. Why don't you take this one?

[Jack Corvici Kramer]

What's it actually called? It's called a frappe. An important note, it's not frappe, it's frappe. Just like when you go to Dunkin Donuts, you don't order a croissant, you order a croissan'wich. A frappe is just like a milkshake but with coffee instead of ice cream. So Andrew blends frappe and cappuccino to come up with frappuccino.

[Nick Martell]

Ah, rule number seven in marketing. Portmanteau. Because two words together are just stronger than two words apart.

[Jack Corvici Kramer]

So they've got the drink, they've got the name, now they just have to sell it.

[Nick Martell]

Now pause the pod here a second, Jack, because a quick problem. They've kind of gone backwards in the entrepreneurial textbook, haven't they?

[Jack Corvici Kramer]

They built the product before knowing if anyone actually wants it. They're just going with their guts. Or more specifically, they're going with their taste buds.

[Nick Martell]

Yeah, they are. So to give their launch a kickstart, George and Andrew hand out two for one vouchers all around town. And as the summer of 1992 heats up, so do George's sales. This frappe, it's doing just what George hoped it is, plugging the summer sales hole.

[Jack Corvici Kramer]

But here's the even bigger surprise. The frappe is a huge hit with people who wouldn't normally drink coffee. This new product has reached an even wider audience than the existing Coffee Connection customer.

[Nick Martell]

Iced coffee wasn't a new thing in 1992, but if you're not already a coffee consumer, you're probably not going to crave an iced coffee in the first place. By blending coffee with milk, ice and sugar, George has transformed a niche product into a mass market sensation. He's broadening his customer base beyond the coffee purists to include kids, teens, anyone who is looking for a refreshing, indulgent treat.

[Jack Corvici Kramer]

But while everyone's slurping Coffee Connection fraps on the east coast, another much larger coffee chain on the west coast is trying out its own version. While George and Andrew have been schwitzing over their Frappuccino recipe for three years, back on the West Coast, Starbucks has been focused on something else. Global domination.

[Nick Martell]

Now, Jack, when we last checked in, Starbucks had just branched out from selling coffee beans to actual cups of coffee. More than a decade after its launch, Starbucks is scaling their coffee shops. But the transition from wholesaler to retailer, it's about to go from glacial to full steam ahead, thanks to yet another coffee convert. His name is Howard Schultz.

[Jack Corvici Kramer]

Before becoming the billionaire we know today, Howard was born in a housing project in Brooklyn in 1953. He first stepped foot in Starbucks in 1981 while visiting Seattle as a sales rep for coffee equipment. He loved the business so much, he convinced Starbucks to give him a job as their director of marketing.

[Nick Martell]

Howard and the Starbucks founders, they have a shared love of coffee. But honestly, that's where their similarities ended. Because the Starbucks founders, they're about consensus. They take things slow, they take things steady. But Howard, he is intense and energetic. As his go to espresso, he's wearing sharp suits, and he has an even sharper mind for business.

[Jack Corvici Kramer]

Around the time Howard joined the company, it had just five locations, all in Seattle, and only one of them was serving freshly brewed coffee. Because their focus was still on selling beans. Wholesale coffee was still way bigger than consumer retail.

[Nick Martell]

But Howard has a plan, because Howard had traveled to Italy and he was inspired by a concept he had never seen before. When he landed, people were sitting, they were hanging, they were reading, writing, chatting, thinking all of it while sipping an espresso in a coffee shop. That coffee shop in Italy, that wasn't your office. It wasn't your home. It was a different kind of place, an important place in people's lives.

[Jack Corvici Kramer]

And that feeling, Nick, is what Howard wants to bring back to Seattle. He wants to make Starbucks into what we now know is called a third place. Instead of being somewhere you grab a bag of beans and maybe a quick cup, he wants to make Starbucks into a destination where people hang out. He pitches this new concept to the Starbucks founders, and they're lukewarm on the idea.

