Starbucks’ CEO Isn’t Leaving. Only Howard Schultz Is.
Posted June 17, 2018 6:39 p.m. EDT
Kevin Johnson has been chief executive of Starbucks for more than a year now, though you wouldn’t always know it. For much of Johnson’s tenure, he has been overshadowed by Howard Schultz, the company’s former chief executive and departing executive chairman.
There was Schultz in Shanghai in December, opening one of the company’s high-end Roastery coffee shops. There was Schultz at the annual meeting in March, drawing rapturous applause from shareholders. There was Schultz on TV in April, running damage control after two black men were arrested at a Starbucks in Philadelphia while waiting for a friend and again when the company closed all its stores May 29 for racial bias training of its employees.
But after several years working in Schultz’s shadow — a door connects the two men’s offices, and Schultz often pops in unannounced — Johnson will be on his own. Starbucks recently announced that Schultz, who has been chief executive or chairman of the company for three decades, will leave at the end of the month, raising speculation that he might be considering a run for president in 2020.
“In these transitions, the prior CEO has to step back a bit to allow the new leader to step forward,” Johnson said in an interview last week, his first since Schultz announced his departure. “We’ve been in that period over the last year and a half.”
Johnson’s ability to take over from Schultz — an emotional leader committed to publicly addressing thorny social issues — has been put to the test, most notably when the arrest of those two men in Philadelphia set off a national debate about race.
“Race relations has been a challenging topic in America for centuries,” said Johnson, 57. “The realization that it happened in Starbucks was a wake-up call.”
Johnson said he had learned of the incident when he woke up in his home in Seattle on a Saturday morning, his inbox flooded with angry emails. He flew to Philadelphia the next day, and over the following days he made a series of public apologies, met with the two men who had been arrested and fired the store manager who had called the police.
As Johnson and other executives considered what more substantial steps they could take, Schultz chimed in with an idea to shut down all stores in the United States for half a day to talk about bias.
“He suggested, ‘Hey, one thing we’ve done in the past, 10 years ago, was close all the stores for the training around pulling espresso shots,'” Johnson said. “We immediately said, ‘That’s what we’re going to do.'”
The anti-bias training was an ambitious attempt to get employees to reflect on their own stereotypes and experiences with discrimination, and will now be part of new-hire orientation. “That’s being woven into the fabric of how we run the company,” Johnson said. Over the years, Schultz turned the coffee company into a progressive force, giving workers above-average benefits, and weighing in on issues like gun violence, same-sex marriage and race relations. Johnson said that wouldn’t change with Schultz gone.
“The mission and the core values of the company are very, very important,” he said. “Those things are so important, and I intend to continue and enhance those.”
Satya Nadella, a Starbucks board member and Microsoft’s third chief executive, after Steve Ballmer and Bill Gates, said he had talked to Johnson “about what it means to succeed a legendary founder.”
“I shared the best advice I got from Steve and Bill,” Nadella said. “It was: ‘Don’t try to be us. Don’t try to fill our shoes.’ He’s not Howard. But at the same time, he’s learned a lot from Howard.”
Johnson also has a business to run. That job will be made easier by the fact that Starbucks is a relatively healthy company. Same-store sales grew 2 percent last quarter in the United States, and 4 percent in China. Total revenue for the quarter was $6 billion, and the company is worth some $78 billion.
Yet Johnson faces several operational challenges as he looks to move Starbucks beyond Schultz. The stock has not budged since Johnson took over as chief executive in April last year. Tastes are fickle, and Starbucks is scrambling to meet the demands of health-conscious consumers.
And while Starbucks continues to open new stores — it has some 28,000 around the world — there are concerns that it may be growing too fast for its own good.
“They are opening units in the U.S. at a fairly rapid clip, especially for a company as mature as they are,” said Sara Senatore, an analyst at Bernstein. Though Johnson’s boosters, including Schultz, say he is the right man for the job, joining Starbucks was not an easy decision, he said. A longtime technology executive who held senior roles at Microsoft before becoming chief executive of Juniper Networks in 2008, Johnson joined the Starbucks board in 2009. But a few years later, he learned he had skin cancer.
At first, he continued to work at Juniper. Then one day, he was at the airport about to travel to Europe for client meetings, having just rescheduled a doctor’s appointment.
“I sat there and I thought to myself, ‘Why am I doing this?'” he said. “'Why am I prioritizing traveling to Europe to sell networking technology over my health, my life, my family, people I love?'”
He soon retired from Juniper to spend more time with his family, but continued serving on the Starbucks board. Then, in 2015, after regaining his health, Johnson was persuaded by Schultz to join Starbucks as chief operating officer.
Those who work with Johnson say he has brought a new level of analytical rigor to Starbucks. They credit him with a series of business decisions that have simplified the company and improved profitability.
Among the actions he has taken: buying full control of Starbucks’s East China operations for $1.3 billion, selling the Tazo tea brand to Unilever for $384 million, closing 298 Teavana stores (a tacit admission that Schultz’s foray into stand-alone tea shops was a mistake) and striking a global distribution deal with Nestle.
“Kevin and Howard will usually get to the same place,” said Rosalind Brewer, Starbucks’ chief operating officer. “For Kevin, it has to be a mental, cognitive transition. Whereas Howard has the gut. This is his baby.”
Perhaps most important, Johnson has led efforts to make Starbucks a more technologically adept company. He has overseen the rollout of mobile ordering and pickup, integrated a loyalty program into the Starbucks app and shut down the company’s e-commerce store, a counterintuitive move he said was a recognition that other retailers, like Amazon, could do it better.
“The most difficult transition any company will ever go through is from founder-led to founder-inspired,” Johnson said. “I’m excited about this opportunity. But I also recognize it’s a significant responsibility. That’s not lost on me.”
As for Schultz, should he run for president, at least one former employee — unsurprisingly — is ready to offer a vote of confidence.
“No matter what Howard decides to do in this next chapter of his life,” Johnson said, “he is a great leader and a great person.”