Former Starbucks CEO says company needs to refocus on coffee

FFormer Starbucks CEO Howard Schultz says company leaders should spend more time in stores and focus on coffee drinks as they work to reverse declining sales.

In a LinkedIn post published over the weekend, Schultz said many people reached out to him after Starbucks reported weaker-than-expected quarterly sales and earnings last week.

The Seattle coffee giant said revenue fell 2% in the January-March period period in which store traffic declined across the world. It was the first time since 2020 that the company saw a drop in quarterly revenue. Starbucks also lowered its sales and profit guidance for the full fiscal year.

Schultz, who bought Starbucks in 1987, is credited with turning the company into the global giant it has become, with nearly 39,000 stores worldwide. He has been the company’s chairman emeritus since last fall, when got down of the Starbucks board.

Schultz remains Starbucks’ largest individual shareholder, holding shares valued at $1.5 billion at the end of last year.

In his post, Schultz said senior leaders — including board members — need to spend more time talking to baristas in company stores.

“I emphasized that the company’s solution needs to start at home: US operations are the main reason for the company’s fall from grace,” he said. “Stores require a manic focus on the customer experience, through the eyes of a merchant. The answer is not in the data, but in the stores.”

Laxman Narasimhan, who became CEO of Starbucks last spring, has been working a part-time shift in Starbucks stores once a month.

At some points in his post, Schultz appeared to question Narasimhan’s recovery plans. On a conference call with investors last week, Narasimhan mentioned several new products that he believes will drive customers into stores later this year, including boba drinks, sugar-free options and the brand’s first energy drink.

But Schultz said coffee is what sets Starbucks apart and reinforces the company’s premium positioning.

“The market entry strategy needs to be reviewed and elevated with coffee-focused innovation,” he said.

Narasimhan announced plans for pop-up coffee shops in the US and elsewhere last month. Starbucks plans to use the stores to sample limited-edition coffee drinks, teach younger customers about coffee and learn about customer preferences.

Schultz also said the company should update its mobile ordering and payments platform to “once again make it the uplifting experience it was designed to be.” He did not specify what changes he thinks should be made. Narasimhan said last fall that Starbucks is accelerating the introduction of new digital features and trying to personalize the customer experience on its app.

“We always appreciate Howard’s perspective. The challenges and opportunities he highlights are ones we are focused on. And, like Howard, we are confident in Starbucks’ long-term success,” Starbucks said in a statement Monday.

Schultz has a history of stepping in when he sees Starbucks struggling. He retired as CEO in 2000 and became president of the company, then returned as CEO in 2008 as the company faced the recession.

Schultz stepped down again in 2017, but returned to temporarily lead the company in 2022. In 2023, he named Narasimhan, a former PepsiCo executive, as CEO. Schultz stepped down from Starbucks’ board last fall and became chairman emeritus.

Starbucks shares were flat on Monday. The company’s share price has fallen more than 20% since the beginning of this year.