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

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Starbucks CEO Plans China Visit Amid Recovery Challenges

In a recent interview with The Wall Street Journal, Starbucks interim CEO Howard Schultz revealed that he has developed a future travel schedule with incoming CEO Laxman Narasimhan. Once China relaxes its pandemic control measures for tourists, he plans to bring Narasimhan to visit China.

Schultz stated that following the release of Starbucks China's vision and financial guidance last week, he asked the company's management to spend several days evaluating their confidence in these targets. He assured them there would be no consequences even if the targets were reduced, but ultimately, the senior leadership team all "insisted on achieving these numbers."

As Starbucks prepares for CEO transition—marking Schultz's third "departure" from the company—he has created a wishlist of priorities. He hopes to ensure that the strategic reform plan developed by him and other executives proceeds according to schedule, expressing "urgent" desire to return to Starbucks' China market.

Leadership Transition and Strategic Vision

Earlier, Schultz mentioned that after Narasimhan officially assumes the role of Starbucks CEO, he will continue serving as a board member and act 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! This time, his eagerness to visit China with the CEO suggests new strategic plans. Due to the COVID-19 pandemic's impact, Starbucks' sales in China have been continuously declining.

As of the end of the third fiscal quarter, Starbucks operated 34,948 stores globally, with 51% company-operated and 49% licensed. Stores in the United States and China account for 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, a 13% increase year-over-year. However, in the second-largest market, China, Starbucks continues to struggle with continuously declining sales. In the third fiscal quarter, Starbucks China's revenue reached $540 million, a sharp 40% decrease year-over-year, with customer traffic declining by 43% and same-store sales dropping by 44%.

China Market Challenges and 2025 Vision

In China, the pandemic has posed significant challenges to Starbucks' business in this second-largest market, which accounts for approximately 13% of Starbucks' annual sales. While Schultz prepares for the leadership transition, Starbucks China last week released its 2025 Vision, which establishes ambitious expansion targets—planning to add approximately 3,000 new stores in China by 2025, demonstrating the importance of the Chinese market to Starbucks.

Schultz also hopes to instill Starbucks' culture and history in the incoming CEO, Laxman, so that issues that have emerged in recent years won't recur. Schultz stated, "If employee turnover decreases and customer service improves, he will consider his work successful. Additionally, Starbucks must restore trust among its investors."

On September 14th, at Starbucks' biennial global investor conference, Starbucks China Chairman Wang Jingying stated, "We continue to anticipate that Starbucks' recovery in China will be non-linear." After overcoming the challenges posed by the pandemic, Starbucks China has become more resilient in its development. "We will more deeply embrace new development opportunities and continue to lead the coffee industry forward," she noted. She observed a strong positive correlation between same-store sales improvements 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 Future Outlook

Starbucks interim CEO Schultz expressed that increasing investments in chain coffee stores and employees will put this coffee giant on the right track for a turnaround by 2024. Schultz introduced Starbucks' strategic reforms at the investor briefing. He stated that Starbucks' spending on café operations and employee benefits will boost sales and profits, and shareholders will benefit from dividends and the eventual restart of stock buybacks. These improvements are expected to help enhance customer service and employee experience.

It is widely believed that Schultz values Narasimhan's capabilities and determination in the digital sector. Indeed, Starbucks may need to continue focusing efforts on digitalization and product innovation. After all, the continuous emergence of new and old competitors like Luckin Coffee in the Chinese coffee market should certainly capture Starbucks' attention.

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

Image source: Internet

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