Starbucks Corp. tapped Laxman Narasimhan, chief executive officer of Reckitt Benckiser Group Plc, as its next CEO, choosing a consumer-industry veteran to chart a new path after the interim tenure of Howard Schultz.
Narasimhan, 55, will join the coffee giant Oct. 1 while longtime leader Schultz, 69, stays at the helm. The new chief will take over fully April 1 and will join the board, on which Schultz also intends to serve. Before his stint at Reckitt, Narasimhan was an executive at global beverage titan PepsiCo Inc.
The incoming CEO is facing a growing union push, along with struggling sales in China, one of the chain’s key areas for growth. Meanwhile, Narasimhan will be working closely with founder Schultz, who’s known as a very hands-on leader.
Starbucks shares were little changed in postclose trading at 4:56 p.m. in New York. Through the close on Thursday, the stock had lost 27% this year, more than the 17% decline of the S&P 500 Index.
Since coming back to the helm in April, Schultz has upended Starbucks, shaking up and restructuring management, and introducing a plan to redesign the company’s thousands of cafes for both customers and employees. The specific details of the plan are yet to be announced, with elaboration expected during the company’s investor meeting scheduled for Sept. 13.
While the company has suspended guidance for the balance of fiscal 2022, its latest earnings results show that diners are willing to keep spending in the key growth market of the US. Comparable sales in the US jumped 9% in the third quarter, and the company is trying to serve more diners their lattes and cappuccinos faster with improved technology.
That strong performance — along with higher menu prices — has helped to offset the sluggishness in China, where the chain has about 5,700 locations. The company says its recovery there will be nonlinear, despite the recent reopening of some of its locations in Shanghai.
The chain has hired a record number of employees so far this fiscal year, and is trying to convince them that they will be better off without a union. Starbucks also is investing in worker training, new equipment and other operational changes to make jobs easier on its baristas. The moves, along with pay increases, total $1 billion, the company has said.
The chain has raised pay to an average of $17 an hour across the US as of the beginning of August while also bumping pay further for managers and more tenured staff. But it hasn’t been enough to stop the union push so far, which is building across the US with about 200 stores voting to unionize with Workers United.
“We are hopeful that Mr. Narasimhan will end Starbucks’s scorched-earth union-busting campaign and work with all Starbucks partners to make Starbucks a better company and better place to work,” said Michelle Eisen, a barista in Buffalo, New York, on behalf of Starbucks Workers United.
‘A lot of work’
“He’s got a lot of work to do,” Bloomberg Intelligence analyst Mike Halen said of Narasimhan. “The rapid unionization of the Starbucks chain is happening way faster than anybody thought.”
There’s also “tons of margin pressure with the commodity inflation, with the decision to increase wages for its employees, and there could be more pressure coming down the pike with the unionization efforts,” Halen said.
Reckitt Benckiser shares fell 5.2% in London after the company announced earlier Thursday that Narasimhan would depart at the end of the month, saying he was pursuing an opportunity in the US. The move was seen as a surprise for an executive who only joined in 2019 and was making headway in restructuring the company and unwinding the missteps of former chief Rakesh Kapoor, most notably the highly priced takeover of Enfamil infant formula maker Mead Johnson.
