Laxman Narasimhan is an extremely odd choice to be the new chief executive officer at Starbucks Corp. (NASDAQ: SBUX), the coffee store company. He won’t actually be CEO at all. The former head of Reckitt Benckiser Group will be trained to become CEO between October 1, 2022, and April 1, 2023. Howard Schultz, the off-and-on CEO at Starbucks, will handle the training. It is a wonder that Narasimhan will not even join the board immediately. He is not trained well enough to join the other directors.
Aside from the fact Narasimhan will have a waiting period, he does not seem to have the right experience to run Starbucks. Reckitt Benckiser sells Lysol disinfectant, Calgon washing machine cleaner and Durex condoms. Starbucks should have found someone with real, recent retail experience.
Starbucks shareholders were not excited by the decision. The stock rose 0.21% after news of the appointment. That is after a 27% nosedive this year to just above $85 a share.
Much of Starbucks is an experiment now. Schultz is testing how stores should be run and how baristas do their jobs. According to The Wall Street Journal, a quarter of these employees leave within 90 days of joining. That creates a churn among the people who are the face of the company. Each new barista has to be trained, so this churn must affect service.
Narasimhan also has to decide whether the company’s efforts to keep unions out of its stores will be an important part of his regime. If Schultz has any say, the efforts will not change.
Starbucks may want a completely new perspective on its business. If so, Narasimhan is a perfect choice. If retaining employees, raising sales and perfecting logistics are the goals, Starbucks should have turned to someone from Home Depot or Wendy’s.
Starbucks also needed someone who could help the company immediately. Its shares were downgraded by Citigroup, Goldman Sachs and Wedbush earlier this year. Each was worried about expense pressures. Narasimhan seems ill-suited to address that pressing problem.
Coffee is not the same as washing detergent. In fact, it is not even close.
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