Costa coffee company information: how Starbucks handled its CEO change

Starbucks founder Howard Schultz has said he will not serve as CEO again and fully supports Laxman Narasimhan, the Reckitt Benckiser chief executive named as his successor. The appointment takes effect on October 1. Schultz will stay on the board and act as a long-term advisor, while Narasimhan described his early period as a structured immersion into the company.

The handover comes as Starbucks faces rising global costs, a sharp decline in same-store sales in China and intense competition from domestic brands. Schultz has predicted China will eventually overtake the United States as Starbucks' largest market by store coverage. The leadership change follows Kevin Johnson's retirement on April 4 after 13 years at the company and five as CEO.

Starbucks' legendary founder Howard Schultz recently made it clear that he will completely step away from the CEO role, will not return, and fully supports new leader Laxman Narasimhan. Narasimhan will officially take office on October 1, and he admitted that the process is like a "structured immersion," giving him a valuable learning opportunity. Schultz will remain on the board and serve as a long-term advisor, safeguarding Starbucks' future. At the same time, Starbucks is facing multiple challenges, including rising global costs, a sharp decline in same-store sales in China, and intense competition from domestic brands. How the new leader will guide the world's largest coffee chain through these changes is worth watching.

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After returning to the company for the third time, Starbucks founder Howard Schultz recently stated publicly that he will never again serve as CEO, because the board has already found a suitable long-term successor. He plans to step down from the CEO position, but will retain his role as a board member and assist new leader Narasimhan over the long term in an advisory capacity.

Not long ago, Starbucks officially announced that Reckitt Benckiser CEO Laxman Narasimhan will become Starbucks' new CEO. Speaking about the tests Narasimhan will face, Schultz described Starbucks as preparing for a "protracted battle." When discussing the Chinese market, Schultz predicted that in terms of store coverage scale, China will eventually surpass the United States to become Starbucks' largest market. Narasimhan, who attended the event with Schultz, said his tenure at Starbucks will be a "structured immersion process," giving him the chance to learn about the company deeply like an apprentice. It is reported that this appointment will officially take effect on October 1 this year.

On March 16 this year, just hours before Starbucks' annual shareholders meeting, the company announced that Kevin Johnson, who had been with Starbucks for 13 years and served as CEO for five years, would retire on April 4. The Starbucks board revealed that Johnson had already expressed his intention to retire to the board a year earlier.

Public information shows that Howard Schultz served as Starbucks CEO twice. In 1982, he joined Starbucks as director of retail operations and marketing; in 1987, he acquired Starbucks and became one of its founders, serving as CEO for the first time during this period. In 2000, Schultz stepped down as CEO; during the 2008 financial crisis, he returned again, until stepping down once more in 2017, after which Kevin Johnson took over.

After Johnson retired in April this year, because no suitable long-term candidate had yet been found, Schultz, who had led the company for 30 years, returned as interim CEO to once again take the helm of the world's largest coffee chain that he had built from scratch. Schultz once said in a statement: "When you love something, you feel a deep sense of responsibility, and you choose to lend a hand."

Schultz, now 68, is the builder and cultural architect of Starbucks. In a statement, he said he had not planned to return to the company, and that he was focused on developing an innovation framework while mentoring and cultivating Starbucks' next long-term CEO. He also said he would not stay in the interim CEO position for too long, and actively asked the company to pay him only $1 as "compensation." As Starbucks' legendary founder, Schultz's return has excited many people.

In fact, Schultz was not Starbucks' earliest founder. When he first visited the Starbucks Coffee Company in Seattle in 1981, he was only a sales manager for a Swedish coffee machine manufacturer. In 1982, at the age of 29, Schultz was hired by Starbucks as director of retail operations and marketing.

Schultz tried hard to persuade Starbucks' bosses at the time to introduce traditional espresso drinks, and succeeded in piloting them in several stores. But the bosses believed that maintaining and repairing espresso machines in the United States was costly, and that American consumers were still unfamiliar with this kind of beverage, so they did not continue to support Schultz's idea.

This prompted Schultz to leave Starbucks in 1985 and open his own specialty coffee shop, taking the risk of introducing espresso to the American market. It is understood that at the time the shop had very few seats and sold ice cream in addition to coffee. In 1988, Starbucks' original management team adjusted its business direction, changed its name to Peet's Coffee & Tea, and sold its retail business to Schultz for $3.8 million.

Afterward, Schultz renamed his coffee shop Starbucks and expanded the business across the United States. Under his leadership, Starbucks gradually built a massive marketing network, profoundly influenced coffee culture in the United States and around the world, and ultimately grew into the world's largest coffee chain brand.

Affected by rising global shipping costs and coffee bean costs, Starbucks' profits fell significantly. According to Starbucks' third-quarter 2022 financial report, the company's total net revenue in the third quarter was $8.144 billion, up 9% from $7.497 billion in the same period last year, with diluted earnings per share of $0.80. In addition, Starbucks' global same-store sales rose 3% in the third quarter, with same-store sales in North America up 9% and same-store sales in China down 44%.

At the same time, Starbucks' other revenue in the third quarter increased by $222 million. Starbucks said this was mainly due to higher product sales and royalty revenue from the Global Coffee Alliance, as well as growth in the ready-to-drink business. As of July 3, 2022, Starbucks had 34,900 company-operated and licensed stores worldwide, up 5% from the previous year.

Due to the impact of the pandemic, employee turnover rose sharply. Data shows that one in four baristas at Starbucks' U.S. stores quit within 90 days, compared with only one in ten previously. Although Starbucks is the world's largest coffee chain brand, competition in today's coffee market is now countless. Brands such as Luckin are developing rapidly, and established beverage companies and new tea drink brands are also launching various innovative products, seizing many of Starbucks' customers and potential customers, so Starbucks can be said to be facing multiple challenges.

Now, Starbucks founder Howard Schultz says he will never be CEO again! Under the leadership of new leader Laxman Narasimhan, what changes Starbucks will undergo remains to be seen.

Image source: Internet

The above content is compiled by CoffeeHunters, a coffee news website.