| Left hand price increase, right hand new energy.
Starbucks, which has just been exposed to expand the business of new energy vehicle charging piles, has ushered in a major personnel change: Schultz, the father of Starbucks, will return again.
On March 17, Starbucks's official website announced that the current CEO of Starbucks, Kevin Johnson, will leave his post on April 4, when Howard Schultz, the 68-year-old founder of Starbucks, will join the board and serve as acting CEO, re-taking the helm of the global coffee giant.
Affected by this news, Starbucks stock price rose more than 8% at one point in pre-market trading. According to Bloomberg Businessweek, Cowen Inc. analyst Andrew Charles noted in a note that Schultz's return is "good news for this stock that has been under pressure."
In his return statement, Schultz said: "Although I had no previous plans to return to Starbucks, I knew that the company would have to transform again to usher in a new, exciting future, a future that would move all stakeholders towards shared prosperity." The announcement released by Starbucks shows that Starbucks will find its next CEO this fall.
This means that the time for a drastic transformation to be handed over to Schultz may only be half a year. Schultz, who became the CEO of Starbucks for the third time, wants to take over a Starbucks that is in transition again.
In 1954, Schultz was born into a slum family in New York, the United States, a family of five crammed into a government-subsidized low-cost housing, and his father's accident made him determined to become a business leader and provide health insurance benefits for ordinary employees. In his autobiography, All the Way Forward, he wrote: "The tragedy of my father's life inspired me as a young man to pursue my dreams."
In 1987, when Starbucks was facing a financial crisis, Schultz turned the tide and transformed Starbucks, which mainly sold coffee beans, into a leisurely coffee shop; in 2008, when the financial crisis came, Starbucks also suffered from stock price lows and operational declines, and Schultz returned again, leading Starbucks to complete the transformation. In the decade before Schultz stepped down as CEO in 2017, Starbucks shares rose 1,350 percent.
Schultz
In the past year, Starbucks has suffered a series of criticisms: in the US market, labor conflicts have led to Starbucks, which has not had a union for many years, produced its first union, and is gradually increasing; in the Chinese market, which Schultz regards as the largest market in the future, it is facing the resistance of China's local coffee brands and new tea brands, encountering weak growth, and the frequent food safety problems have also made Starbucks deeply involved in the whirlpool of public opinion, and a little bit cannibalize the high-end image that Starbucks has established for more than two decades.
There are growing signs pushing Starbucks to the brink of transformation again. Judging from the feedback from the investment market, the outside world is also looking forward to Schultz's return to save Starbucks again. Only, will he succeed this time?
Before Schultz first became CEO of Starbucks, he had already founded his own coffee brand, Il Giornale, which means "newspaper" in Italian and "everyday."
Before founding Il Giornale, Schultz had just left Starbucks because his idea of transforming a coffee shop to starbucks had not passed, so the frustrated Schultz decided to do it himself. When he resigned in 1985, Schultz had been at Starbucks for three years and had assumed the position of head of marketing.
After leaving Starbucks, Schultz's Il Giornale Café lived up to what his ideal coffee shop should look like: laid-back, comfortable, and everyone in it doing their own thing.
In 1987, while Schultz was happy to have his dream come true, Starbucks was in financial crisis. The Starbucks founder approached Schultz to buy Starbucks and help It weather the crisis. Eventually, with the help of investors including gates sr. Gates, the father of the world's richest man at the time, Schultz bought Starbucks for $3.8 million, allowing Starbucks to "load" Il Giornale's coffee service model.
It can also be said that today's Starbucks is actually the "Il Giornale" founded by Schultz in 1985. At the time, the original Starbucks Company had only six stores and Il Giornale had only three stores, but Schultz promised starbucks to open 125 stores in five years.
With the expansion of all parts of the United States, the welfare of employees, future investment projects, and the improvement of management standards, Starbucks has developed in full swing with the realization of the measures proposed by Schultz, and in 1990, it opened 30 stores in a year.
In 1999, a new store with a mermaid logo appeared in Beijing Guomao, which was starbucks's first store in the Chinese market. With the opening of this store, Starbucks not only opened up the Chinese coffee market step by step, but also influenced the pattern of the Chinese coffee market for a long time, and Schultz stepped down as CEO for the first time in 2000.
However, at the beginning, Schultz insisted on betting on the Chinese market, which was subjected to considerable internal pressure. In his autobiography " All the Way Forward " , he wrote : " Years of losses [in the Chinese market ] have created a huge pressure to leave and abandon the Chinese market both inside and outside the company. ”
Starbucks, which was expanding dramatically at the time, soon faced a crisis. By 2007, the number of Starbucks stores worldwide reached 15,011, with a compound annual growth rate of 35.1%, far exceeding the steady growth rate of "15%-20%" planned by Starbucks.
Food safety problems and negative public opinion caused by rapid expansion also occur from time to time, which directly affect Starbucks's comparable store sales (that is, the year-on-year increase or decrease rate of existing store profits). In the fourth quarter of 2007, this figure fell to 1%, which had previously remained at 5% or more, which Schultz considered to be "the worst performance since 1992".
Schultz had to return to the front lines of operations, becoming Starbucks CEO again in January 2008, pointing out the hidden dangers of Starbucks' explosive expansion, and pointing out that its deeper problem was that Starbucks had deviated from the soul of its former business.
On the one hand, Schultz launched a radical "slimming program", closing nearly 1,000 stores in two years and laying off more than 10,000 employees, on the other hand, rebuilding relations with customers and communities, reminding employees that "the cornerstone of the company we value most is our culture and behavior." The concept of "third space" has since taken root in Starbucks.
In 2017, Schultz stepped down as CEO for the second time. The direct reason for this departure was attributed to Schultz for the U.S. presidential campaign.
