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Starbucks' Schultz and Johnson tell us about the challenges facing the company

Starbucks’ (SBUX) long-time leader Howard Schultz took the stage at the coffee giant’s annual shareholder meeting for the last time as CEO on Wednesday.

On April 3, Schultz will step aside, assuming the role of executive chairman, while Kevin Johnson, the company’s president and COO, will take over as CEO. In the executive chairman role, Schultz is going to focus on the company’s involvement in social causes and growing its roasteries and Reserve brand.

“I’ve had the privilege of being on the Starbucks board now for eight years and working closely with Howard for the last two years and I think that there’s areas that we have great similarities,” Johnson told Yahoo Finance. “We both embrace innovation — Howard through the lens of an entrepreneur and a merchant, me through the lens of the technologist. We both care about growing a company and certainly his life’s work has created this beautiful company called Starbucks and the opportunity for me to take that and stay true to the mission, the values, and the core business as we scale it will be a great opportunity that I look forward to.”

Johnson, a former CEO of Juniper Networks and a former Microsoft executive, will be tasked with building shareholder value, while also growing aspects of the company that Starbucks views as paramount to its responsibility as a public company.

How do you get this big and stay small?

“I think the challenge for us over these many years is how do you get this big and stay small, how do you maintain intimacy with our customers and our people? And also, how do we continue to push forward the social impact of the company’s agenda when we’re all living at a time of great uncertainty. I think the role and responsibility of a public company is very different than it was five years ago and certainly over the last year or so,” Schultz said.

At the shareholder meeting, Starbucks unveiled plans to create 240,000 new jobs, including 68,000 in the U.S. The coffee giant committed to hiring 25,000 more military veterans and their spouses.

Starbucks’ Kevin Johnson (L) and Howard Schultz (R).

Retail has been going through a challenging period. Schultz has previously said America is “over-retailed.” Through the lens of a merchant, Schultz noted that in order to be successful in this environment, retailers need to become a destination.

“I think the enduring success of being a retailer today in an ever-changing consumer environment, especially for bricks and mortar retail, is it must be experiential and you must create a destination,” Schultz said. “And you think about the Starbucks experience over these many years, what is it that we created that’s so unique and so enduring? And I think it’s even more relevant going forward and that is the sense of community, the third place, and what Kevin and I talked about with the board last night, there’s such a need for human connection and a sense of place and that’s why Starbucks will continue to be successful. But great retailers in the future must create experiences that are emotional and that really speak to the human experience.”

Starbucks isn’t trying to be political

A trademark quality of Schultz’s tenure as CEO has been his public memos addressing various social causes.

More recently,  on Jan. 29, Schultz sent out a company-wide letter following Trump’s decision to sign an executive order temporarily halted citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen from entering the US. (That order has been stymied in court. Earlier this month, Trump signed a new travel ban executive order that excludes Iraq.)

In the letter, Schultz detailed plans to hire 10,000 refugees in the 75 countries where the coffee chain operates by 2022. This was met with some backlash on social media, with some users calling for a boycott of Starbucks.

“Let me explain that if I can,” he said. “First off, the history of the company has not been taking on things that are political that people are trying to politicize. We were not trying to do anything that was against the president or the administration. And what we’re trying to do is maintain our principles and core values. So hiring of veterans, opportunity youth, free college for our partners, and now the hiring of 10,000 refugees globally are all things that we believe are highly principled and consistent with the humanity of the company and from time to time if we think it’s important we will speak out, but Kevin is the CEO on April 3rd—that will be up to him.”

“We will never ever turn our back on our commitment to providing health insurance for our people”

Another major hallmark of Starbucks has been its health insurance coverage. Starbucks began providing health insurance and equity in the form of stock options in 1990, two years before it went public. What’s more, the company offered health insurance for all employees, including those who work twenty hours a week.

In recent weeks, there have been efforts from the GOP to repeal and replace the Affordable Care Act.

“Regardless what happens in Washington our commitment to our people going forward is that we will never ever turn our back on our commitment to providing health insurance for our people. And if you see what we’ve done the last two years — the first company in America to ever provide a free four-year college tuition program… I think going back to the rules of engagement of a employer today, we must do more for our people. We must do more for the communities we serve and we must balance profit with benevolence,” Schultz said.

When asked about what Schultz will do next, he reiterated that he has a full-time job at the company. He also plans to use his platform for good.

“I want to do everything I can to help Kevin, but at the same time build these roasteries globally and extend the new Starbucks Reserve brand. And then I want to use the platform I have for good, working with like-minded CEOs, elected officials, to try and do everything I can, as a private citizen, to help those people who don’t have a voice, to help those people who are being left behind, and to try and elevate the conscience of the country, and I think, I would hope that we would become a more compassionate society and the government becomes more compassionate.”

Schultz wouldn’t comment on President Trump when asked about what a business person would bring to the White House and what they might lack.

“What I would say is what the country does need is authentic leadership and I think truthfulness and above all else I think we’re longing for a level of trust and confidence in all of our leaders not only in Washington but in business.”


Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.

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