[Nick Martell]

They're not into it.

[Jack Corvici Kramer]

They sell brewed coffee. This isn't a place to hang out for them. Starbucks is all about the beans, which seems crazy to us now. You know, honestly, it seemed crazy to.

[Nick Martell]

Howard Schultz back then, too. So he pulls the ultimate power move. In 1986, Howard starts his own chain of coffee shops he calls Il Giornale. And in a twisted move, he actually gets the beans for this new coffee shop from Starbucks.

[Jack Corvici Kramer]

The immediate success of Il Giornale as a third place between work and home, that's actually his proof of concept. And if that doesn't prove his point enough, in 1987, Howard convinces a bunch of investors to back him in a successful bid to buy Starbucks for $3.8 million. Starbucks has 11 stores and is bringing in $1.3 million in annual revenue.

[Nick Martell]

So Howard is going to use this new cash to remodel Starbucks in the image of his liking.

[Jack Corvici Kramer]

Solid tables, padded chairs, and porcelain cups that you need to hold with both hands.

[Nick Martell]

It's no longer just about selling the beans. This is about selling an experience. And that experience is something people are willing to pay for.

[Jack Corvici Kramer]

By 1992, Starbucks is a 165 store, $90 million coffee empire with year on year growth boiling over at 60%.

[Nick Martell]

Not too shabby.

[Jack Corvici Kramer]

That same year, Starbucks lists on the Nasdaq. With an initial public offering, Starbucks becomes.

[Nick Martell]

A publicly traded coffee stock in the.

[Jack Corvici Kramer]

Same three year period it takes George Howell to perfect his Frappuccino. Over in Boston, Howard Schultz has taken Starbucks from 11 stores to 165. Howard has proved himself as a caffeinated business mastermind. He's also the guy who's turning coffee into a national phenomenon. At this point. But here's the thing. He's not slowing down. Just like that coffee inspo he got at a cafe across the ocean in Milan. Howard's always on the hunt for the next big idea. The California sun beats down on Santa Monica's 3rd Street Promenade. Outside of a Starbucks store, a chalkboard offers steaming hot espressos and lattes. Inside, Greg Rogers stares at the half empty tip jar as he wipes down the counter. It's the summer of 1994 and Greg's at a transition point in his career. He's a barista by day and by night he's a stand up comic. But between his late night sets at the Laugh Factory and the early morning shifts behind the counter, Greg notices something that's no joke. Business at Starbucks slows way down in the summer.

[Nick Martell]

At moments like these, Greg thinks back to another job he once had at a frozen yogurt shop in LA called Humphrey for Yogurt. He remembers how there'd be these huge lines snaking out the door during the summer. So Greg asks his manager at Starbucks if the store can get a blender. Greg wants to come up with a drink that combines coffee with the same icy, indulgent and refreshing appeal that had people clamoring for froyo on the hot summer days.

[Jack Corvici Kramer]

When the blender arrives, Greg uses all his downtime and his improv skills to experiment. Eventually, he comes up with this. His own icy recipe of espresso shots, sugar, vanilla, half and half and mocha mix. He whizzes it together with ice in the blender and offers free samples to customers for feedback.

[Nick Martell]

First of all, nothing better than a free sample.

[Jack Corvici Kramer]

Second of all, what a go getter. I love that he's not happy just sitting idly.

[Nick Martell]

It's like you and I always say, ownership mentality. Hire that man.

[Jack Corvici Kramer]

Yeah. So as he's handing out the free samples, some customers say it's too bitter, so he adds a little bit more sugar.

[Nick Martell]

Other customers say they want it richer, so he adds a little bit more vanilla. But basically, this guy is using Starbucks as his own personal focus group. Little by little, Greg fine tunes the drink until customers stop critiquing and start asking for full sized portions. And that is when Greg knows he's onto something.

[Jack Corvici Kramer]

Greg's manager notices what's going on and gives him permission to start selling it in the store. And by August, it's accounting for almost 40% of sales at Gregg's Starbucks location in sunny Santa Monica.

