Starbucks has a new CEO, and there’s a lot to know about him! Here’s the lowdown on Laxman Narasimhan, the man about to take over the reins of the biggest coffee company in the world.

Reckitt Star Man Takes Starbucks Hot Seat

Starbucks is all set to see a change at the top, with the global coffee behemoth on September 1 announcing Laxman Narasimhan, the former boss of fast-moving consumer goods (FMCG) major Reckitt Benckiser, as its new CEO.

The 55-year-old Narasimhan, who is credited with helping the beleaguered Reckitt script a turnaround, would be joining Starbucks on October 1. He will, however, spend a few months working closely with Starbucks' father figure and interim CEO Howard Schultz, the partners, the management team, and the customers, in order to get an in-depth understanding of the Starbucks brand, the culture at the organization, and its 'reinvention plan'.

The company's 'reinvention plan' includes better pay for baristas, re-imagining stores, better employee welfare, and consumer experience. Narasimhan's appointment can also be seen as a part of this 'reinvention'. It is driven by an emphasis on reconnecting with customers and re-envisioning the company's mission statement.

The mission statement inspired by Schultz looks "to inspire and nurture the human spirit one person, one cup, and one neighborhood at a time".

Narasimhan will formally take over as the CEO and join the Starbucks board on April 1, 2023. During this transition period, he will stay "fully immersed" in the company, according to a Starbucks statement. Narasimhan will also visit Starbucks stores, coffee farms, and manufacturing units.

Until Narasimhan takes over, Schultz will stay as the interim CEO of the company. After that, he will remain on the board of the company.

Another Indian to Head Big US Business

Narasimhan joins a long list of CEOs of Indian origin taking over the reins at big American corporate houses. Some of the top names are Sundar Pichai, the CEO of tech conglomerate Alphabet Inc and Alphabet's subsidiary Google; Satya Nadella, the CEO of tech giant Microsoft; Arvind Krishna, the Chairman and CEO of IT behemoth IBM; Shantanu Narayen, the CEO of software firm Adobe; Jayshree Ullal, the CEO of cloud networking firm Arista Networks; Leena Nair, the global CEO of cosmetics giant Chanel; Punit Renjen, the CEO of professional services company Deloitte; Raghu Raghuraman, the CEO of cloud computing organization VMware; Vasant Narasimhan, the CEO of pharma major Novartis; Sandeep Kataria, the global CEO of shoemaker Bata; and Parag Agrawal, who was named by social media giant Twitter as its CEO.

Former Indian-origin captains of global businesses include Ajay Banga, the former CEO of Master Card, and Indra Nooyi, the former CEO of food and beverage major PepsiCo. The Starbucks CEO-designate Narasimhan had worked closely with Nooyi when they were at PepsiCo together.

Laxman Narasimhan: A Leader Par Excellence

Narasimhan has rich and varied experience, having carried out key leadership roles at a number of frontline global brands for a period spanning more than three decades.

Narasimhan had been with global consulting agency McKinsey & Company for 19 years (1993-2012), where he worked as a senior partner, focusing on the company's technology, retail, and consumer practices in America, Asia, and India, and steered the company's strategies as far as the future of retail is concerned.

In 2012, Narasimhan joined PepsiCo, where he held several senior positions till 2019, including CEO, Europe, Latin America, and sub-Saharan Africa; CFO, PepsiCo Americas Foods; and global chief commercial officer.

From July 2019, Narasimhan led hygiene-to-health business Reckitt Benckiser, which owns top global brands like Dettol, Durex, Lysol, and Mucinex. Earlier this month, the company announced that Narasimhan would be stepping down as CEO at the end of September.

Narasimhan is a trustee of the research group Brookings Institution as well, apart from being a member of the international relations and foreign policy think tank Council on Foreign Relations, a member of the advisory board of the Jay H Baker Retailing Center at the University of Pennsylvania's Wharton School, and part of wireless carrier company Verizon's Board of Directors. He had also served in the UK private sector advisory body Build Back Better Council, chaired by the Prime Minister.

Education + Early Life

Narasimhan was born and brought up in India, and earned a mechanical engineering degree from the College of Engineering at Pune University. He then completed an MA from the Lauder Institute, the University of Pennsylvania in German and International Studies, and an MBA from The Wharton School, University of Pennsylvania, in Finance.

Narasimhan described his childhood as "tough" during an interaction with The Sunday Times. His older sister passed away before he was born. Disaster struck the family again when Narasimhan's elder brother, who was eight years old at the time, passed away from a kidney disease. His father set up a business that supplied machine parts to America, but it was hard going. His father eventually fell seriously ill, and Narasimhan, who was at college at that time, had to frequently visit home to care for his ailing father.

However, he noted in the Sunday Times interview that his childhood in India was a valuable learning curve. "You learn resilience, you learn tolerance, you learn to find a way through," he said.

A string of scholarships and a couple of jobs then gave him the launchpad to migrate abroad for further studies, and he hasn't looked back since.

Salary + Perks

As expected, Narasimhan's accession to the top spot of the world's biggest coffee chain comes with a plethora of perks and benefits. His move from Reckitt Benckiser to Starbucks represents a massive step up if the market capitalization of the two companies is compared. While Reckitt is worth around $55 billion, Starbucks' value at $102.20 billion is nearly double. Narasimhan's personal rewards would see a matching hike and his annual payout is expected to be $17.5 million if he is able to fulfill targets.

At Starbucks, Narasimhan's initial annual base salary would be $1.3 million. He would also be entitled to a yearly incentive amounting to 200% of the base salary. His annual equity awards can go up to $13.6 million.

