Starbucks Announces New Leadership Structure to Drive Next Wave of Global Growth

Also effective April 3, 2017, Howard Schultz, chairman and ceo, will be appointed executive chairman and will shift his focus to innovation, design and development of Starbucks Reserve® Roasteries around the world, expansion of the Starbucks Reserve® retail store format and the company’s social impact initiatives. In this new role Schultz will continue to serve as chairman of the Board.

“Starbucks consistently outperforms the retail industry because our stores, our offerings and the experiences our partners create make us a destination. The best evidence of the success of the core strategy driving our business is that we continue to deliver quarter after quarter of record, industry leading revenue, comp sales and profit growth, and that the newest classes of Starbucks stores continue to deliver record-breaking revenues, AUV’s and ROI both in the U.S. and around the world,” said Schultz. “As I focus on Starbucks next wave of retail innovation, I am delighted that Kevin Johnson – our current president, coo, a seven-year board member and my partner in running every facet of Starbucks business over the last two years – has agreed to assume the duties of Starbucks chief executive officer. This move ideally positions Starbucks to continue profitably growing our core business around the world into the future.”

 As president and chief operating officer since March 2015, Johnson has led the company’s global operating businesses across all geographies as well as the core support functions of Starbucks supply chain, marketing, human resources, technology, and mobile and digital platforms. Johnson has been a Starbucks board member since 2009, and will continue to serve as a member of the Board.

"Over the past two decades, I have grown to know Starbucks first as a customer, then as a director on the board, and for the past two years as a member of the management team. Through that journey, I fell in love with Starbucks and I share Howard’s commitment to our mission and values and his optimism for the future," said Johnson.  “It is an honor for me to serve the more than 300,000 partners who proudly wear the green apron and I consider it a privilege to work side-by-side with Howard, our world-class board of directors, and a very talented leadership team. Together, we will reaffirm our leadership in all things coffee, enhance the partner experience and exceed the expectations of our customers and shareholders.  We believe in using our scale for good and having positive social impact in the communities we serve around the world.”

Johnson's career spans 33 years in the technology industry which included a 16-year career at Microsoft and a five-year tour as CEO of Juniper Networks. At Microsoft, he led worldwide sales and marketing and became the president of the Platforms Division. In 2008, he was appointed to the National Security Telecommunication Advisory Committee where he served Presidents George W. Bush and Barack Obama. He joined the Starbucks board in 2009 and the management team in 2015.

Transcript from Investor and Media Conference Call, December 1, hosted by Howard Schultz and Kevin Johnson

Howard Schultz:

Kevin and I are very excited to have this opportunity to provide additional context around this afternoon’s announcement and to answer any questions you might have.

You may recall that it was three years ago that I shared with you what I sensed were the early signs of a seismic shift in consumer behavior – away from bricks-and-mortar and towards mobile and online retailing. Today, that shift has taken firm hold around the world, both disrupting and redefining retailing and significantly reducing the consumer foot-traffic that traditional retailers have relied on for decades.

Despite the shift, Starbucks has been able to consistently outperform the retail industry. We’ve been able to do so because our stores, our offerings and the experiences our partners create make us a destination, and because we invested way ahead of the curve to create world-class mobile, loyalty and digital capabilities that enable us to provide our customers with an increasingly elevated Starbucks Experience to our customers.

Evidence of the correctness, and the success, of the core strategy that is driving our business are the facts that we continue to deliver quarter after quarter of record, industry-leading revenue, comp sales and profit growth, and that each successive new class of Starbucks stores is delivering record-breaking revenues, AUVs, ROI – both in the U.S. and around the world. This trend was repeated most recently in the 2016 fiscal year that just ended.

I also shared with you the view that the U.S. was over-retailed. To survive – let alone succeed – traditional bricks-and-mortar retailers would have to evolve their physical spaces into relevant customer destinations, as Starbucks stores have been for the last 40 years through the environments we create and the beverages and foods we serve – and create premiumized, experiential consumer venues.

That view is what inspired development of the Starbucks Roastery and Reserve brand.

Since its opening two years ago, our Seattle Roastery has become widely recognized as the world’s most immersive, coffee-forward retail experience. Executives from premier global retailers like Apple, Nike and Zara have shared with me their view that the Roastery delivers the best retail experience – in or out of coffee – that they have ever encountered. Our Roastery is attracting customers and visitors to Seattle alike, and casting a bright halo across the entire Starbucks global brand and ecosystem.

With the Roastery, we introduced into the coffee category a previously unattained level of premiumization. Its success is unparalled, last year achieving a comp sales increase of 24% and delivering a ticket that is four times the ticket of a typical Starbucks store. The Roastery has become a learning laboratory for breakthrough innovation and experiential design and a beacon for the next wave of Starbucks global growth and evolution.

Going forward, we will open at least 20 Roasteries around the world, six by the end of calendar 2019 alone. At the same time, elements of the Roastery are forming the basis of the 1,000 or more Starbucks Reserve stores we will be opening around the world in the years ahead.

Starbucks Reserve is a new, premium retail coffee format that will showcase the newest coffee-brewing methods and offer customers the finest assortment of exclusive, micro-lot coffees sourced from around the world in an all sensory experience emblematic of our Seattle Roastery, paired with artisanal food offerings developed with our partners from Italian artisanal baker Princi. We expect Starbucks Reserve stores to deliver twice the unit economics of the typical Starbucks store.

We will also add Reserve bars into thousands of existing Starbucks stores over time. Let me explain what a Reserve bar is and what that means to the company.

