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Howard Schultz Announces Permanent Departure from CEO Position

Recently, Howard Schultz, Starbucks founder who has "come out of retirement" for the third time, stated that he will never serve as CEO again because the company has found the right candidate. He will step down as CEO while continuing to serve as a board member and will serve as a long-term advisor to Narasimhan.

A few days ago, Starbucks announced a new appointment, with Reckitt Benckiser CEO Laxman Narasimhan announced as Starbucks' new leader. When discussing the challenges he faces as the new CEO, Howard Schultz said that Starbucks will engage in a "protracted war."

Chinese Market and Leadership Transition

When discussing the Chinese market, he said that in terms of company footprint, China will eventually surpass the United States. Narasimhan, who attended the same program, stated that his tenure at Starbucks will be a "structured immersion process," which gives him an opportunity to be an apprentice. It is understood that this appointment will take effect on October 1st of this year.

On March 16th of this year, just hours before Starbucks' annual shareholders' meeting, Starbucks announced that Kevin Johnson, who had been with the company for 13 years and served as CEO for 5 years, would retire on April 4th. Regarding Johnson's departure, the Starbucks board stated that Johnson had already signaled to the board a year ago that he was considering retirement from Starbucks.

Until his retirement in April this year, there was no suitable candidate, so Howard Schultz, who had led the company for 30 years, returned to serve as interim CEO, once again managing this global largest coffee chain company that he built from scratch. Schultz once stated in a declaration: "When you love something, you have a strong sense of responsibility, and you choose to reach out and help."

Howard Schultz: The Creator and Cultural Architect

The 68-year-old Schultz is the creator and cultural architect of Starbucks. He stated in a declaration that he had no plans to return to the company previously. He focused on establishing an innovation framework while guiding and cultivating Starbucks' next long-term CEO. He also stated that he would not serve for long, and this return as interim CEO requested the company to pay him $1 as "compensation." As the legendary founder of Starbucks, Schultz's return excited many people.

In fact, Schultz was not the earliest founder of Starbucks. When he first visited Starbucks Coffee Company in Seattle in early 1981, he was just a sales manager for a Swedish coffee machine manufacturer. In 1982, the then 29-year-old Schultz was hired by Starbucks as Director of Retail Operations and Marketing.

The Vision and Split

Schultz had worked hard to convince the then Starbucks owners to offer traditional espresso drinks, and successfully piloted them in multiple stores. However, the owners at that time realized that the cost of maintaining and repairing espresso machines in the United States was very high, and Americans were not familiar with this type of beverage, so they did not continue to support Schultz's idea.

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

Building a Global Empire

From then on, Schultz renamed his coffee shop Starbucks and expanded its business scope throughout the United States. Under his leadership, Starbucks gradually established a huge marketing network, influencing the coffee culture of the United States and even the world, becoming the world's largest chain coffee brand.

Current Challenges

Due to rising global shipping costs and coffee bean costs, Starbucks' profits have shown a significant decline, according to Starbucks' Q2 2022 financial report. Data shows that Starbucks' total net revenue in the second quarter was $8.144 billion, a 9% increase from $7.497 billion in the same period last year, with basic earnings per share of $0.80 diluted. Additionally, Starbucks' global same-store sales increased by 3% in the second quarter, with North American same-store sales growing by 9% and Chinese same-store sales declining by 44%.

Meanwhile, Starbucks' other revenue in the second quarter increased by $222 million. Starbucks stated this was mainly due to increased product sales and royalty income from the Global Coffee Alliance, as well as growth in its ready-to-drink business. As of July 3, 2022, Starbucks had 34,900 company-operated and licensed stores worldwide, a 5% increase from the previous year.

Affected by the pandemic, employee turnover has risen sharply. Data shows that one-quarter of baristas at Starbucks US stores resign within 90 days, compared to the previous ratio of one-tenth. Although Starbucks is the world's largest coffee chain brand, the competition in the coffee market is now countless. Brands like Luckin Coffee are developing at high speed, while established beverage companies and new tea brands are also launching various innovative products, capturing many of Starbucks' customers and potential customers. Starbucks is facing multiple challenges.

Looking to the Future

Now Starbucks founder Howard Schultz has stated that he will never serve as CEO again! What kind of changes will Starbucks usher in under the leadership of new chief Laxman Narasimhan? Let us wait and see.

Image source: Internet

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