Starbucks, the global coffee giant valued at $90 billion, is grappling with internal strife as its sales continue to slump both domestically and internationally. The company’s shares have plummeted nearly 20% this year, signalling deeper issues within its operations. In response, activist investors like Elliott Investment Management and Starboard Value have taken stakes in Starbucks, seeking to influence its direction and governance.
Elliott’s strategic move to take a position in Starbucks in July 2023 and its reported talks with the company to appoint fund partner Jesse Cohn to the board could potentially reshape the company’s future. This development comes as Starbucks’ current leadership, led by CEO Laxman Narasimhan, is under increasing pressure to address the company’s declining sales and operational inefficiencies. Narasimhan, who assumed his role in March 2023, has had a challenging tenure marked by tensions with former CEO Howard Schultz and ongoing disputes with unionised employees.
Schultz, who remains a significant shareholder and serves as chairman emeritus, has publicly criticised the current leadership. His influence looms large over the company, making any boardroom changes a delicate balancing act. Activist investors, including Starboard Value, are pushing for governance reforms, yet they must navigate the strong-willed Schultz and the sensitive union dynamics.
One of the most pressing issues confronting Starbucks is its declining global comparable store sales, a critical problem that cannot be overlooked. These sales fell by 3% year-over-year in the most recent quarter, with North America and China, two of Starbucks’ most prominent markets, experiencing significant drops in performance. China, in particular, saw a staggering 14% decline. While loyal customers in the Starbucks Rewards program contribute a substantial portion of the company’s revenue, the challenge lies in attracting and retaining more transient customers.
Narasimhan has expressed willingness to implement significant changes, including forging new partnerships in China and investing $600 million over three years to digitise stores. However, the challenge remains in executing these plans amid internal conflicts and external pressures from activist investors.
As Elliott and Starboard push for boardroom changes, the question remains whether these moves will steer Starbucks back on course or further complicate its leadership struggles. With too many voices vying for control, Starbucks risks pulling its operations in conflicting directions, making it difficult to brew a successful turnaround.
