Tag: Howard Schultz

Howard Schultz, Starbucks’s public face, wrote an emotional letter to employees on Monday to announce his plans to leave the Seattle company on June 26 after some 40 years, saying, “I would like to humbly remind you not to lose sight of what matters most: your fellow partners and our customers.”

Schultz, who will leave his position as Starbucks’s executive chairman, continued, “Success is not an entitlement; it must be earned every day through hard work and teamwork.”

A good reminder that was. Starbucks, under Schultz, has been a success story.

The company has expanded from 11 stores in 1987 to 28,000-plus, in 77 countries, becoming the world’s No. 1 coffeehouse chain thanks to its “Third Place” pitch as a community spot for people between home and work. The company’s stock has jumped 21,000% since its 1992 IPO, and Starbucks was ahead of curve in offering employee benefits including comprehensive health care and free college tuition.

It also has become a poster child for corporate activism and social consciousness. And with mobile phones fast changing consumer behavior, Starbucks was also ahead in building a mobile payment and rewards system that’s given it coveted customer insights.

Starbucks’s share in the $58 billion global specialty coffee shop market rose to about 46% last year, from 41% in 2014, according to Euromonitor. Its share in the nearly $25 billion U.S. market surged to more than two-thirds, from 61%, during the same period, Euromonitor data shows.

However, as much as Starbucks, or Schultz, can take pride in those accomplishments, the reality is that what once set Starbucks apart has been widely replicated and, in some cases, outdone. Just look at the crop of gourmet coffee shops like Think Coffee, Gregorys Coffee, Blue Bottle Coffee and Stumptown Coffee Roasters, which have suddenly mushroomed in cities like New York and beat Starbucks at its own game.

Starbucks is also facing growing competition on the low end, led by McDonald’s, and increasingly has to respond to the trend of consumers’ brewing more high-end coffee at home or buying more ready-to-drink coffee on the go. A recent Mintel study, for instance, showed ready-to-drink coffee has posted five straight years of double-digit sales growth, outpacing the specialty coffee shop sales growth tracked by Euromonitor.

Meanwhile, as Starbucks has grown, it has faced the mounting challenge of training its employees and maintaining the same level of customer service and experience. For instance, even though the company recently shut its more than 8,000 company-owned U.S. stores to train nearly 175,000 employees on unconscious bias after a Philadelphia manager called the cops on two black men, the response from both employees and customers has been mixed. (Just look at Starbucks’s painstaking responses to each Facebook post applauding or faulting it for the move.)

With its recent move to officially declare its Use of Third Place policy to welcome anyone, paying customer or not, to its stores, the chain also needs to figure out who and how it wants to please without alienating its loyal customers.

The warning signs started coming even before the Philadelphia incident. A Market Force Information study of U.S. coffee, bakery and donut shops in February found Starbucks’s composite loyalty index, which measures things such as customers’ satisfaction and their likelihood to recommend a restaurant, actually declined to 49% this year, from 58% in 2017. This ranked Starbucks below rivals including Krispy Kreme and Panera Bread.

In yet another cautionary sign, in KPMG’s 2018 U.S. Customer Experience study, which was released Tuesday and covers 250 brands of various sectors, Starbucks actually came in a less-than-impressive 80th place. Among those categorized as restaurants in the study, it fell behind chains like Chick-fil-A, In-N-Out Burger and Krispy Kreme.

Starbucks, which has also been hurt by declining U.S. mall traffic, has seen the Americas region’s comparable sales, or sales at company-owned locations open for more than 13 months, slow each year to 3% in fiscal 2017 from 7% in fiscal 2013. Even in Asia, where Starbucks has identified China as a big growth driver, comparable sales have slowed over that time.

That’s not even counting the fact that growth elsewhere likely won’t come fast enough to move the needle and eclipse the U.S.-dominated Americas region, which represented 70% of fiscal 2017 sales versus Asia’s 14%.

“Never embrace the status quo,” Schultz, whose upcoming departure from Starbucks has sparked speculation of a possible presidential run, wrote in his letter. “Have the curiosity to look around corners and the courage to push for reinvention. … Change is inevitable, and the world has become a more fragile place since we first opened our doors.”

Starbucks needs to take those words to heart. After all, the world has not only become a more fragile place; it’s also become a more fickle place.

