Starbucks’ new boss will bring consumer insight to coffee culture

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LONDON, Sept 2 (Reuters) – Laxman Narasimhan may have no experience running cafes, but the outgoing CEO of British packaged goods group Reckitt will bring insight into changing consumer habits when he takes the head of Starbucks.

At Reckitt (RKT.L), maker of Strepsils throat lozenges and Dettol floor cleaner, Narasimhan, 55, led a sweeping, but unfinished, corporate turnaround while honing his relationships with retailers ranging from Walmart (WMT.N) to Tesco. (TSCO.L).

When he joins Starbucks in October, Narasimhan will need to adapt his focus to serve the millions of people who enter the coffee chain’s approximately 32,000 stores every day.

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But his experience, including a months-long stint as chief commercial officer of PepsiCo (PEP.O) in 2019, should ensure a smooth transition to Starbucks, analysts say.

“I don’t think he had significant exposure to direct-to-consumer businesses or retail network management,” said Credit Suisse analyst Eamonn Ferry.

“He has no direct coffee experience, so you can imagine that. However, he has a deep understanding of the consumer and that is far more important,” added Ferry.

Narasimhan succeeds interim CEO Howard Schultz, who joined the chain for a third time after former CEO Kevin Johnson retired this spring. Read more

Starbucks identified Narasimhan as a potential successor to Johnson more than a year ago as they strategized for the coffee chain’s future and evaluated internal and external candidates, people familiar with the matter said.

Charles Tribbett III, who co-leads Russell Reynolds Associates CEO and board advisory business, led the search for Johnson’s successor, the sources said.

The world’s largest cafe chain is reworking its business model, shifting from a focus on cafes to mobile pickup and delivery, while facing higher ingredient and labor costs. Read more

Seattle-based Starbucks is also facing a labor drive, with more than 200 of its US stores unionizing in the past year and staff pushing for better benefits and wages.

Narasimhan, who also spent nearly two decades at well-known advisory and turnaround firm McKinsey & Co, will have six months after joining to familiarize himself with the business before taking over as Starbucks CEO in April 2023.

His background and attention to detail suggest he will use this time to study all facets of the business, analysts and investors said.

“Narasimhan was considered to have done a good job so far,” said Jack Martin, fund manager at Reckitt shareholder Oberon Investments, adding that he had “steadied the ship” after a relatively choppy period under his predecessor. .

FROM REJUVENATION TO REINVENTION

At Starbuck, Narasimhan will oversee a “reinvention” plan, which the company says includes paying better wages for baristas, improving employee wellbeing and customer experience, and reinventing stores.

His record at Reckitt suggests he’s ready to make painful decisions early.

Shortly after becoming CEO of Reckitt in 2019, he commissioned a strategic review, pledging to spend £2bn ($2.3bn) over three years to “rejuvenate” it.

At the start of the plan, Reckitt touched its margins to fund new investments and refocus on hygiene, health and nutrition brands. This approach ultimately proved popular with shareholders.

“Under Laxman, Reckitt has a newfound confidence – investors seem to be confident that everything is headed in the right direction,” said Bernstein analyst Bruno Monteyne.

“He radiates – oozes – confidence,” Monteyne added.

For Reckitt, Narasimhan’s exit leaves a big hole.

For now, Nicandro Durante, a longtime Reckitt board member and former head of British American Tobacco (BAT), will lead the maker of Lysol surface cleaner and Durex condoms.

“When Laxman made his intention clear…they thought it best to act quickly,” said Patricia O’Hayer, global head of communications and government affairs at Reckitt. She noted that Durante led BAT, a larger company, through its own transformation.

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Reporting by Richa Naidu; additional reporting by Jessica DiNapoli; Editing by Alexander Smith, Louise Heavens and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

Richa Naidu

Thomson Reuters

London-based journalist covering retail and consumer goods, analyzing trends including supply chain coverage, advertising strategies, corporate governance, sustainability, policy and regulation. Has previously written about US-based retailers, major financial institutions and covered the Tokyo 2020 Olympics.

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