Starbucks' First Airborne CEO: I Now Have a Chinese Name

Starbucks has been striving to become a unique company and will implement it in its own way.

Article | Chinese Entrepreneur Reporter Liang Xiao

Editor | Mina

Image Source | Interviewee

After arriving at Starbucks, Laxman Narasimhan had a Chinese name - Nasihan.

On March 20th, 151 days after his appointment as CEO of Starbucks, Nasihan officially took office - nearly two weeks ahead of schedule.He is the seventh CEO of Starbucks (three of them are the founder Howard Schultz). Strictly speaking, he is also the first airborne CEO in Starbucks' history.

At this point, Starbucks has entered the turning point of recovery. According to financial report data, Starbucks' global business net revenue increased by 14.5% year-on-year and net profit increased by 34.7% year-on-year in the second quarter of 2023 (as of April 2, 2023); Net revenue in the Chinese market increased by 3%, while same store sales increased by 3% - the first positive growth since the third quarter of the 2021 fiscal year.

Schultz can finally rest assured to hand over the baton. In 2022, Starbucks faced internal and external difficulties, and Schultz had to return five years after handing over as CEO in 2017- the last time was in 2008. He transformed Starbucks from a small shop specializing in baking and selling coffee beans only in Seattle to a chain coffee retailer with over 36000 stores worldwide, and twice pulled the company back from the brink of crisis. He is a legendary entrepreneur with great appeal and influence.

Becoming a successor is not easy, and becoming a successor to a celebrity founder is even more difficultHow does Nasihan face the challenges and pressures?

Schultz is the absolute founder of the company, and we deeply respect everything he has done. "In an interview on May 30th, Nashan answered a question from" Chinese Entrepreneur "and said," I am not Schultz, but the experience and training of the past 30 years have prepared me for this job,Not as an entrepreneur, but as a professional leaderTake Starbucks to a new level of development

In the past 7 months, Nashan has gradually entered the role. Before his official succession, he worked together with Schultz for 6 months, went to the store to learn more coffee related knowledge, and also participated in the training of coffee masters - after 40 hours of training, he became a junior "green apron barista" certified by Starbucks. But I haven't been able to get the black apron yet, "Nashan said." My friends suggested that I need to be more proficient in the art of drawing flowers

In these 9 days in China - his first visit to the Chinese market as CEO of Starbucks - he visited stores in Beijing and Shanghai, attended two Chinese Partner Forums, and a Starbucks employee on site said, "Nasihan is very passionate, like a speaker" - which is also the impression of Schultz from the outside world.

In the book 'All the Way Forward', the founder once reflected on the gains and losses of past handover, writing that 'the person who can lead Starbucks best should be someone who has served within the company for many years'. But now he has made such a choice. Perhaps, Nashan, the CEO with the least Starbucks bloodline, will become the person Schultz ultimately trusted with Starbucks.

A name

The name is actually a "meeting gift" given to the new CEO by the Starbucks China team.

Belinda (CEO of China) called me and said, 'We have an idea and we've given you a new name - Nasihan, what do you think?' I said, 'This idea is great,' "Nasihan recalled, 'I should have done that long ago.'

His interest in China has a long history.Nashan was born in India and first came to China in 1999- the year Starbucks opened its first store in the Chinese market; In 2010, he specially took his mother to China to celebrate her 70th birthday and took her to climb the Great Wall. "The steps are too high, she can only climb two or three steps," he said.

His work background is also closely related to China, and he has been researching the Chinese market and consumers for over 25 years. Before joining Starbucks, he worked for McKinsey, PepsiCo, and the parent company of brands such as Li Jieshi - Durex, Delu, and Mead Johnson, all of which were the first foreign-funded enterprises to discover the potential of the Chinese market and lay out their business here. On the day he officially became the CEO of Procter&Gamble in 2019, Nasihan chose to conduct live streaming with his employees in China, placing the first global employee conference outside of the UK at Procter&Gamble in China.

But he never thought about giving a Chinese name until this time. He has been practicing this name, especially the character 'Han', which he knows has rich connotations, but 'the strokes are really too difficult'.

Just like the Chinese market for Starbucks - significant but also challenging.Nowadays, China has become Starbucks' second largest market outside of the United States, with revenue accounting for nearly 10%. Schultz has repeatedly stated that "Starbucks' business scale in the Chinese market will eventually surpass that in the US market." Nashan believes this, "China's per capita coffee consumption is 12 cups, Japan's is 200 cups, and the US's is 380 cups - there is still a lot of room for growth, so Starbucks still has many development opportunities

There are also more and more competitors: Ruixing, which has been established for more than 5 years, has already surpassed Starbucks in the number of stores by over 10000 through direct sales and franchise. The latter currently has more than 6200 stores; MStand, based on premium coffee, is also constantly encroaching on Starbucks' main stronghold; Canada's old brand coffee Tims has separately packaged and listed its Chinese business; Even cross-border players such as China Post and Hailan Home, who were previously invisible through telescopes, have come up with the idea of coffee.

Competition is pressure and the best teacher. In recent years, Starbucks has accelerated its store opening speed in ChinaIt is also announced that by 2025, 9000 stores will be opened in China, while expanding its development reach to more third and fourth tier cities - which means opening over 1000 stores annually in the future. In the past four fiscal years (2019-2022), Starbucks China's net increase in stores was 600, 581, 654, and 661, respectively.

Innovation has also increased, both at the product and service levels. In early 2023, Starbucks launched the Oleato olive oil coffee series; On March 21st, Starbucks China and Gaode Maps jointly launched a "street pickup" service - customers who drive can choose Starbucks stores along the way to place orders, and the store staff will deliver the coffee directly to the car. According to Starbucks' data, there are currently over a hundred stores in Beijing that can provide this service, and plans to promote it to over 1000 stores nationwide within the next year.

Starbucks China CEO Wang Jingying referred to these as "slow enjoyment experience" and "fast experience" respectively - Starbucks will rapidly expand in these two directions in the future. But she also emphasized that despite competition, one thing has never changed: "Our goal is to share our love for coffee, introduce the experience and culture of coffee shops, and do it in a way that we are proud of ourselvesStarbucks China will not adopt a franchise model - even a few years ago, it took back all its franchised stores.

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CEO

Starbucks has been striving to become a unique company, and we will achieve it in our own way.

Theater, Factory, and Future

butWhile emphasizing the store experience, it brings high operating costs.Taking Starbucks' cost composition for the second quarter of 2023 (as of April 2) as an example, while generating revenue of $8.7 billion, operating costs reached $7.5 billion, with store operating expenses accounting for the highest proportion at 48%; The second is product and delivery costs, accounting for 39%. In contrast, according to data from Lucky Coffee for the quarter ended March 31, 2023, the largest expense among the 547 million US dollars in operating costs was procurement expenses, accounting for 47%; The operating cost of the store is 130 million US dollars, accounting for 24%.

On the one hand, it cannot reduce the service experience; On the one hand, it is impossible to compress labor costs - both of which violate Schultz's business principles. So where do cost optimization and benefit enhancement come from?

butThe front 'theater' needs the support of the back 'factory', and in order to present the performance, it is necessary to ensure that the 'factory' becomes stronger.

Starbucks' key investment in recent years has also focused on this, such as the Starbucks Coffee Creative Park built in Kunshan, which is not only a more modern baking factory, but also a comprehensive upgrade of supporting distribution centers - this is Starbucks' largest investment outside the United States, achieving a complete supply chain from coffee cultivation to production and distribution in the Chinese market.

This is both an opportunity and a challenge for Starbucks.

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Just like when he switched shifts three times before.