Starbucks chairman Howard Schultz shocked many of his 350,000 associates across the world by announcing his resignation with just three weeks notice.

Political commentators have been quick to link his sudden departure to a bid for the Democratic presidential nomination for the 2020 election, rumours about which have been swirling for months.

Schultz’s last day at the small Seattle company he bought in 1987 and built into one of the world’s largest cafe chains will be on June 26 when he will be designated chairman emeritus. Myron E Ullman, formerly chairman and CEO of JCPenney, will take over as chairman with Mellody Hobson, president and director of Ariel Investments, becoming vice chairman.

In a long letter to staff and customers, Schultz said it seems like yesterday that he first walked into the Pike Place store, “stepped across the threshold, and was swept into a world of coffee and community”.

“That moment began the journey of a lifetime. Not just for me, but for so many of us. Who could have imagined how far we would travel together, from 11 stores in 1987 to more than 28,000 stores in 77 countries. But these numbers are not the true measures of our success. Starbucks changed the way millions of people drink coffee, this is true, but we also changed people’s lives in communities around the world for the better.”

Perhaps a clue to his future political intentions was an invitation in the letter to follow his website which appears to be brand new. On the site he signs off from Starbucks in another letter, closing with the comment: “I still have the same curiosity that’s fuelled me all these years, and a relentless passion to enhance the lives of others. I encourage and welcome your thoughts about what comes next…”

During recent years, Schultz has been more outspoken about his political views, publicly endorsing Hillary Clinton and condemning several actions of US President Donald Trump.

It’s not goodbye

In his letter to Starbucks staff and customers, Schultz said the move will be an emotional transition.

“But I’m looking forward to spending time with my family this summer. I’m also writing a book about Starbucks’ social impact work and our efforts to redefine the role and responsibility of a public company in an ever-changing society. It’s a journey that has prompted me to consider the many ways that each of us, as citizens, can give back to our communities. I’ll be thinking about a range of options for myself, from philanthropy to public service, but I’m a long way from knowing what the future holds.”

He was also clear in his desire to remain part of the company he built so strong. “I’ll never say goodbye to you. Just thank you.”

Starbucks CEO Howard Schultz has stepped aside from the CEO role to take up a new role driving innovation, design and development of the Starbucks Roastery and Reserve retail store formats internationally.

He will also oversee the company’s social impact initiatives and continue to serve as chairman.

President and COO Kevin Johnson will expand his responsibilities, assuming the role and responsibilities of president and CEO, effective April 3.

In his current role, since March 2015, Johnson has led the company’s global operating businesses across all geographies as well as the core support functions of Starbucks supply chain, marketing, human resources, technology, and mobile and digital platforms. Johnson has been a Starbucks board member since 2009, and will continue to serve as a member of the Board.

“Over the past two decades, I have grown to know Starbucks first as a customer, then as a director on the board, and for the past two years as a member of the management team. Through that journey, I fell in love with Starbucks and I share Howard’s commitment to our mission and values and his optimism for the future,” said Johnson.

Johnson’s career spans 33 years in the technology industry which included a 16-year career at Microsoft and a five-year tour as CEO of Juniper Networks. At Microsoft, he led worldwide sales and marketing and became the president of the platforms division. In 2008, he was appointed to the National Security Telecommunication Advisory Committee where he served presidents George W. Bush and Barack Obama.

Announcing the changes overnight, Schultz said the company was continuing to deliver quarter after quarter of record, industry-leading revenue, comp sales and profit growth, and that the newest classes of Starbucks stores continue to deliver record-breaking revenues around the world.

“The truth is, in all my years at Starbucks I have never been more energised or exhilarated about the opportunities that lie ahead.”

Schultz said the Roastery concept added a previously unattained level premiumisation into the coffee category.

“Its success is unparalleled, last year achieving a comp sales increase of 24 per cent and delivering a ticket that is four times the ticket of a typical Starbucks store. The Roastery has become a learning laboratory for breakthrough innovation and experiential design and a beacon for the next wave of Starbucks global growth and evolution.”

Starbucks will open at least 20 Roasteries around the world, six by the end of 2019 alone.

“At the same time, elements of the Roastery are forming the basis of the 1000 or more Starbucks Reserve stores we will be opening around the world in the years ahead.”