Starbucks has named the outgoing head of Reckitt Benckiser as its next chief executive, handing Laxman Narasimhan the task of executing a “reinvention” strategy designed by Howard Schultz since he returned in April to take charge of the coffee chain for the third time.
The India-born, US-educated executive will join as “incoming CEO” on October 1 but will spend six months working with Schultz before the man who built a Seattle coffee bean supplier into a global brand steps back from his interim CEO role to a non-executive position in April.
Starbucks’s appointment of the 55-year-old outsider came hours after Reckitt, the UK consumer goods group behind Durex condoms and Dettol and Lysol cleaning products, surprised investors with the news that Narasimhan was leaving at the end of September for an opportunity that would let him move from London to the US.
After three years running Reckitt, his turnround plan “seems to be working”, Bernstein analysts said, “but it’s still too early to take the credit for a job well done”. Reckitt shares fell more than 5 per cent on the news of his departure.
Starbucks hailed Narasimhan’s nearly 30 years of experience leading consumer brands, noting the one-time McKinsey partner’s previous roles at PepsiCo as the snacks and beverages group’s chief commercial officer and head of its Latin America, Europe and sub-Saharan Africa operations.
Shares in Starbucks have lagged behind the wider market as it has struggled with labour unrest in the US and coronavirus pandemic-related store closures in China. The stock was up slightly on news of Narasimhan’s appointment in after-hours trading.
Schultz has already overhauled Starbucks’s senior leadership since announcing in March that Kevin Johnson, the man he had picked in 2016 to replace him as chief executive, was retiring.
Schultz has also set out much of the “reinvention” strategy that Narasimhan will be expected to deliver, suspending share buybacks to channel investments into improved wages, training and equipment to make the increasingly complex cold drinks which now dominate its US sales.
Shareholders have been told to expect more news at an investor meeting in Seattle on September 13 on “game-changer” plans to improve productivity and innovations including a platform for selling digital collectibles.
Narasimhan’s time at Reckitt was defined by turnround efforts and productivity improvements after a period of lacklustre growth, and the UK company said he had “rejuvenated” its strategy and capabilities.
He sold underperforming businesses and rode sharp changes in supply and demand during the pandemic, which provided an initial boost to disinfectant sales but then precipitated a series of supply chain challenges.
Starbucks highlighted Narasimhan’s record of developing “purpose-led” brands, “rallying talent” and “building on companies’ histories”.
“Laxman is an inspiring leader,” said Mellody Hobson, Starbucks chair. Schultz said Narasimhan “shares our passion of investing in humanity and in our commitment to our partners, customers and communities”.
Starbucks has offered Narasimhan a package worth more than $28mn. He is entitled to a base salary of $1.3mn, annual cash bonuses worth up to $2.6mn and annual equity awards with a target value of $13.6mn. In addition, Starbucks is paying a $1.6mn signing bonus in cash and $9.25mn in equity to compensate him for incentives he is giving up by leaving Reckitt.
The company would pay Narasimhan $7.8mn and part of his annual bonus if he resigns before becoming chief executive next April. If it decides not to make him chief at that point he could also receive the $9.25mn equity grant on top of those severance payments.
Schultz would remain “closely involved” as an adviser to Narasimhan, the company added.
Additional reporting by Judith Evans in London