[Nick Martell]

Employee of the month, Employee of the year. Frame Greg's photo and stick it up on the wall, baby.

[Jack Corvici Kramer]

We repeat, nearly half the store's business now comes from one barista's little laboratory side hustle project. And it's still an unofficial beverage. You can't find it anywhere else.

[Nick Martell]

Pretty soon, people start asking for this drink at other Starbucks locations throughout Santa Monica. So Greg goes around to all these other Starbucks shops and starts showing them how to make his little concoction.

[Jack Corvici Kramer]

Then, in a huge twist of fate, a Starbucks vice president stops by and tries the drink. He's just as blown away as everyone else. So he gets straight on the phone and dials Howard Schultz. And he says, howie, we gotta get this new drink in every store. And Howard says, no.

[Nick Martell]

Oh, he says no. And why is that?

[Jack Corvici Kramer]

Jack Howard is a coffee purist.

[Nick Martell]

He shudders at the thought of people walking out of his sedate coffee oasis, slurping on a sickly sweet slushie. What is this, 7 11? Howard wants to get new customers hooked on straight up coffee, not some new drink that distracts from the simple magic of the traditional bean that he felt so long ago back in Milano.

[Jack Corvici Kramer]

Sorry, Greg, but Howard hates your idea. And even though there's a huge business opportunity here, Howard's just not convinced that this blended frozen coffee thing is worth pursuing yet.

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[Jack Corvici Kramer]

Howard Schultz, Starbucks CEO, has just put the kibosh on a wild blended drink dreamed up by a bored barista. Again, employee of the century. But here's the thing. Howard didn't tell that Santa Monica store they had to stop selling it. All he said was he doesn't think the drink is right for a national release.

[Nick Martell]

Yeah, to sprinkle on some more context here, it's 1994, and Starbucks isn't even worth half a billion dollars. Starbucks has got 425 stores, and none of them are outside North America. It's basically still a startup.

[Jack Corvici Kramer]

And back in la, orders for the drink keep coming. At the Santa Monica Starbucks again, it's making up almost half of the store sales. And soon people are asking for it at other locations around la. So those stores get Blenders and start serving the drink too.

[Nick Martell]

Basically, every Angeleno is taking their Mercedes to Pilates with a frozen Starbucks Venti in the cup holder.

[Jack Corvici Kramer]

This icy blended drink is clearly hitting a stomach nerve.

[Nick Martell]

Even if it's not part of Howard's original plan, it is becoming impossible for him to ignore. Sometimes, Jack, you just gotta look at the data and say, hey, maybe the customers know something that I don't.

[Jack Corvici Kramer]

And that's exactly what Howard does. So he gets his R and D department to come up with a scalable recipe for the drink so they can send it out to all of Starbucks stores. They've got the proven market. Louisiana. Has been the perfect cold coffee guinea pigs. Howard is on board with the blended icy coffee drink thingy.

[Nick Martell]

All they need now before they go national is an name.

[Jack Corvici Kramer]

Meanwhile, back in Boston, George Howell is grappling with an inner conflict. He's no Howard Schultz. In fact, he's kind of the exact opposite as an entrepreneur.

[Nick Martell]

Yeah, he really is.

[Jack Corvici Kramer]

He never wanted to run a big operation. He wants to stay small and independent. But he knows he has a mermaid shaped target on his back.

[Nick Martell]

Starbucks. They're aggressively expanding and they're eyeing George's patch. New England. There's no Starbucks in Boston yet. But George knows it's only a matter of time before they're showing up.

[Jack Corvici Kramer]

George doesn't want to roll over, so he hits the investing circuit. He snags some funding, and he takes coffee connection from 12 to 24 stores. He's trying to defend New England from the invasion of Starbucks. He's trying to expand across the Northeast, establishing brand loyalty from Nantucket to Nashua. George is stuck in a bit of a founder's paradox. To save his company, he's got to grow bigger quickly and become more corpor. He's under pressure to become the very thing he never wanted to be.