Furthermore, when he joins the company in October 2022, he would receive $1.6 million in cash as a signing bonus, and an additional $9.3 million in shares to compensate for the bonuses he is set to lose by leaving Reckitt. He will have $50,000 as legal fee cover as well. The company's private jet will also be at his disposal.

What Lies Ahead

The plum perks notwithstanding, Narasimhan's job is expected to be anything but easy. Indeed, there is no rose without thorns, and the thorns at Starbucks manifest themselves in the form of labor disputes and the growing specter of a recession.

The coffee chain is facing a push for unionization in its home market, the US, with more than 200 outlets voting in favor of the union. The acrimonious to-and-fro between the employees and the management has resulted in fights in court, affecting the company's image.

The Starbucks Workers United has revealed that 235 stores have already been unionized and 90 more have filed for elections, The Guardian reported. According to the workers' body, the company management prioritizes the interests of the shareholders at the cost of the rights of the workers, who are "understaffed, overextended, exhausted and burnt-out". In fact, only a handful of stores have begun negotiating a settlement with the unions.

According to a recent court ruling, the company was ordered to reinstate seven employees in Memphis, Tennessee, who were sacked allegedly for taking part in union activities. The company, however, contests the ruling and has expressed its intention to appeal. Starbucks has also been cribbing that federal officials have been interfering in favor of employees.

The company is also faced with declining sales in its second-biggest market, China, as strict lockdown norms imposed by the Chinese government in keeping with its zero-COVID policy, have dented operations.

The company has also had to suspend share buybacks in order to spend more resources on training and wages in the US.

Proven Managerial Expertise

Despite the challenges that stare Narasimhan in the face, his tactical nous and problem-solving expertise honed, especially at Reckitt, stand him in good stead to tackle the issues at Starbucks head-on.

Narasimhan assumed charge at Reckitt only a few months before pandemic shutdowns came into effect across the world. Though the pandemic pushed the sales of hygiene and health products up, there were other issues that proved difficult to handle.

When Narasimhan took over the reins, Reckitt was emerging from a cyberattack. It had manufacturing problems and suffered an unsuccessful product launch. It also found itself embroiled in a health scandal that saw hundreds dying in South Korea due to lung diseases resulting from exposure to one of Reckitt's humidifier disinfectants.

Narasimhan met the members of the South Korean independent panel for social disaster investigation, and wrote an apology letter to the commission, Bloomberg reported. He put a turnaround strategy in place, and two quarters is all he took to prepare a roadmap for communicating and rolling out his strategy.

Within his initial three months at Reckitt, Narasimhan replaced the company's chief financial officer, and let go of the hygiene home division president, who had been with the company for over three decades. Narasimhan also brought in an expert from his former organization PepsiCo to carry out the functions of chief transformation officer, according to the Bloomberg report.

Within six months of taking over, Narasimhan devised a strategy that focused on prioritizing investment and growth in the nutrition, health, and hygiene branches of the company, while letting go of non-core businesses. Accordingly, the Chinese arm of Mead Johnson that made infant formula was dispensed with. Narasimhan's predecessor Rakesh Kapoor had scripted a $17 billion takeover of Mead Johnson, which cost more than the sum of all of the company's earlier deals and put Reckitt in a financial mess.

Narasimhan also changed the culture at Reckitt. He visited warehouses and factories to get a better sense of the business, and improved ties with the company's major retail customers.

High Hopes Ride on New Boss

Schultz, who had built the coffee chain into a global empire, lauded the incoming CEO's passion for investing in humanity, and emphasized that Narasimhan was the "right leader to take Starbucks into its next chapter". Schultz further pointed out Narasimhan's "partner-centered approach and demonstrated track record of building capabilities and driving growth in both mature and emerging markets".

"His (Narasimhan's) deep, hands-on experience driving strategic transformations at global consumer-facing businesses makes him the ideal choice to accelerate Starbucks' growth and capture the opportunities ahead of us," said Starbucks Board of Directors Chair, Mellody Hobson.

The employee unions are hoping for a change for the better too. "This is the perfect opportunity for Starbucks to end the wrongful terminations, store closings, and war against workers, and instead embrace our union and sign the fair election principles," Michelle Eisen, a Starbucks Workers United leader, said, according to a Guardian report. One hopes the new Starbucks CEO would be able to build better Employee Engagement and hence, find a solution to the labor disputes in the organization.

Where Starbucks Stands Today

Starbucks started off in 1971, opening its first store in Pike Place Market in Seattle. Since then, it has grown impressively, operating over 34,000 stores, and employing 383,000 staff members across the world. Its growth was due in large part to Schultz, who had joined the company as the director of retail operations and marketing in 1982 and subsequently became the CEO. Some of Starbucks' landmark initiatives with Schultz at the helm included starting Frappuccino-blended beverages, an extension of the Starbucks brand into American grocery channels, expanding digital offerings with unlimited and free Wifi, and setting up a presence on Social Media .

According to a report by Statista, Starbucks earned $4.87 billion from its global operations in 2021. This was a significant improvement over the previous year's earnings of $1.56 billion. Starbucks had a brand value of around $60.3 billion in 2021, according to a Statista report. McDonald's emerged as the most valuable brand in the quick service restaurant or Qsr Industry that year with a value of approximately $154.9 billion.

Schultz, who took the chain from just 11 stores to over 28,000, came in as the interim CEO earlier in 2022 after the retirement of his hand-picked successor Kevin Johnson. Since then the company made several changes in its line-up of top executives and was reported by The Wall Street Journal to be looking only at external candidates for the role of the new CEO. This was part of Schultz's plan to bring in fresh talent to leadership positions.

Schultz has a Business Plan ready to help the company recover from a difficult year in which Starbucks' market value had shrunk by one-third. Narasimhan fits perfectly in that grand scheme of things.