The Roastery has taught us and demonstrated that we can create customized, handcrafted beverages for our customers, using cutting-edge brewing methods and profitably deliver them at scale. Over time, you will see us introduce this unique capability into thousands of existing Starbucks stores around the world, further elevating the Starbucks Experience we deliver to our customers and further extending the halo that the Roastery casts across the entire Starbucks brand.

Like our current stores – and the new classes of Starbucks stores we will be opening globally in the years to come – Roasteries, Reserve Stores and Reserve bars that will be customer destination venues. They will broaden, deepen and elevate our customer experience, and represent an unprecedented new global growth opportunity for the company. I am personally as passionate about developing the Reserve brand, and opening more Roasteries, as I was about opening our first espresso bar more than 30 years ago in Seattle.

As I shift my focus to this next wave of retail innovation, I am sincerely pleased that Kevin Johnson – our current president, coo, a seven-year board member, and my partner in running every facet of Starbucks business day-to-day over the last two years – will be assuming the duties of Starbucks chief executive officer in April 2017. This move ideally positions Starbucks to continue to profitably grow our core business around the world.

Let me tell you why I personally asked Kevin to take on the ceo role, and why the Board and I believe that he is the ideal ceo for Starbucks at this moment in our journey.

Many of you are familiar with the breadth of global management experience and the deep consumer and technology expertise that Kevin brought to Starbucks when he joined our board in 2009.

Since then, Kevin has been a wise and supportive resource for me, personally, both during and following our company’s transformation. For years he has provided invaluable insights into how we scale the company around the world, and how to best integrate industry leading customer facing technology into our customer experience and operations.

I'll simply note that Kevin has been immersed with us on management and operations issues and opportunities well before he took over the coo role two years ago. And that the two fiscal years following his engagement have been the best years in the history of Starbucks Coffee Company, with the most recent year producing record-shattering financial results and operating metrics across the board. Let me just say he deserves a tremendous amount of credit.

Along the way, Kevin and I have formed a trusting partnership, and Kevin’s collaborative leadership style has won the loyalty and respect of our people while driving the team to deliver record performance.

Kevin brings to the ceo role an unparalleled understanding of the market dynamics and strategic choices that have driven Starbucks to become one of the world’s most recognized and respected companies and brand.

We share a passion for customer-focused innovation and a commitment to preserving Starbucks heritage. Our complementary backgrounds – my entrepreneurial journey building Starbucks and Kevin’s decades spent scaling global businesses – will continue to help Starbucks navigate this new period of worldwide growth and innovation.

Kevin is, in every respect, a true servant leader and a person whose courage, compassion and empathy model the very characteristics we want for all partners and all our leaders. His approach to solving complex problems and his ability to bring out the best in people will continue to make all of us at Starbucks better in the same context that he has made me better.

I will remain Starbucks executive chairman, focusing full-time on the incredible growth opportunities we have in expanding Roasteries and building out our portfolio of Reserve stores and on Starbucks social impact agenda which will be a significant part of the focus going forward.

The truth is, in all my years at Starbucks I have never been more energized or exhilarated about the opportunities that lie ahead.

Please join me in congratulating Kevin. These are exciting times for all of us. Kevin…

Kevin Johnson:

Thank you, Howard, and good afternoon everyone.

Howard summarized our strategic imperative very well. Given the seismic shifts in consumer retail behavior, we have seamlessly extended our brick-and-mortar experience to the digital world, and we are now focused on a multi-year strategy to elevate the entire brand, extend our differentiation around the customer experience, and build on the strength of Starbucks as a destination.

Our five-year strategic plan, which we will review again at next week’s investor conference in New York, outlines seven core strategies for growth that will enable us to capture the global growth opportunities before us.

I firmly believe in this strategy, and we are already in execution mode. As a leadership team, we have prioritized initiatives, allocated resources, and aligned talent to enable us to execute against this strategic plan. It was the key driver of the organizational alignment decisions we made in July, when we created a Global Starbucks Retail organization and a Siren Retail organization.

Today’s announcement is another evolutionary step in our journey. This formalizes the leadership roles and responsibilities that Howard and I have taken on as we focus on this strategic plan. This plan requires us, as a leadership team, to execute several things in parallel and do them well. We are doing this by leveraging Howard’s unique capability to establish an ultra-premium consumer experience through the Roasteries and Reserve Stores while we continue to leverage my experience in large global businesses and technology to accelerate the pace of customer-relevant innovation across the entire brand – all at scale.

I value the partnership that Howard and I have developed over the past decade. My experience working with him on the board since 2009 combined with the past two years on the management team has evolved into a very special relationship. We share common values, a love for the company, and a commitment to always do the right thing for our partners, our shareholders, the customers and communities we serve.

I do want to acknowledge the obvious: Howard Schultz is among the world’s most iconic leaders and entrepreneurs. I know Howard doesn’t personally think of himself that way, but as his business partner and friend, I know this to be true. It is a privilege to work side-by-side with Howard. I have great confidence in our strategy, the partnership that we have developed, and the world-class talent we have assembled.

The women and men of Starbucks Leadership Team have become my trusted partners. They support this transition, and I appreciate the passion, creativity and commitment that each person brings to this team. We work well together and have built a foundation of trust, transparency and teamwork. I believe we will elevate our collective contribution as we pursue our mission and achieve the company’s ambitious goals.

A few final thoughts: Having Starbucks in my life has been a gift. I know I am not alone. So many Starbucks partners have shared their personal life stories with me and what Starbucks means to them. I have so much respect and admiration for the more than 300,000 partners who proudly wear the green apron in service of others, and I am proud to serve them. I want to thank Howard for his faith in me, his ongoing partnership, and the immeasurable gifts he has given so many for so long. I am honored to serve as the chief executive of a company that has a role and responsibility – and a deep opportunity – to create value for so many.