One of the requisites when Laxman Narasimhan joined Starbucks as its global CEO in October 2022 was to be trained as a barista. On his recent visit to Pune, where he grew up and studied mechanical engineering at the College of Engineering, Narasimhan, 56, visited the Starbucks outlet at Koregaon Park, gamely donned the green apron of a barista and went behind the counter to serve up some coffee. With excited Starbucks staff and camera persons milling around, he prepared filter coffee in its newly launched ‘picco’ sized six ounce coffee cups for those who prefer a small shot of the brew.
In this interview, Narasimhan, whose grandfather and uncle both worked in The Hindu group for several years, talks about what it means to step into the iconic shoes of the founder, Howard Schultz, his plans to ‘refound’ Starbucks and the India story for the coffee giant. Narasimhan, a polyglot who speaks six languages, has worked across several countries in Latin America, Asia and Africa and in the US. Starbucks had a record year in 2023 with revenues of $36 billion and Narasimhan intends to grow on this base rapidly. Excerpts:
How did your role with Starbucks happen? How did Howard Schultz identify you from hundreds of managers in the US and the world?
I have had a privileged career. I went to America with very little, graduated from Wharton with an MBA in finance and then had a global career. I spent many years at McKinsey, PepsiCo and then Reckitt; it has helped me get an experience and quite a global life. So, when I was in the UK with Reckitt, I needed to return to the US for personal reasons. Starbucks too searched across the world and they probably saw in me the fact that I understood the categories they were present in. I am a global citizen and I understand the importance of our partners in the execution of the Starbucks brand. Starbucks saw that our values were consistent, and through the interviews, they also got a sense of my love of technology and how tech plays a key role in Starbucks.
How has it been stepping into Howard Schultz’s large shoes?
Howard is an iconic entrepreneur. He’s redefined how the world drinks coffee. He built the company with a market cap of well over $100 billion, 38,000 stores across the world and he’s built a platform for 4.6 lakh partners. We buy coffee, in a sustainable way, from over half-a-million farmers, and with a platform that supplies information and knowledge to another half-a-million. It’s been a journey of an iconic founder who built an iconic brand. I don’t have that record that he has, but I bring different things to the table. The company is at that stage where he needed somebody who understood the partners, the theatre at the store front as well as the factory at the back, the importance of the global opportunity, and bring in an innovative way of thinking to bear on the products to scale the business.
My relationship with Howard has been one of a sensei — a teacher. When I first came over, we agreed that we will ‘refound’ this company, which is exactly what we have been doing since January of last year. So, we have gone on a path to contemporarise this company for the next generation.
The triple shot reinvention strategy, how’s it working for you?
We announced it only in November. It’s how we further redefine the ambition of the company, in terms of what we do. It is about how we elevate the brand and innovation through the various types of experiences that we deliver across all formats, depending on where the customer is, and how we ensure the brand remains at the forefront of culture and trends. Coffee will continue to be at the core of our innovation with new beverage offerings and customisations and we will focus on providing distinct food options as an attach for our customers.
The second thing we announced is how we strengthen and scale up digital and how we connect with customers. The third is going truly global; we have a leg in the US and we have a leg in China and the third leg of the stool is the rest of the world, and there’s a large number of places where the brand is highly regarded and we have to turn on the gas in some of these places and grow faster and we have to build the capabilities and also ensure that the culture reinforces all of it.
What that means is, it takes you to the two pumps; there’s a pump around efficiency, to manage the factory at the back and largely to fund the capabilities. Also, the partner culture is so core to the company and as we get bigger and the world gets more complicated, you got to reintegrate the partner culture to ensure we stay at the cutting edge. So, this reinforces the two pumps and it’s a long-term goal. This is a journey that we are on, this is our North Star and we feel good that what it leads to in terms of the economics and the business that it can generate.
We also defined who we are at our best across six stakeholders: for partners it’s about bridging to a better future, for customers it’s about uplifting them every day, for coffee farmers it’s about ensuring the future of coffee, for communities it’s about contributing positively and therefore for the environment giving back more than we take, and which then gives enduring returns for our shareholders.
There are five values that drive us. The first is about the craft of making coffee; the second is about results, about the coffee that is served and the financial results; the third is courage, we have done things boldly to redefine the business; and, lastly, Starbucks is about belonging and joy.
What is the India story in the Starbucks piece?
We have a launch pad; the coffee culture in India is at the moment where you are going to see us move even quicker. Last year we did 71 stores — that’s one store in five days. Now we are going to do one store every three days. India is a very important market for us. Now that we have built the foundation, the time has come to further develop it and grow it sustainably.
India is primarily a tea drinking country; do you see a shift towards coffee?
Look at it this way: we went to China 25 years ago when it was a fully tea drinking country. We worked really hard and we now have 6,000 stores there. We open a store in China every eight hours. But consumption is still only at 12 cups per capita. While in Japan, the per capita consumption is at 280 and in the US it’s at 380. Japan had a coffee drinking culture even before the war; we went to Japan 25 years ago and we have 1,735 stores there. In markets like China, which had a history of tea drinking, it takes time. The true test is not what happens in the next one year, but what happens in the next 10-20 years. With partners like the Tatas, we can really think in the long term and build a business that is substantial and something that makes an impact for India.
Starbucks is perceived as a premium offering. Are you looking at affordable options for the middle market?
First of all, we have to ensure we deliver a consistent experience that customers value. In addition to that is accessibilitys in meeting customers where they are — both in terms of formats and locations, and also in terms of providing them options. We have done this with the recently introduced ‘picco’ range (a six ounce cup of coffee). We’ll continue to give customers an accessible choice in both beverage and food attach as the market evolves. But we are an experiential brand and we always watch that the value that we offer matches the experience that we provide and we will try to ensure that the two are always in sync.
Will India be among your faster growing markets?
India is definitely one of our faster growing markets but it’s on a small base, relative to what we have internationally. On a global base of around 38,000 stores, we have only 390 in India. We plan to get to 1,000 stores by 2028. This is a game we are playing for the long term; India will grow and change as the investments come to bear in the cities and they evolve. We are not chasing numbers, we are here for the long term. We are looking at a business that is substantial and delivers a great experience. So far, we are pleased with the investments we have made in India and we intend to, along with the Tatas, continue to do more.
Do you see Starbucks in India also emerge as a ‘third place’ for consumers?
We are in the business of human connection. The need is universal. That’s the secret sauce of this business and we do that with coffee, a medium to make that happen. One of the memories I have, maybe it’s my Tamil upbringing, but it’s to do with the early morning coffee which my parents would have, and it’s about connecting with yourself. Only when you connect with yourself you connect with others.
In the US we are the number one coffee brand. In the connection business, we play across the spectrum. Some drink our coffee at home, some in the stores, some come alone but like to be with others around; they sit with their coffee and may be a laptop and look around at other people and perhaps think that they are part of something bigger. Many just observe life as they work. In a polarised world, we need that place where we can come together and find a common ground.