Is the third time the charm for Starbucks and Howard Schultz?
Image source: Starbucks
Howard Schultz of Starbucks is undoubtedly one of the most successful retail CEOs of all time. With the phenomenal rise of Starbucks, Schultz has built that success almost like a founder.
In 30 years, Starbucks has grown its revenues from a mere $500 million in 1995 to $30+ billion. At the same time, the company's profit margins have more than doubled, and the revenues per store have risen by 50%.
Despite all that success, Mr Schultz has failed in the most critical task of a CEO, especially a founder-like figure like Mr Schultz. He has not been to find a worthy successor.
One of the most critical moments in big companies is the transition of power from an old CEO to a new one. Far too many companies have lost their way after a charismatic leader has stepped down (Jack Welch, GE; Terry Leahy, Tesco; Steve Jobs, Apple for the first time; Bob Iger, Disney; maybe even Jeff Bezos, Amazon?)
Mr Schultz is now stepping down for a third time. Hopefully, this time it is for good.
For the first time, he stepped down in 2000 as Orin Smith succeeded him. The new management was able to grow both the profitability as well as the revenues of the company.
However, around the financial crisis of 2008, Mr Schultz realised that maybe Starbucks had lost its way. The comparable sales of stores had started to grow less fast, and in 2008 they even declined. That was the time when Mr Schultz came back for the first time.
His turnaround of Starbucks in 2008 & 2009 is one of the great turnaround stories in business history. The story is well documented in Mr Schultz’s book "Onwards".
After building a robust growth track for Starbucks, Mr Schultz retired for the second time in 2017. Kevin Johnson, the current Chief Operating Officer, was selected as his successor.
Mr Johnson also saw revenues grow and profits rise over his tenure. Starbucks even managed to survive the pandemic quite well. The company recovered its pre-pandemic sales right next year in 2021. Revenues in 2022 were already $6 billion above the 2019 levels.
Despite that, Mr Johnson was replaced by Mr Schultz in 2022. Mr Schultz has been back for more than a year, and the primary purpose of his return was to find a new successor for the company.
The new CEO about to start is Laxman Narasimhan, an Indian American executive who has worked as chief executive officer of Reckitt and as a chief commercial officer of PepsiCo.
It remains to be seen how he can steer Starbucks in its growth journey and through other meaningful topics, such as employee unionisation. It won't be easy, especially with a figure like Howard Schultz in the background.
However, for Starbucks, it would be best if Mr Schultz would find a way to stay out of the company's everyday activities. As legendary as he is as a CEO, there will come (sooner or later) a time when Starbucks moves ahead without him. The sooner that time comes, the better.