[Nick Martell]

I mean, Jack, let's just look at George's Saturday nights. He's now swimming in balance sheets and growth projections. And that's when he realizes his heart just isn't in it anymore. He still loves coffee, but he's falling out of love with running the coffee shops.

[Jack Corvici Kramer]

Then one day, he's sampling some freshly imported beans for a stock order. And it hits him. It's the business of beans that he truly loves. Maybe he can ditch the coffee shops altogether and continue his crusade for quality coffee on the supply side.

[Nick Martell]

So when Starbucks comes knocking with an offer to buy out his coffee shop business, George agrees. For $23 million, Starbucks gets the Coffee Connection locations plus their IP, their recipes. And George gets freedom and funding to pursue his passion for coffee production.

[Jack Corvici Kramer]

Starbucks gets a launch pad into the Massachusetts market. And they also get one of the most valuable pieces of IP in the history of food and beverage.

[Nick Martell]

Oh, I know you're going to say.

[Jack Corvici Kramer]

Jack, they get that beautiful, evocative, so fun to say word, Frappuccino.

[Nick Martell]

Put a little Italian accent on that thing.

[Jack Corvici Kramer]

Frappuccino.

[Nick Martell]

I knew you had it in you.

[Jack Corvici Kramer]

That's right.

[Nick Martell]

The Starbucks Frappuccino actually came from an acquisition of a Boston based coffee startup.

[Jack Corvici Kramer]

Isn't that wild?

[Nick Martell]

It is wild. No one knows that.

[Jack Corvici Kramer]

And the timing was impeccable.

[Nick Martell]

Oh, perfect timing, Jack, because Starbucks had just put the finishing touches on the mass produced version of the frozen coffee drink that they've been testing out in Southern California. And the final ingredient, the last thing that they needed, was a name.

[Jack Corvici Kramer]

So they ditched the Coffee Connection Frappuccino recipe and they slapped the name Frappuccino onto their own blended icy beverage just in time for the national rollout in 1995.

[Nick Martell]

A coffee by any other name, would it taste so sweet.

[Jack Corvici Kramer]

For Starbucks, Frappuccino is a memorable, marketable name that connects the drink with customers and brings in new ones too.

[Nick Martell]

That last part that is key, Jack. They're bringing in the new ones with the name.

[Jack Corvici Kramer]

The Frappuccino gives this new market expanding drink an identity that they can scale nationally. It might actually be the most profitable portmanteau in history. Jeggings. Yeah, nice try.

[Nick Martell]

Now, the first generation Starbucks Frappuccino, it actually only came in two flavors, coffee and mocha. No whipped cream topping, no domed lid. Yet. Is a Frappuccino without whipped cream truly a Frappuccino at all?

[Jack Corvici Kramer]

Man. Another important difference between the two Frappuccinos was how they were made. Yes, the choice of tool is actually going to have a huge impact on the long term financial value of this drink. Right?

[Nick Martell]

Because, Jack, if I remember correctly, the color Coffee Connection recipe, they used a frozen yogurt maker. That's what they insisted on buying to make this drink.

[Jack Corvici Kramer]

But Starbucks uses a much more familiar machine. A blender.

[Nick Martell]

Yeah, pretty simple.

[Jack Corvici Kramer]

And the blender makes it easier for baristas to take customer requests. It makes it easier to add different syrups, add some powders if they want, and add in other bells and whistles.

[Nick Martell]

Be careful what you wish for though, Jack. That simple choice of tool, it actually boosts Frappuccino's appeal. Because Starbucks quickly realizes that people love to put their own stamp on their drink order. And from then on, baristas basically become part time drink makers, part time customization wizards.

