Starbucks' new chief can make the coffee brand sing after radical stint at Dettol maker

Laxman Narasimhan has shown he is not afraid to introduce drastic changes in strategy

At first glance, it Is difficult to see what Laxman Narasimhan brings to the Starbucks chief executive role. Reuters
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It was a question that no one could answer. We were with a friend in the music business who had a lucrative line in writing jingles for adverts.

“When you think of Dettol, what musically comes into your head?” Quite how you pen a tune to sell a brand of disinfectant was beyond us.

I was reminded of our reaction when it was announced that Laxman Narasimhan is quitting as chief executive of Reckitt Benckiser, maker of Dettol, for the top job at Starbucks. He’s swapping the Thames Valley home of not only, Dettol but also Durex condoms, Calgon detergent, Nurofen painkillers and Strepsil throat lozenges, for Seattle and the headquarters of the world’s biggest and determinedly earnest coffee chain.

To say it seems like an unlikely match, packaged goods and coffee shops, is an understatement. At first glance, it is difficult to see what Narasimhan brings to the Starbucks chief executive role, how he landed the position.

But chosen he was, after what is claimed to have been a rigorous search by Charles Tribbett III, then co-leader of Russell Reynolds Associates’ CEO and board advisory arm, now vice-chair of the recruiter. Apparently, the 55 year-old was identified as a likely successor to Starbucks’ chief, Kevin Johnson, a year ago.

Johnson retired earlier this year and Howard Schultz returned to lead Starbucks for a third time. If anyone was identified with Starbucks’ raging success, it was Schultz. He first ran the firm in 1987, and in over four decades as chief executive and chairman, he drove the business from 11 stores to more than 28,000 in 77 countries.

Laxman Narasimhan has no experience of selling directly to consumers but he has instigated radical change. Reckitt Benckiser

Narasimhan goes from persuading the likes of Tesco and Walmart to stock and display prominently his floor cleaner and roster of, let’s face it, not-exactly-exciting, household goods, to serving millions of customers who visit a Starbucks every day.

He has no experience of selling directly to consumers, nor has he managed a network of retail businesses. Neither has he run a coffee shop nor operated a coffee machine. But he is an expert in consumer behaviour, in predicting and responding to their changing habits, and in making them pick up his items in preference to others.

What he has in his armoury is a CV that, apart from Reckitt, includes a stint as PepsiCo’s chief commercial officer, and also nearly 20 years at the consultancy and turnaround specialist, McKinsey & Co.

Narasimhan showed that at Reckitt he was not afraid to implement radical change. His first action on taking over in 2019 was to commission a strategic review. That saw him pledge to spend £2 billion over three years to, as he put it, “rejuvenate” the company’s line-up. Margins suffered as he funded new investments and redirected the group towards health, hygiene and nutrition brands.

The task facing Narasimhan is to repeat the magic at Starbucks. Bloomberg

Investors, sceptical at first, were won round. After a period of turmoil that had seen questions asked about its very survival, Reckitt is sharp and focused. It’s a group that has a newfound confidence, shareholders are delighted, and those doubts have gone away.

The task facing Narasimhan is to repeat the magic at Starbucks. That is the point, and goes to the heart of why he was anointed: for all its size and iconic status, the global brand is not in great shape.

At Reckitt, he called it rejuvenation; at Starbucks, they’re already referring to “reinvention”. Even before his appointment, the company was introducing better pay for baristas, and planning improvements to staff welfare and customer experience, and reimagining the stores.

Once the trendsetter, the original coffee chain that swept the world has been overtaken by cooler, smarter names. Starbucks, in short, is no longer the star it once was. The pandemic involved a greater emphasis on mobile pick-up and delivery. The branches felt empty and tired.

Starbucks is not immune to higher costs and supply chain difficulties. Nothing is more sensitive or prone to comparison and discussion than the price of a cup of coffee. It’s got to deal as well with its outlets often being in the wrong places as working patterns have shifted. Suburban independent coffee shops have enjoyed a boom from WFH; office district and downtown Starbucks, by comparison, have struggled.

Narasimhan’s new employer is not a happy nirvana. Getty

Despite its once-hippie image and love of positive messaging, Narasimhan’s new employer is not a happy nirvana. In the US, employees at more than 200 branches have signed up to labour unions in the past 12 months. More are following suit. Staff are seeking greater benefits and wages.

The feeling persists that Starbucks has grown too big, too sprawling, too disconnected from its origins and now seems old-fashioned and lacking in innovation, for which it was once famous.

Schultz, who remains on the board, is driving a shake-up — tellingly he decreed that the new CEO had to be external, citing a need for fresh talent and skills in its senior management.

Enter Narasimhan. Except he is not taking charge straightaway. In recognition of the dramatic transition he is making, and playing to his strengths as a strategist and planner, he is taking six months to get to know the business before officially commencing as CEO in April 2023.

Management are in for an awkward period. He’s known as a details merchant. Every aspect of Starbucks can expect to be examined and taken apart as he decides his moves.

Why Narasimhan? On closer inspection, it makes sense. A song for Dettol? Alas, I still can’t answer that one.

Published: September 07, 2022, 1:50 PM
BUSINESS