Starbucks Father Howard Says: Will Visit China with New CEO Soon!

Starbucks Leadership Plans a China Visit

In a recent interview with The Wall Street Journal, Starbucks interim CEO Howard Schultz revealed that he had drawn up a future travel schedule with incoming CEO Laxman Narasimhan, and that once China relaxes its pandemic control measures for travelers, he plans to bring Narasimhan to visit the country.

Schultz said that after Starbucks China released its vision and financial guidance the previous week, he asked the company's management to spend several days assessing their confidence in those targets. He assured them there would be no consequences even if the targets were lowered, but in the end the senior leadership team all "insisted on achieving these numbers."

As Starbucks prepares for its CEO transition — Schultz's third "departure" from the company — he has drawn up a wishlist of priorities. He hopes to ensure that the strategic reform plan he and other executives developed proceeds on schedule, and he has expressed an "urgent" desire to return to Starbucks' China market.

Leadership Transition and Strategic Vision

Schultz has said that after Narasimhan formally takes over as CEO, he will remain on the board and serve as Narasimhan's long-term advisor, guiding him to lead Starbucks to new heights. He subsequently announced that he would not serve as CEO again. His eagerness to visit China with the new CEO this time suggests fresh strategic plans. Because of the COVID-19 pandemic, Starbucks' sales in China have been falling steadily.

As of the end of the third fiscal quarter, Starbucks operated 34,948 stores globally — 51% company-operated and 49% licensed. Stores in the United States and China make up 61% of Starbucks' global business, with 15,650 stores in the United States and 5,761 in China.

In the largest market, the United States, Starbucks generated $5.62 billion in revenue, up 13% year over year. In the second-largest market, China, it continued to struggle with steadily declining sales. In the third fiscal quarter, Starbucks China's revenue reached $540 million, a sharp 40% decrease year over year, with customer traffic down 43% and same-store sales down 44%.

China's Challenges and the 2025 Vision

In China, the pandemic posed significant challenges to Starbucks' business in a market that accounts for roughly 13% of its annual sales. As Schultz prepared for the leadership transition, Starbucks China released its 2025 Vision the previous week, setting ambitious expansion targets — planning to add approximately 3,000 new stores in China by 2025, a clear signal of how much the market matters to the company.

Schultz also hopes to instill Starbucks' culture and history in Laxman, so that problems that emerged in recent years do not recur. Schultz said that "if employee turnover decreases and customer service improves, he will consider his work successful," adding that Starbucks must also restore the trust of its investors.

On September 14, at Starbucks' biennial global investor conference, Starbucks China Chairman Wang Jingying said, "We continue to anticipate that Starbucks' recovery in China will be non-linear." Having weathered the challenges of the pandemic, Starbucks China has become more resilient, she said. "We will more deeply embrace new development opportunities and continue to lead the coffee industry forward." She observed a strong positive correlation between improvements in same-store sales and the relaxation of pandemic control measures. "This gives us confidence that once travel restrictions are completely lifted, sales will show a strong rebound."

Strategic Investments and Outlook

Interim CEO Schultz said that increasing investment in chain coffee stores and employees would put the coffee giant on the right track for a turnaround by 2024. Introducing Starbucks' strategic reforms at the investor briefing, he said the company's spending on cafe operations and employee benefits would boost sales and profits, and that shareholders would benefit from dividends and the eventual restart of stock buybacks. Those improvements are expected to lift both customer service and the employee experience.

It is widely believed that Schultz values Narasimhan's capabilities and determination in the digital sector. Starbucks may indeed need to keep focusing on digitalization and product innovation — after all, the steady emergence of competitors old and new, Luckin Coffee among them, should certainly hold Starbucks' attention in the Chinese market.

Given that the appointment came relatively recently, it remains unclear how incoming CEO Laxman Narasimhan will develop the Chinese market, Starbucks' second-largest globally. Under Schultz's guidance, can the new leader turn Starbucks China's operating profit from losses to profitability?

Image source: Internet

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