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Former Starbucks CEO Schultz says the company needs to refocus on coffee as a sales battle

FILE – Starbucks founder and former CEO Howard Schultz testifies before the Senate Committee on Health, Education, Labor and Pensions at the Capitol in Washington, Wednesday, March 29, 2023. In a LinkedIn post published the weekend of April 4, 2024, Schultz says the Company leaders should spend more time in stores and focus on coffee drinks as they work to reverse declining sales. (AP Photo/J. Scott Applewhite, file)

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

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

The Seattle coffee giant said sales fell 2% in the January-March period as store traffic declined around the world. It was the first time since 2020 that the company saw quarterly revenue decline. Starbucks also lowered full-year sales and profit expectations.

Schultz, who bought Starbucks in 1987, is credited with growing the company into the global behemoth it has become with nearly 39,000 stores worldwide. He has been chairman emeritus of the company since last fall, when he stepped down from Starbucks’ board.

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

In his role, Schultz said senior leaders – including board members – should spend more time talking to baristas in the company’s stores.

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

Laxman Narasimhan, who became CEO of Starbucks last spring, works half a day once a month at Starbucks stores.

At some points in his post, Schultz appeared to question Narasimhan’s turnaround plans. In a conference call with investors last week, Narasimhan mentioned several new products that he believes will draw customers to 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 go-to-market strategy needs to be revised and taken to the next level with innovation in coffee,” he said.

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

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

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

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

Schultz stepped down again in 2017, but returned in 2022 to lead the company on an interim basis. In 2023, he appointed Narasimhan, a former PepsiCo executive, as CEO. Schultz left Starbucks’ board last fall and became chairman emeritus.

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

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