On September 9, Brian Niccol officially assumed the role of CEO at Starbucks. His appointment marks a pivotal shift in leadership as Starbucks grapples with significant brand identity issues and a downturn in sales.
According to an August 13 press release, Starbucks Board Chair Mellody Hobson announced the replacement of former Starbucks CEO Laxman Narasimhan with Niccol, the former CEO of Chipotle, following a year in which the corporation’s brand identity continued to struggle and sales declined.
“Our board believes he [Niccol] will be a transformative leader for our company, our people, and everyone we serve around the world,” Hobson said in the press release.
USA Today reported at the beginning of the year that the National Consumers League had sued Starbucks for allegedly engaging in false advertising by claiming its beverages are 100% ethically sourced, despite evidence that the company relies on suppliers with egregious labor and human rights violations. The lawsuit, filed in Washington, D.C., aims to protect consumers from unknowingly purchasing unethically sourced products at a premium and seeks corrective advertising and significant reform in Starbucks' sourcing practices. Starbucks plans to defend itself against these claims, asserting that it takes the allegations seriously.
By the end of April, Starbucks reported a 2% drop in second-quarter earnings, with net revenue falling to $8.6 billion. This trend continued into the third quarter, with Starbucks again falling short of analysts' projections. Net sales decreased by 1% to $9.11 billion, compared to the anticipated $9.24 billion. Despite these figures, the company's shares rose more than 5% in extended trading, as the results were not as dire as feared. The coffee giant's net income also dropped, reaching $1.05 billion, or 93 cents per share, down from $1.14 billion, or 99 cents per share, the previous year. U.S. traffic declined by 6%, prompting Starbucks to explore strategic partnerships in China and expand its global footprint with 526 new stores during the fiscal quarter.
Starbucks Founder Howard Schultz said repairing Starbucks’ damaged brand has to start within, referencing the company’s current operations issues and corporate culture. He posted his statement in an open letter on LinkedIn, saying: Starbucks’ “fix needs to begin at home: U.S. operations are the primary reason for the company’s fall from grace… At Starbucks, culture is the currency of the company and its internal operating system. All roads at Starbucks—groundbreaking innovation, relentless execution, years of growth, and outsized financial performance and shareholder value—go through its culture.”
According to a June 26 report in BloombergLaw, Bodum USA Inc. and its subsidiary Pi-Design AG are suing Starbucks for allegedly selling a French press coffeemaker that infringes on Bodum's patented design and violates an exclusive seller agreement. The lawsuit, filed in the US District Court for the Northern District of Illinois, claims Starbucks' product mimics Bodum's patented "Plunger-Filter Beverage-Making Machine with a Closable Pouring Opening" and breaches a 2008 settlement agreement where Bodum was designated as Starbucks' exclusive supplier. Bodum alleges that Starbucks' actions have harmed its market share, brand, and profits and is seeking injunctive relief, damages, and other compensation. Starbucks denies the claims and intends to defend itself in court.
According to a Globe Banner report, Starbucks has been involved in numerous breach of contract legal disputes, including a recent lawsuit over alleged misuse of trade secrets related to a product launch, raising concerns surrounding the company’s ethics.
Starbucks was founded in 1971 at Seattle's Pike Place Market, initially selling coffee beans, tea, and spices. The company's name was inspired by the novel "Moby-Dick." In 1982, Howard Schultz joined the company and introduced the coffeehouse concept to Starbucks in 1987 after visiting Italy in 1983. The company expanded first within the U.S. and then internationally, opening stores in Japan, Europe, and China by the late 1990s. Starbucks now operates globally with a focus on coffee quality and customer experience.