Indian-origin CEOs are everywhere, and the truth is you do not imagine it. Starbucks Corp. joins the list of US corporations from Microsoft, Google, Twitter, Barclays, and IBM, among others, to have an Indian CEO.
Laxman Narasimhan, the CEO of Reckitt Benckiser Group PLC, is set to join the Coffee giant on October 1 as its next CEO. He will take over from the interim CEO Howard Shultz, a long-time leader at Starbucks. Narasimhan will work alongside Shultz and take over fully from April 1, 2023, while Schultz will continue on the board.
Before his tenure at Reckitt, Narasimhan worked with beverage giant PepsiCo Inc., which incidentally also had a Indian origin Indra Nooyi CEO. He also worked the McKinsey & Co, a global management consulting firm.
Challenges Ahead
The incumbent CEO faces the challenges of stagnant sales in China, a key growth area for the Coffee chain, and a growing push from unions. Founder and interim CEO Schultz will handhold him initially and later serve as an indefinite advisor to Narasimhan. The larger question is how the dynamics will work out as Schultz is known to be a hands-on leader.
New leaders struggled when their more dominant predecessors continued to remain associated with the company. A case in point is the CEO Bob Chapek of Walt Disney, who had to deal with Bob Iger when he continued as Executive Chairman.
Having a CEO with no restaurant experience is debatable as
Starbucks has decided to discard the chief operating officer role, currently held by John Denver, from October 3, 2022.
New Spin
Analyst Andrew Charles at Cowen Inc. believes that Schultz’s choice of Narasimhan is that he wants the new CEO to do things differently. The founder wants Starbucks to be handled by someone strong and capable.
Shares of Starbucks rose 0.5% post trading in New York Thursday. It had lost around 27% this year, more than the 17% decline of the S&P 500 index.
The Shakeup
Shultz, taking over at the top in April this year, turned Starbucks upside down, restructured the management, and announced a plan to design thousands of Starbucks cafés for employees and customers. The details will be announced at the company’s investor meeting on September 13.
The company has not disclosed its guidance for the rest of the year, but its latest earnings show consumers are willing to spend in this key growth segment in the US. Starbucks sales have gone up 9% third quarter compared to the previous year in the US. The coffee retailer plans to serve cappuccinos and lattes faster with better technology.
Bloomberg Intelligence analyst Mike Halen says that Narasimhan has a lot of work to do. Starbucks faces the threat of rapid unionization in its retail chain. The commodity inflation has already curbed profit margins, and the decision to increase the workers’ salaries will add to the pressure.