[Jack Corvici Kramer]

And there's a case to be made that the Frappuccino catapulted Starbucks to a whole new level of cultural dominance. In the first week of its launch, the Frappuccino exceeded expectations, selling 200,000 drinks, which then doubled to 400,000 the next week and then to 800,000 the week after. We are literally talking parable growth here, Jack. We have never seen any other product that doubled sales every week for multiple consecutive weeks.

[Nick Martell]

We're not talking about a software, we're talking about a milkshake, a coffee.

[Jack Corvici Kramer]

A year later, 1996, Starbucks made over $52 million in FRAP sales alone.

[Nick Martell]

That's 10% of Starbucks entire revenue that year.

[Jack Corvici Kramer]

The same year it opens its first.

[Nick Martell]

Store outside of North America in Japan.

[Jack Corvici Kramer]

And jumps to over a thousand stores nationwide.

[Nick Martell]

So, Jack, I'm adding it all up here and there's an extra scoop of irony to top off our Frappuccino story, isn't there?

[Jack Corvici Kramer]

The drink Howard Schultz thought might ruin his brand actually blew it up in the best possible way.

[Nick Martell]

In fact, Starbucks would not be the $130 billion 40,000 store conglomerate it is today without one local coffee chain's little caffeinated milkshake.

[Jack Corvici Kramer]

The acquisition of the Frappuccino frappe quisition.

[Nick Martell]

If you will, Jack.

[Jack Corvici Kramer]

I will. It was only the beginning of its scale because Starbucks realized the real value would be in developing the Frappuccino like it was a Marvel Superhero. In 1996, they basically doubled their footprint overnight by developing ready to drink bottled versions that you could buy at a gas station. That put the Frappuccino and convenience store coolers in partnership with Pepsi Cola.

[Nick Martell]

But it's not until 1999 when we finally get the first flavored Frappuccino. And that caramel Frappuccino comes with two big image defining additions. Whipped cream and a dome lid.

[Jack Corvici Kramer]

Very nice.

[Nick Martell]

The biggest innovation in package design since the bag handle. And from then on, the Frappuccino sales had no chill whatsoever.

[Jack Corvici Kramer]

Most valuable of all, the Frappuccino is a converter. Just like George first discovered so many years ago, this product uniquely converts non coffee drinkers.

[Nick Martell]

It's basically the Catholic church of coffee, Jack. The Frappuccino is a missionary product.

[Jack Corvici Kramer]

Its popularity with teens makes Frappuccinos a gateway for building lifelong brand loyalty. Everyone remembers their first frappe just as it was originally intended. It keeps customers coming even when the weather's hot.

[Nick Martell]

In fact, yeti's we still see Frappuccino's impact in Starbucks earnings report 30 years later. Today, the majority of Starbucks coffee sales are cold, even in the winter. So the Frappuccino, it's left a major legacy on the balance sheet.

[Jack Corvici Kramer]

The Frappuccino walked so that the iced latte could run.

[Nick Martell]

Preach, Jack.

[Jack Corvici Kramer]

So the Frappuccino has never been a bigger celebrity than it is today, culturally or financially. But what about the people that brought her to life?

[Nick Martell]

Jack, are you thinking a little where are they now? Montage.

[Jack Corvici Kramer]

Let's kick it off with Andrew Frank.

[Nick Martell]

Oh, I love Andrew.

[Jack Corvici Kramer]

He came up with the all important Frappuccino name, but he actually left Coffee.

[Nick Martell]

Connection just before the Starbucks buyout. So he may have missed out on a big payday, but his marketing legacy lives on in the Frappuccino name, posted at every single Starbucks store in America.

[Jack Corvici Kramer]

As for Greg Rogers, the barista slash stand up comic who came up with the first Starbucks Frappuccino formulation, he was given a certificate of achievement, a $5,000 bonus and a Rolex for being employee of the century. And he went on to a career in PR.

