Starbucks Picks a New President - From the Tech Industry

Ok, Starbucks uses technology, just like every other retail business does. But what makes its business so technologically driven that it would select a new president with a tech background, rather than one with experience in restaurants, hospitality or even marketing?

Well, nothing really. It's just that Starbucks may realize that, to a greater degree than competitors or others in the same field, that its customers and therefore its business is increasingly dependent on tech. So, having someone who is has experience and may even be a visionary when it comes to meshing the physical with the digital.

The reality is that the future of commerce is going to be decided by the efficiency of the interface between those two realms. Handing the company's future to someone who has spent much of his career trying to bridge that divide isn't particularly risky or revolutionary - it's just common sense. JL

Ilan Brat and Tess Stynes report in the Wall Street Journal :

Starbucks executives have said that the company must adapt to the shift to online purchasing for everything from food to clothing by finding new digital strategies to help consumers engage with the Starbucks brand and buy its products.
Starbucks Corp. tapped a longtime technology-industry leader as its No. 2 executive, reflecting the coffee giant’s increasing emphasis on digital payments and other innovations to drive its growth.
Kevin Johnson, a former chief executive at Juniper Networks Inc. and 16-year veteran of Microsoft Corp. , will take over as Starbucks president and chief operating officer on March 1. The company also reported an 82% jump in earnings in its latest quarter.
Mr. Johnson, who has been a Starbucks board member since 2009, will succeed current COO Troy Alstead, who Starbucks earlier this month said is taking an indefinite leave of absence to spend time with his family after 23 years at the company.
Starbucks Chairman and CEO Howard Schultz will relinquish the title of president to the 54-year-old Mr. Johnson. Mr. Schultz, 61, said the appointment wasn’t the result of a succession plan.
Mr. Schultz said that as a director Mr. Johnson long had engaged with the company’s digital operations, and in his new position he would more directly oversee those efforts as well as supervising information technology and supply chain operations.

 

Starbucks reported a profit of $983.1 million, or $1.30 a share, up from $540.7 million, or 71 cents a share. Photo: Bloomberg News

“We are so fortunate in a sense to have a No. 1 draft pick” in Mr. Johnson, Mr. Schultz said on call with analysts.

Starbucks executives have said that the company must adapt to the shift to online purchasing for everything from food to clothing by finding new digital strategies to help consumers engage with the Starbucks brand and buy its products. The company has been ramping up its use of digital tools like mobile-payment platforms.
In an effort to boost traffic during the holidays, Starbucks offered a chance to win free Starbucks coffee drinks for 30 years to customers who used gift cards. And the company began a pilot project in December that allows customers to place orders on their mobile phones and pick them up at about 150 Starbucks outlets in Portland, Ore.
The results from the first two months of the mobile-ordering project are encouraging, said Chief Financial Officer Scott Maw, and Starbucks plans to expand it to about 600 outlets in the Northwest. The company hopes the mobile-ordering initiative will help boost sales growth at Starbucks outlets much like pairing a drive-through with a traditional order-counter store, said Mr. Maw. “We believe giving (customers) choice actually drives more traffic,” he added. “I think that’s what we’re going to see in mobile order and pay.”
Starbucks’s digital initiatives helped drive fiscal first-quarter earnings, Mr. Schultz said. For the period ended Dec. 28, Starbucks reported a profit of $983.1 million, or $1.30 a share, up from $540.7 million, or 71 cents a share, a year earlier. Excluding a gain related to its Japan Starbucks deals, earnings were 80 cents a share. The company expected per-share profit of 79 cents to 81 cents.
Revenue increased 13% to $4.8 billion, matching analysts’ expectations.
Sales at company-operated stores in the U.S. open at least 13 months rose 5% during the latest quarter as traffic grew by 2% and the size of the average ticket increased 3%. Comparable sales world-wide also rose 5%.
The amount of dollars loaded onto Starbucks cards jumped 17% to $1.6 billion. Starbucks said one in seven Americans received a Starbucks gift card in the holiday quarter, up from one in eight a year ago.
Starbucks shares rose about 4% in after-hours trading on Thursday following the news, after having risen 1.8% in 4 p.m. trading on the Nasdaq Stock Market to $82.74 each.
Longer term, Starbucks’s strategy to improve its sales include efforts to draw in customers later in the day with other food-and-drink offerings. It also plans to add more locations domestically and abroad, including new categories such as tea stores.