Industry News | December 2, 2016 | QSR Exclusive Brief

Starbucks' Howard Schultz on Why He's Stepping Down

Former Starbucks' CEO Howard Schultz says he believes that Kevin Johnson "is better prepared to be CEO on a go-forward basis" than he is. Starbucks
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Starbucks named Kevin Johnson its new CEO, effective in April, as Howard Schultz will step down to focus on the brand’s Reserve Roasteries and Retail stores.

Johnson, the current president and COO, will take over the CEO role on April 3, and Schultz will continue to serve as chairman of the company’s board of directors in this new role.

Schultz said Thursday in a conference call that the leadership shift will allow him to focus on the “premiumization” of the brand’s offerings and store model, which will create a new source of revenue and profit to complement the core business.

Starbucks opened its first Reserve Roastery in Seattle two years ago, and Schultz says Starbucks expects its reserve stores to double the unit economics of a traditional store.

“With the Roastery, we introduced into the coffee category a previously unattained level of premiumization,” he says. “Its success is unparalleled, last year achieving a comp sales increase of 24 percent and delivering a ticket that is four times the ticket of a typical Starbucks store.”

Johnson has been president and COO since March 2015, and has served as a Starbucks board member since 2009. His career spans 33 years in the technology industry, which included a 16-year career at Microsoft and five years as CEO of Juniper Networks.

Schultz says Johnson’s expertise in global business and technology will accelerate the brand’s customer experience.

“I think he is better prepared to be CEO on a go-forward basis than I am,” Schultz says.

This isn’t the first time Schultz has stepped away from the CEO role. He took an eight-year hiatus from 2000 to 2008.

“The difference between then and now couldn’t be greater,” Schultz says. “In 2007–2008, the country was going through a cataclysmic financial crisis that affected all companies, and Starbucks was not immune.”

Schultz says the management team during that period did not have the experience to navigate through the challenges, but the team now is the strongest in the company’s history.

Schultz says the typical size of the Reserve store will be 3,500–4,000 square feet, and will offer food from the brand’s new Italian artisanal baker partner, Princi. The brand plans to open 1,000 or more retail stores in the years ahead, along with 20 international Roasteries, showcasing the newest brewing methods and offering exclusive micro-lot coffee selections.

Another product category for the Reserve retail stores, along with more store plans, will be announced at an investor conference next week.

By Alex Dixon