[Nick Martell]

Now, Howard Schultz grew Starbucks to 3,500 stores and over $2 billion in revenue before stepping down as CEO in 2000. And then he did another stint in the big chair from 2008 to 2017. And he's actually come back for a third time as interim CEO in 2022. Howie, if you're listening, and we know you are, Jack and I have a great idea for a Patagonia collaboration with Starbucks Frappuccino. We'll have your people call our people.

[Jack Corvici Kramer]

And after he sold the Coffee Connection to Starbucks in 1994, George Howell, the guy we started this story with, turned his attention to promoting sustainable coffee, growing as a consultant for the United Nations. He also got the $23 million check from Starbucks for selling his Boston coffee chain. And we hope he invested some of that in Starbucks stock, because Starbucks Stock is up 14,000% since 1994.

[Nick Martell]

George still lives and works just outside Boston.

[Jack Corvici Kramer]

So, Nick, now that we've heard the story of the Frappuccino.

[Nick Martell]

Yeah. Now that you've clearly had your fifth cup of coffee in between the ad.

[Jack Corvici Kramer]

Breaks, should we hit the takeaways?

[Nick Martell]

Yeah, let's hit the takeaways.

[Jack Corvici Kramer]

You go first.

[Nick Martell]

Idea arbitrage. Innovation doesn't always mean inventing something new. It can actually be about recognizing proven value in one market and then simply introducing it to another. We call this idea arbitrage. Identifying a product Or a concept that's thriving in one place, but it's absent elsewhere. Creating an opportunity for growth.

[Jack Corvici Kramer]

Howard Schultz saw Italian coffee culture, and he brought it to Seattle. George Howell. He brought the San Francisco coffee shop scene and introduced it to Boston.

[Nick Martell]

That was idea arbitrage. So what about you, Jack? What's your takeaway?

[Jack Corvici Kramer]

Corona says, find your beach. We say find your Frappuccino.

[Nick Martell]

Yeah, it sounds better.

[Jack Corvici Kramer]

This is about seasonality. Seasonality can feel like a limitation, but in reality, it's an opportunity in disguise. Many businesses accept seasonal slumps as inevitable, but the most successful ones find ways to break the cycle. George Howell did it. He could have accepted that coffee sales would dip in the summer and left it at that. But instead, he worked hard to create a new product that turned his slowest months into. Into his best months.

[Nick Martell]

And Starbucks agreed. They were facing the same calendar challenge. Starbucks took that idea, and then they ran with it. And today, cold beverages make up a majority of Starbucks sales.

[Jack Corvici Kramer]

Don't let seasonality be an excuse. Instead, own the calendar. Don't let the calendar own you. Okay, before we go, it's time for my absolute favorite part of the show. The best facts yet.

[Nick Martell]

The best facts yet. These are the hero stats, the facts and surprises we discovered in our research, but we just, just couldn't fit into the story.

[Jack Corvici Kramer]

Oh, let her rip, Nick.

[Nick Martell]

Starbucks says there are 36, 000 possible unique Frappuccino order combinations and over 170, 000 ways to customize all of their beverages.

[Jack Corvici Kramer]

Some outside sources think it's even more with 300 billion different ways when you count all the possible different pumps, double pumps, fake pumps, shots and swirls.

[Nick Martell]

And don't forget the triple pumps, Jack. And while that's good news for the people who like to hyper fixate on their coffee routine, it's actually bad news for Starbucks.

[Jack Corvici Kramer]

There was some horrible headlines about Starbucks having really long wait times, right? Like people were waiting 10 minutes for their drinks. It's because of all these different Frappuccino flavor combinations. It's complex and time consuming for the baristas.

[Nick Martell]

It's why Starbucks stock actually fell in 2024. Maybe Howard Schultz's initial instinct that flamboyant drinks like the Frap could be bad for business was right after all.

[Jack Corvici Kramer]

Maybe. But Starbucks has doubled down on the frappe's appeal with limited editions like 2017's Unicorn Frappuccino, which I wish Derek Zoolander had. One of. It changed color from blue to pink as you consumed it, and that blew.

