Starbucks Sacks CEO Donald, Brings Back Schultz

Starbucks Corp. Chairman Howard Schultz is returning to the job of CEO with the ouster of Jim Donald. The departure of the latter has been a matter of “when” rather than “if” for quite some time. With the stock price down 50% in 12 months, the company needs a new plan and someone credible to implement it. Thus far, Mr. Schultz is the someone credible, but only the faintest outline of a plan is public knowledge.

Mr. Schultz is undoubtedly the man for the job. As Starbucks’ CEO from 1987 to 2000 and as current chairman of the board, he knows the company as well as anyone could. He said yesterday that his commitment as CEO was “for the long term,” as it must be to succeed. And he intends to streamline the Company’s management structure – which is code for getting rid of people he doesn’t like or trust.

However, a shake up in the top levels of management isn’t going to be sufficient. According to the Wall Street Journal, which has internal corporate documentation as its source, McDonald’s intends to add coffee bars including baristas who serve cappuccinos and iced coffee drinks to 14,000 of its locations. As of November 2007, Starbucks had just over 15,000 outlets globally.

The real killer for Starbucks, though, is macroeconomic in nature. As much as Americans have taken to its Double Ristretto Venti Nonfat Organic Chocolate Brownie Frappuccino with Foam and Whipped Cream Upside Down Double Blended, paying $4 or $5 for a cup of coffee doesn’t make it in a slow-growth economy. Coffee may be necessary to the caffeine addicted, but they can buy a can of the stuff for that price.

The rumor mill says that the full plan for revitalizing the company will go public when Starbucks announces its financial results on January 30. It may include expansion overseas rather than in the US, new products, new store designs and better training for staff. Maybe if they could just get the staff to avoid sneering when someone mispronounces one of the drinks it would help.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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