Starbucks CEO Laxman Narasimhan Gets a Grande From His Former Boss Amid Declining Sale of Branded Brews

In the wake of Starbucks’ disappointing earnings results last week, former boss Howard Schultz has called for the coffee giant to renew its focus and acknowledge its shortcomings. Schultz, who served as the company’s chief executive three times prior, expressed his views in a LinkedIn post on Sunday.

Without naming CEO Laxman Narasimhan, Schultz criticized the direction of the company. He said Starbucks, which in recent times was beset with employees’ unionization drives among other issues, needs to regain “a maniacal focus on the customer experience, through the eyes of a merchant.”

“The answer does not lie in data, but in the stores,” Schultz wrote, taking an aim at Narashimhan who is known for his data-driven and analytical approach to leadership.

Narasimhan, whom Schultz helped recruit for a corporate turnaround, has been in the role since March 2023. During last Tuesday’s earnings call, Narasimhan acknowledged the company’s underperformance and expressed confidence in the strategy to help the business climb out of its rut.

During last week’s earnings call, Narasimhan acknowledged the challenging quarter, saying, “We had a tough quarter. We need to do better, and we will. As I look forward, I’m confident we have the right strategy.”

Starbucks’ shares tumbled, according to the Wall Street Journal, after the company cut its sales outlook for the second time this year, with net income declining 15% in the second quarter compared to the same period last year, and revenue dropping 2%. The chain’s executives outlined plans to speed up service during morning hours, roll out new food and beverage options, and coax customers back.

While former CEOs typically maintain a low profile to allow their successors room to make their mark, Schultz has remained closely involved with Starbucks’ leadership since stepping down from the board in September. He has posted a series of public letters, many of which have centered on Starbucks, the WSJ reported.

Narasimhan also faced intense questioning last week from CNBC analyst Jim Cramer during a tense interview following the coffee chain’s lackluster quarterly results. The interview, which went viral on social media, saw Cramer directly asking Narasimhan, “Is it possible that your coffee is just too darn expensive?”

Narasimhan acknowledged that the “occasional U.S. customer” has “clearly cut back on visits to us” due to the high levels of inflation. He admitted that Starbucks has “not been able to communicate to them the value that we provide.” 

Narasimhan assumed the stewardship of one of the world’s largest coffeehouse chains in March 2023, taking over from interim CEO Schultz, who had previously served as the company’s long-time CEO.

India-born Narasimhan earned a degree in Mechanical Engineering from the University of Pune and later pursued a Master’s in German and International Studies from the University of Pennsylvania. He also holds an MBA from the University of Pennsylvania’s Wharton School.

Before joining Starbucks, he spent nearly two decades at McKinsey & Company, a leading global management consulting firm, where he advised clients on various strategic and operational issues.

In 2012, he moved to PepsiCo, where he rose through the ranks, overseeing operations in Latin America, Europe and sub-Saharan Africa, and becoming chief commercial officer. 

Narasimhan’s selection as CEO in 2023 was seen as a strategic move by the company to bring in fresh leadership and perspective to navigate the challenges posed by the post-pandemic environment and the growing unionization efforts among Starbucks employees.