Starbucks Fires CEO; Founder Returns to Helm

With its stock price down sharply from a year ago, Starbucks has fired its CEO. Howard Schultz, the company's founder and chairman, will take over as chief executive. Starbucks executives say it's time to refocus on the customer experience. The company also plans to slow its domestic growth and shift resources to foreign expansion.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

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And I'm Michele Norris.

Now, the big jolt at Starbucks. With its stock down sharply from a year ago, the company has fired its CEO. Starbucks chairman and guiding force, Howard Schultz, will return to that position. And here's that word again, Schultz is promising change, as NPR's Wendy Kaufman reports from Seattle.

WENDY KAUFMAN: Each week, Starbucks serves up coffee and other things to 50 million customers.

Unidentified Man: Good morning. How are you?

Unidentified Woman: How you doing today?

KAUFMAN: Starbucks continues to make money, and lots of it, but after years of seemingly unimpeded growth in profit, the company is facing serious challenges. The stock, which was at $36 a year ago, is now trading at about $20 a share. And for some customers, the weak economy has turned the latte into a luxury item. Dairy prices are up and competition is increasing. On the very day that Starbucks fired its CEO, McDonald's announced it would put coffee bars in 14,000 of its stores. But for Starbucks, there is a larger problem. In 1992, Starbucks had 119 stores. Today, more than 15,000. Along the way, says chairman and now CEO Howard Schultz, the company lost some of its emotional connection to its customers. On a conference call late yesterday, Schultz said Starbucks was a victim of its own success.

HOWARD SCHULTZ: The most serious challenge we face is of our own doing. I'm here to tell you that just as we created this problem, we will fix it. We are changing our organization now and for the future. It will take a good deal of work and some time, but it will happen starting today. To put it simply, we are going back to what has made Starbucks and the Starbucks experience so unique.

KAUFMAN: A friendly environment, more personal attention, and a less bureaucratic approach. Julie Daniels(ph), who was grabbing a drink this morning at a suburban Seattle Starbucks, worked as a company barista for about a year. She saw firsthand the kinds of things that Schultz wants and needs to address.

JULIE DANIELS: It's change. It's so much more businesslike and - customer service is the number one thing that we tried to do, but it just got down by how many we sold, and I thought it was pulling away from what the intention of Starbucks was, so.

KAUFMAN: Starbucks understands it won't be easy to address all the issues the company faces. But Schultz says he intends to be CEO for the long term. Among his first initiative, close underperforming U.S. stores and shift resources from opening new domestic stores to opening more new foreign ones, all of which make sense to Bob Goldin, executive vice president of Technomic, a leading restaurant industry consulting firm. But Goldin goes on to say that ousting the CEO and bringing back Schultz is a drastic move, especially for a company that remains highly profitable.

BOB GOLDIN: This is a company that may be a little bigger, that may have - their problems may be a little bit bigger than we thought.

KAUFMAN: Starbucks will be offering up more details on its restructuring and revitalization campaign later this month.

Wendy Kaufman, NPR News, Seattle.

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