[Nick Martell]

Up across social so intensely that it increased Starbucks sales by 4% for the month it was available, even though we.

[Jack Corvici Kramer]

Was only available for four freaking days.

[Nick Martell]

And finally, for our yetis up in New England, yes, Starbucks took the Frappuccino name and ditched the original Coffee Connection recipe. But there is still one place you can still try it. The original Frappuccino. And where is that, Jack?

[Jack Corvici Kramer]

At George Howell's Coffee in downtown Crossing Boston.

[Nick Martell]

And by the way, the first Starbucks in Boston also still exists on the corner of Charles and Beacon. Suggestion, Jack. Let me make sure I remembered this correctly. That was triple shot homemade macadamia milk, extra cream, plus the latte art.

[Jack Corvici Kramer]

Is that what we got? None of that is my order, Jack.

[Nick Martell]

I think I still got just enough energy to finish the credits.

[Jack Corvici Kramer]

Get this man another quarter calf. And that, my friends, is why the Frappuccino is the Best Idea Yet.

[Nick Martell]

Coming up on the next episode of the Best Idea Yet. We're calling up JLO because we're going to get warm, fuzzy, and maybe a little juicy.

[Jack Corvici Kramer]

We're slipping into the story behind the juicy couture tracksuit.

[Nick Martell]

If you've got a product you're obsessed with but wish you knew its backstory, drop us a comment right here and we'll look into it for you.

[Jack Corvici Kramer]

Oh, and don't forget to rate and review the podcast. That's how we grow the show. Follow the Best Idea yet on the Wonry app, Amazon Music, or wherever you get your podcasts. You can listen to every episode of the Best Idea yet early and ad free right now by joining Wondery plus in the Wondery app or on Apple Podcasts.

[Nick Martell]

Before you go, tell us about yourself by filling out a short [e-mail] survey the best idea yet is a production of Wondery hosted by me, Nick Martell.

[Jack Corvici Kramer]

And me, Jack Crevici Kramer. Our senior producers are Matt Beagle and Chris Gautier.

[Nick Martell]

Peter Arcuni is our additional senior producer.

[Jack Corvici Kramer]

Our senior managing producer is Nick Ryan. And Taylor Sniffin is our managing producer.

[Nick Martell]

Our associate producer and researcher is H. Conley.

[Jack Corvici Kramer]

This episode was written and produced by Adam Skierce.

[Nick Martell]

We use many sources in our research, including the story of the Frappuccino by Janelle Nanos in Boston Magazine and the birth of the Starbucks Frappuccino right here in Santa Monica by Leslie Bala in Eater Los Angeles.

[Jack Corvici Kramer]

Sound design and mixing by Kelly Krameric.

[Nick Martell]

Fact checking by Erica Janik, music supervision.

[Jack Corvici Kramer]

By Scott Velazquez and Jolina Garcia for frees on sync.

[Nick Martell]

Our theme song is Got that Feeling Again by Blackalac Executive producers for Nick and Jack Studios are me, Nick Martell.

[Jack Corvici Kramer]

And me, Jack Revici Kramer.

[Nick Martell]

Executive producers for Wondery are Dave Easton, Jenny lauer, Beckman, Aaron O'Flaherty and Marshall Louie.

[D]

What if your mind could trick your body into feeling sick or even worse? In Hysterical, I investigate the bizarre medical mystery that unfolds in a high school in upstate New York. It starts with one girl developing strange, violent symptoms. And then another, and then another. Rumors begin to swirl. Is it something in the water inside the school, or is it all in their heads? Hysterical is my search for answers. And along the way I uncover surprising connections to unexplained incidents around the world, events that challenge everything we think we know about our bodies and our minds. Named Podcast of the Year at the Gambies, Hysterical is a mind bending, unforgettable ride. Binge all episodes right now exclusively and ad free on Wondery. Start your free trial of Wondery in the Wondery app or on Apple Podcasts.