Starbucks' New Leadership... Challenges in Performance and Labor Union Issues (Comprehensive)

Starbucks Leadership Change Amid Financial Struggles to Overcome Crisis Head-On

(Photo by Bloomberg)

[Asia Economy Reporter Yujin Cho] Starbucks, the world's largest coffee chain facing management difficulties, is making a bold move to overcome the crisis by changing its leadership. Starbucks, which has expanded to 83 countries worldwide in its 50 years since founding and risen to become the undisputed global number one company, is now confronted with numerous challenges to resolve, including deteriorating performance due to the COVID-19 pandemic and increasing employee dissatisfaction leading to a rise in stores forming labor unions.

According to major foreign media such as CNN on the 1st (local time), Starbucks announced that it has appointed Laxman Narasimhan (55), CEO of the UK household goods company Reckitt Benckiser, as its next CEO.

Through its official website on the same day, Starbucks stated, "Following founder and interim CEO Howard Schultz, Narasimhan will join Starbucks on October 1 and become a board member on April 1 next year." Schultz will continue as an advisor and maintain his interim CEO position until April next year. CNN reported that Narasimhan will work alongside Schultz for a while to receive a handover before officially taking on the CEO role from April next year.

Narasimhan, who will lead Starbucks succeeding Schultz, has been recognized by the US economic media CNBC for his 30 years of experience leading global consumer brands as well as his achievements in brand development and innovation.

Starbucks board chair Melody Hobson said in a statement that day, "His practical experience in driving strategic change in consumer-facing businesses is expected to be an ideal choice to accelerate Starbucks' growth and seize the opportunities ahead."

An Indian-American, Narasimhan worked for 19 years at the global management consulting firm McKinsey before holding key positions at global beverage company PepsiCo for seven years starting in 2012. He then became CEO of UK-based Reckitt Benckiser in 2019, succeeding Rakesh Kapoor. Narasimhan was acknowledged for his management skills by boosting sales of hygiene and health products during the COVID-19 pandemic.

As the new head of Starbucks, Narasimhan is expected to prioritize overcoming rising costs and sluggish overseas markets. To address rising material costs due to inflation and labor shortages, he is likely to explore transforming the business model toward mobile ordering and delivery.

Another challenge for him is to devise a plan to overcome the slump in China, Starbucks' largest overseas market. Due to the zero-COVID policy, Starbucks' sales in China from April to June dropped by 44% compared to the same period last year. This was caused by lockdown policies from Chinese authorities, which led to 25% of all stores closing and the suspension of operations in major cities like Shanghai.

According to the US Wall Street Journal (WSJ), Starbucks is pushing for a major innovation by reviewing all aspects of its business from beverage recipes to store layouts to overcome this crisis. Once Narasimhan assumes the CEO position, he is expected to lead these announced large-scale innovations in earnest.

Labor union conflicts are also among the challenges he will face. At the end of last year, for the first time in its 50-year history, individual Starbucks stores formed labor unions. The power of workers has grown stronger through the COVID-19 pandemic, and the movement to form unions is spreading further.

Last month, the US federal agency National Labor Relations Board (NLRB) filed a lawsuit against Starbucks, accusing the company of retaliating against three employees involved in union organizing by unfairly dismissing them or placing them on unpaid leave. In response, Starbucks has filed complaints against the union for blocking entrances and using abusive language during protests, continuing a standoff.

Foreign media have noted that attention is focused on how Starbucks will respond to this management risk, as more than 200 unions have been established across the US demanding improved working conditions and wage increases.

This content was produced with the assistance of AI translation services.