The announcement by Starbucks that long-serving CEO Howard Schultz would step down in 2017 certainly jolted Wall Street on Thursday. But Schultz told analysts and investors not to fret the change at the top of the coffee giant: he promises he is leaving the global restaurant chain in good hands.
On April 3, Starbucks (SBUX) will be handed off to President and Chief Operating Officer Kevin Johnson, who first joined Starbucks’ management team back in early 2015 after Troy Alstead decided to take a sabbatical after 23 years with the company. Johnson, who received $8.5 million in compensation last year, has little experience in building a consumer brand, but instead brings a lot of background in the world of tech to the role.
Johnson had decades of experience in tech having previously served as CEO of Juniper Networks (JNPR) and as an executive at Microsoft (MSFT). His expertise in tech is important for restaurant chains like Starbucks, which have seen consumers use mobile devices as a way to engage with brands and expect more as it relates to order and pay, delivery, and promotions.
Schultz, meanwhile, will retain his role as executive chairman and focus on a passion project that has been brewing at Starbucks for some time: a focus on premium beverages and a premium retail experience through the company’s Roastery locations. Starbucks wants to role out more of these massive retail locations across key cities like New York City and Tokyo, while also opening up 1,000 “Reserve” coffee bar stores that feature a greater variety of brewing methods than what customers see in a typical Starbucks store today.
By focusing more of his energy on the bet on premium, Schultz says he can dedicate more energy to a business that will be a new source of revenue and profitability for the greater Starbucks’ corporation.
“I’m not leaving the company,” Schultz said. He said that while he will be busy “building a new franchise at Starbucks and will help Kevin and the team when necessary,” Johnson is “in charge.”
Wall Street observers fretted the transition a bit during a conference call hosted by Starbucks on Thursday afternoon. That’s because Starbucks enjoyed a lot of success under Schultz’s leadership during his first 13-year tenure as CEO, which ended in 2000. He had to return to that role in 2008 as the coffee giant found itself struggling in the U.S. during the financial crisis. Many observers credit him for helping the brand become a powerhouse again.
Schultz and Johnson stressed that their close working relationship—Johnson even sounded emotional on the call when talking about his boss—had been well established and gave Johnson plenty of insight into the opportunities and challenges that Starbucks faces.
The leadership pivot points to the success that Starbucks, along with Domino’s Pizza (DPZ), Panera Bread (PNRA), and a few other restaurant chains have had when it comes to incorporating mobile into the restaurant experience. Mobile payments now make up 25% of all transactions at Starbucks, while mobile order & pay accounts for 6% of transactions. Those figures will likely continue to tick up higher.
“I think Kevin is better prepared to be the CEO on a go-forward basis than I am,” Schultz told analysts during a conference call following the announcement, specifically citing Johnson’s tech expertise.
Though Johnson has only been in active management since 2015, he has been a member of the board since 2009. There are also no plans to make any significant changes to the current leadership team, which Schultz touted as the strongest bench in Starbucks history.