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Howard Schultz, who built Starbucks’ coffee empire, stepped down from the company's board of directors last week. Insiders told the New York Post that the longtime CEO had become a “distraction” for the business.
“The business has changed a ton since Howard’s heyday,” one source said. “It doesn’t make sense for him to be part of it anymore.”
Schultz, who bought Starbucks in 1987 for $3.8 million, is credited with transforming Starbucks from a regional coffee and equipment seller to a global coffee chain, with more than 37,000 stores in 86 markets. He was CEO from 1987 to 2000 and then again from 2008 to 2018, before his recent stint as interim CEO. Now that he is officially retired, the company honored him with the title of “lifelong chairman emeritus.”
The Wall Street Journal wrote in a 2016 profile, “Schultz changed the way Americans drink coffee and even socialize, creating what he called a ‘third place’ where people could gather outside home and work. Starbucks showed Americans that coffee could be more ambitious than home-brewed Folgers.”
However, the outspoken Schultz returned as interim CEO in April 2022 after baristas in Buffalo formed the first unionized Starbucks location, and he quickly became the face of Starbucks’ anti-union stance.
Taking on a more aggressive stance than predecessor Kevin Johnson, Schultz charged that unions only cause division. This past March, he appeared before a U.S. Senate committee in a widely followed, contentious session. Senator Bernie Sanders stated that Starbucks was engaged in the “most aggressive and illegal union busting campaign in the modern history of our country.”
By early June, Starbucks had lost 16 of 17 cases decided by National Labor Relations Board administrative law judges involving worker intimidation, discriminatory rules, and unlawful discipline and termination of union organizers, according to Bloomberg Law. Less than 4% of Starbucks’ U.S. locations have unionized.
During his third stint that ended this past April, Schultz also introduced a $450 million “reinvention plan” running through 2025 that includes equipment upgrades, enhanced training, and employment benefits, along with adding another 2,000 U.S. locations.
The plan appeared to show progress, with North American operations delivering 7% same-store sales growth in the third quarter that ended June 30, leading to the highest average weekly sales in history.
However, the “third place” experience Schultz envisioned has become somewhat antiquated as over two-thirds of Starbucks sales are now made through drive-thrus, mobile orders, and delivery. The java giant plans to devote 90% of new store growth to units with drive-throughs.
A continued digital-first emphasis will be spearheaded by Laxman Narasimhan, its new CEO, although he has continued to highlight the importance of “human connections.” Narasimhan said on a recent quarterly call, “We will measure our success on our business performance through the lens of humanity, just as we always have."