Starbucks names Indian-born Narasimhan as new CEO

Starbucks has hired Laxman Narasimhan as its next CEO, the company announced Thursday, putting him in charge of the world’s largest coffee chain as it grapples with a growing unionization movement, rising inflation and losses in China.

Narasimhan will take over in April from Howard Schultz, Starbucks’ longtime leader, who took back the reins of the company this past April after Kevin Johnson stepped down as CEO.

“We were looking for somebody that was a true servant leader that had a deep sense of humility,” Schultz said in an interview. “Laxman first and foremost is a true servant leader.”

Narasimhan, 55, will be thrust into one of the world’s most prominent corporate leadership roles, overseeing roughly 35,000 stores and 383,000 employees globally. A former senior PepsiCo executive, he has most recently led Reckitt Benckiser, the British conglomerate that makes Lysol disinfectant and Durex condoms.

Born in Pune, India, Narasimhan moved to the United States in 1991 to attend the University of Pennsylvania’s Wharton School. He then joined consulting giant McKinsey & Co., eventually becoming a senior partner. In 2012, he moved to PepsiCo, where he rose through the ranks, overseeing operations in Latin America, Europe and sub-Saharan Africa, and becoming chief commercial officer.

He was hired at Reckitt in 2019 to revive the conglomerate, which had been burdened by the $16.6 billion takeover of infant products maker Mead Johnson and an ill-fated move to split the company. He drew praise from investors and analysts for selling underperforming operations and steering the company through the pandemic.

Shares in Reckitt fell more than 5% Thursday after the company unexpectedly announced that Narasimhan would step down as its CEO on Sept. 30 — explaining only that he “has been approached for an opportunity that enables him to live” in the United States. He had been looking for a job that would return him to the United States, where his two adult children live.

It was that breadth of experience across industries and international borders that drew Starbucks to Narasimhan. “He’s a true operator and has the DNA of an entrepreneur,” Schultz said, adding that his background in technology and supply chains would be invaluable to the company.

Schultz is expected to remain the company’s interim CEO until April, and then become an adviser to Narasimhan. Schultz will remain on the company’s board as well.

In Starbucks’ most recent earnings report, in August, Schultz spoke of the company’s early progress in reinventing itself — a task that will now fall to Narasimhan.

The coffee chain has become a focal point for a resurgent unionization movement over the past year, as workers press for higher pay and better working conditions. Since December, Starbucks has gone from no unions at its roughly 9,000 company-owned stores in the United States to 230 as of Monday.

Labor organizers and the National Labor Relations Board have accused Starbucks of illegally interfering with unionization drives and retaliating by closing stores and firing pro-union workers. The company has denied those claims, although it continues to resist unionization efforts. Last month, it raised wages for baristas except those at unionized stores, saying workers there needed to collectively bargain with management.

Schultz — who has pushed Starbucks to take progressive stands on issues like same-sex marriage and race relations, drawing criticism from conservatives — has said he opposes unions among the company’s employees. “We don’t believe that a third party should lead our people,” he said in June.

Still, the labor organization effort faces challenges, including reaching collective bargaining agreements at newly unionized stores. The pace of new union petitions filed with the NLRB, which peaked in the spring, has fallen sharply since.

Starbucks faces other challenges as well. In its earnings report last month, the company said that its profit margins had fallen, under pressure from the rising costs of ingredients and higher wages. It also suffered from lower sales in China, one of its biggest markets outside the United States, tied to pandemic restrictions in the country, although customers had begun to return.

Schultz has also spoken about an even more transformative shift in Starbucks’ business model.

The chain has long described itself as a “third place,” between work and home, where customers could lounge for hours. But the pandemic upended that hanging-out model. So, too, has the rise of pickup and drive-thru orders that drastically cut customers’ time in stores and increase expectations of quick service, putting more pressure on baristas.

Even consumers’ evolving drink preferences are driving change. As customized frozen drinks, which require more intricate and labor-intensive preparation, grow in popularity, the company has been forced to retool its stores to account for ice storage and new layouts to help its baristas.

Narasimhan will join the company in October, Schultz said, spending the next several months getting “immersed” in the culture of Starbucks, traveling to stores around the world and even working behind the counter at some before officially taking over.

“He will make us better,” Schultz said.