In March 2017, The New York Times reported that Schultz was close to running in the 2016 presidential election. As a businessman, Schultz was extremely concerned about national politics. In an interview with The New York Times, Schultz said that "I am deeply concerned about the current state of the country", and he himself was once described by the US media as "one of the most outspoken corporate leaders in American politics".
At a salon event in 2019, Schultz publicly announced that he was considering running in the 2020 presidential election, but many people in the room at the time thought that his chances of winning were no more than 1%. In the end, Schultz's thoughts about running for president became less and less concerned.
In 2022, the challenge of being ceo of Starbucks for the third time once again fell on Schultz's shoulders.
Since January this year, the cumulative decline in Starbucks stock price has reached 26.95%.
As the Chinese market that had high hopes for Schultz, in the past six months, food safety and trust issues have been concentrated, and the remarks of "boycotting Starbucks" and "Starbucks getting out of China" have risen one after another on the Internet. For a long time, starbucks's brand image in the Chinese market has the potential to gradually collapse.
In December last year, the news that Starbucks tampered with the shelf life to sell expired pastries exploded the Internet, raising questions about the so-called highest standards in the coffee industry's ceiling and forcing the public to re-examine the well-known coffee institution. Starbucks China issued an emergency statement saying it had closed both stores and immediately launched an in-depth investigation.
On the eve of 315 this year, that is, on March 12, Starbucks was once again on Weibo's hot search for food safety issues. A netizen posted a picture saying that he drank cockroaches in Starbucks coffee. Starbucks China's official Weibo once again responded, saying, "The customer involved placed an order for a drink through a third-party takeaway platform on March 10... No related pest problems were identified. ”
As Starbucks' second largest market in the world, the Chinese market contributes more than 10% of Starbucks' revenue every year. According to Starbucks' earlier fiscal 2021 financial report, Starbucks's market in China reached $3.67 billion, contributing 12.7% of Starbucks' revenue.
As a long-standing coffee benchmark in the Chinese market, Starbucks' position is being increasingly challenged.
Local Chinese coffee brands, such as Luckin and Manner, as well as new tea brands such as Neixue's Tea and Xicha, are diverting Starbucks' consumer users.
There is even a saying in the investment circle that as long as a Manner is opened next to a Starbucks store, the sales of this Starbucks will drop by 30%.
This impact is already reflected in Starbucks earnings. Starbucks' fiscal first quarter results for fiscal 2022 (October 4, 2021 to January 2, 2022) show that same-store sales in China fell by 14% in the quarter, the average unit price fell by 9% during the earnings period, and the transaction volume fell by 6% year-on-year.
Not only the Chinese market, but also the U.S. market, the largest market, the union movement has also made Starbucks suffer an unprecedented impact.
Last December, Starbucks employees in Buffalo, N.Y., voted to form a union, the first since Starbucks was founded. More unions are in the works. According to CNBC, in February, a third Starbucks store voted for the union. As of Feb. 26, more than 100 Starbucks stores had submitted union election applications, all within the past six months.
In the face of new challenges, Starbucks has introduced a series of targeted strategies.
In the past few months, Starbucks China has raised prices twice in a row. In the price increase in February this year, the price of many products, including American coffee and latte coffee, has increased by 1-2 yuan. Starbucks responded to the outside world, "Pricing is set after considering a number of factors such as operating costs. ”
It is worth noting that Starbucks in the United States is also raising prices. According to CNN, Kevin Johnson said that Starbucks raised its price in the United States in October last year and raised its price again in January this year.
The price increase may be a measure for Starbucks to cope with the crisis of declining sales and rising costs. Due to the squeeze on profits caused by inflation and labor market problems related to the epidemic, after the release of this year's latest earnings report, Kevin Johnson said: "Starbucks expects to continue to raise prices in the coming months."
In the face of competition from local Chinese brands, Starbucks has accelerated the speed of store opening (197 new stores were added in the first quarter of fiscal 2022, which is the fastest quarter since Starbucks entered China), while extending its tentacles to the territory of the other party, adjusting the proportion of tea products in stores, and launching new flavors of tea in a targeted manner.
At the same time, in the menacing battle of China's local coffee brands, in order to retain talents, Starbucks China has also begun to increase employee wages and benefits.
On November 12 last year, Starbucks China's official website announced that starting from October 2021, all full-time retail partners (employees) of Starbucks China will enjoy "14 salaries" for the first time. In addition, Starbucks China has also launched welfare initiatives including competitive annual performance pay adjustments, more optimized morning and evening shift allowances, upgraded "housing assistance allowances" in some cities, and "Partner Know the World" program to encourage employees to experience in different cities.
If these are Starbucks presents, where is the future for Starbucks? Recently, Starbucks gave one of the answers - to enter the new energy vehicle track.
On March 15, local time in the United States, Starbucks officially announced that it officially entered the electric vehicle refueling track and cooperated with Volvo to lay a DC charging network. At the same time, Starbucks also revealed that it will continue to expand investment in new energy after that, and promised that by 2030, Starbucks charging stations will all use solar energy as a source of electricity.
For Starbucks, there is no doubt that it can use the charging time to leverage potential customer groups, making it a new consumer user of the store, and then increasing the unit price of store customers.
Before the arrival of this autumn, will Schultz's transformation plan come to an appointment?
Resources:
"From scratch" by Howard Schultz
"Starbucks CEO is about to retire founder Schultz is temporarily at the helm", Bloomberg Businessweek
"Interview with Howard Schultz, father of Starbucks: Navigating Tough Times with Creativity and Empathy" Interface News
"Starbucks also engages in charging piles, the kind that joins forces with Volvo" smart car reference
Howard Schultz: The Soul of Starbucks Retired, Next Stop is the President of the United States, The Time