It’s Been a Bad Month for Starbucks. Ex-CEO Howard Schultz Agrees

Starbucks has been facing a challenging environment, with its shares falling 15% to their lowest in two years on May 1. The company reported its first quarterly sales decline since 2020, lower-than-expected earnings, and same-store sales growth. Economic experts predicted that sustained profitability for coffee chains would be difficult due to many purchases being baked into customers’ commutes, especially as the number of people working from home tripled. However, Starbucks is facing several complicating factors that seem to be reflected in this quarter’s numbers: boycotts, new competitors, and, perhaps the most influential, a public comment from ex-CEO Howard Schultz indicating he wasn’t confident in the chain’s current strategy and leadership.

Starbucks became embroiled in boycott calls on TikTok after it sued Workers United, a union of Starbucks employees, for trademark infringement over a since-deleted social media post from the union’s account that retweeted an image of a bulldozer breaking through the barrier between Israel and Gaza. The company described the post as “reckless and reprehensible.” In response, the union countersued, which only intensified calls for boycotts, which some analysts have correlated, at least partially, to the dip in Starbucks’ sales. Another contributing factor is the fact that there are simply more coffee chains cutting into Starbucks’ market share.

One of note is the Oregon-based Dutch Bros, which reported 10% same-store sales growth and positive traffic trends last quarter. National Restaurant News’ Joanna Fantozzi said that “beyond hard numbers, the two companies have recently taken very different operational strategies.” Starbucks’ recent, aggressive introduction of new products, which will continue this summer with the release of the company’s first blue beverage and of boba pearls, is one of the many things former CEO Howard Schultz subtly criticized in a recent LinkedIn post addressing the company’s disappointing second quarter numbers.

Schultz emphasized that the company’s fix needs to begin at home: U.S. operations are the primary reason for the company’s fall from grace. The stores require 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 clarified that he has had no formal role within the company since April 2023 and no longer serves on the board of directors. He said his love of “all those who wear ‘the cloth of the company’” knows no bounds.

Both mainstream and industry publications, from the Wall Street Journal (with the story “Howard Schultz Is Back-Seat Driving Starbucks. That’s a Problem for His Successor”) to PR Daily, have commented on the impact of Schultz’ post. PR Daily’s editor-in-chief Allison Carter wrote that the overall situation is awkward for current CEO Laxman Narasimhan, who Schultz helped to recruit. “Overall, it’s Schultz who comes off the worst here, publicly backseat driving under the guise of thought leadership. If he wants to communicate with Starbucks leadership, he certainly has the means to do so. But public criticism of a former employer rarely reflects well.”

Read More @ Salon

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