Starbucks is having a tough 2024. The Seattle-based coffee shop chain watched sales suddenly slump in November. They did not get any better come January and not even an apparently strong lavender beverage introduction helped.
And then Howard Schultz decided to end his silence on the chain for which he is synonymous. He made clear a view held by many, that the company needs to improve in-store operations. Don’t look at data. Look inside the stores. And fix the mobile app.
It probably didn’t help matters. Rather than provide some needed insight into what might be ailing the company, Schultz’s comment only raised the volume on the issue, providing fuel in the media and only making matters worse for his successor.
But we’re not sure what Laxman Narasimhan could have expected when he took the job in the first place.
Schultz had chosen Kevin Johnson to succeed him as CEO in 2017. But Schultz grew frustrated with problems at the chain and made a presentation to the board, and by early 2022 the board opted to name him interim CEO when Johnson retired. This, even though Starbucks was generally performing well at the time, based on sales data.
Schultz then spent a year working on a “reinvention” plan to fix what ails the chain. He also looked for a permanent CEO, who would spend six months inside stores, learning about Starbucks culture under Schultz before he became permanent chief executive.
That person would be Narasimhan, the former Reckitt CEO, who took over officially just more than a year ago. Schultz, after initially saying he planned to stay on the board, instead resigned, went back into retirement and let his successor drive the bus.
Schultz was never that far from Starbucks. He was a resource for the company and for Narasimhan. “We’re benefitting by having him around,” Starbucks Chief Communications Officer AJ Jones said to us last year.
Yet now, rather than be a resource, Schultz is a commentator, one with a rather large megaphone.
And maybe we should have expected this: He returned from a retirement once. Why would we expect Schultz to remain silent this time, given the seriousness of the sales decline.
To be sure, a lot of people have opinions on Starbucks right now. I believe the company is going through something akin to Papa Johns in 2017, where a social media uproar caused a certain percentage of customers to stop coming in. Others believe prices are to blame. Schultz, like still others, believes the company isn’t doing a good enough job in the stores with all the mobile ordering.
But it’s also difficult on a chief executive to have the former chief executive, one who is the chain’s effective founder at that, out there saying what he thinks the chain should do.
Now, not only does Narasimhan have to focus on trying to resuscitate Starbucks’ sales, he has to look over his shoulder at the company’s founder with that aforementioned track record of CEO replacements.
No matter what the cause of Starbucks’ problems, those issues will require a lot of work. Starbucks sales have taken a significant hit in a short period of time. It will need to figure out strategies to reconnect with casual consumers who abandoned the chain in droves.
It may need to rethink pricing or fix its mobile app or convince a general public that it is a better citizen than they think. But it’s hard to do any of those things when you’re looking over your shoulder at a guy who could at any moment call for your job.
Schultz may well be right. And he may be simply giving people what they want, his views on the state of the company.
But he would be doing Starbucks far more by putting down that megaphone and returning to his status as a behind-the-scenes resource for its executives. They have enough problems right now.