Labor Was The Case That They Gave Schultz — Starbucks Takes On Union-Busting Accusations Against The Company’s Generational Employees
The Weekend Brief Newsletter (TWB) is inspired by Snoop Dogg’s classic rap jam Murder Was The Case. Under the management and production of Death Row Records, the song was produced by Dr. Dre, but there was so much controversy around the Death Row label at the time as discussed in Xenon Picture’s documentary about Death Row Records on Plex.
It has been widely reported that unions are forming at the world’s largest coffee-chain, Starbucks. Leading the charges against Starbucks is the National Labor Relations Board (NLRB) with the help of outspoken US senators such as Bernie Sanders.
Sanders, among other US senators, lambasted Howard Schultz for his refusal to testify at a senate hearing on Starbucks’ compliance with federal laws regulating the right of unionization. After Schultz initially refused the invitation, Sanders, chair of Health, Education Labor and Pensions (HELP) Committee, maintained the stance that the public should “hold Mr. Schultz and Starbucks accountable for their unacceptable behavior and look forward to seeing him before our committee.”
Watch a video about Starbucks’ unionized stores on CNBC for more information on the NLRB’s position.
On 29 March 2023, Schultz attended the US Senate committee hearing at last. The former CEO of Starbucks faithfully defended the company against the following accusations brought against them:
- Illegally firing Starbucks baristas who were allegedly for joining a union
- Spying on employees as unions were being planned or organized
- Offering new benefits, such as higher wages, only to employees at non-unionized stores
After going through the charges, Sanders told the Senate committee bluntly: “Starbucks has waged the most aggressive and illegal union busting campaign in the modern history of our country.”
One of Schultz popular retorts to the unionization effort among Starbucks is that it is a generational problem, as more and more young people are suffering from a lack of job opportunities in the marketplace. He told CNN that “things have gone sour for young people”. But don’t just take his word for it, CNN also published a report documenting the first-hand accounts of Starbucks baristas who shared their personal stories on the struggles they are enduring as the unionization effort at Starbucks rages on.
Unfortunately for them, the opposing side of the legal case against Starbucks — Collective Action Against the Unionization of Starbucks — doesen’t agree that the company is exacerbating their plight.
What’s even more unfortunate is how the outcomes of the one of the union-busting cases played out at a federal court in Michigan. Federal judge Mark Goldsmith initially posed a blocking order on Starbucks from firing employees based on their participation in collective action at the company. This was heraleded as a major win for the Starbucks baristas and Workers United at the time.
But on 24 Feburary 2023, the same judge called the case back into question, and questioned his own ruling, for which Goldsmith acknowledged that the original injunction against Starbucks was not accurately assessed; the blocking order was withdrawan at the federal level, but reinstated in the state of Michigan.
The new injunction order placed in Michigan revolves around a case in Ann Arbor, Michigan, where an employee violated Starbucks store policy that two employees must be present at a store location at any given time during store opening hours.
Starbucks is still revered for its global brand presence. It is also widely written about as one of the top performers in restaraunt industry.
A new CEO of Starbucks was announced in September 2022. He joined the company on 1 October 2022, and will assume the leadership as CEO in April 2023. His name is Laxman Narasimhan — a man of Indian descent — with a professional background in London, England, formerly the CEO of Reckitt and global chief commercial officer at PepsiCo.
Narasimhan takes control of Starbucks during a pivotal time in the company’s trajectory. Former CEO Howard Schultz had stepped in as the interim CEO — replacing former CEO Kevin Johnson who decided to retire in March 2022 — as a unionization movement was sweeping across the company’s United States commercial footprint. This led to a “Reinvention” project during which Starbucks offically closed down 16 of its US stores due to safety concerns.
On the Reinvention plan, statements from Schultz and Narasimhan are aligned on the objective of creating a new era of growth and sustainble development at Starbucks.
Howard Schultz: The perspectives he brings will be a strong asset as we build on our heritage in this new era of greater well-being.
Laxman Narasimhan: The Reinvention and investments in the partner and customer experiences position us to meet the changing demands we face today and set us up for an even stronger future.
Stock market analysts were surprised to find that this CEO transition didn’t cause volatility to the Starbucks (SBUX) stock price. In fact, SBUX has performed fairly well considering the changes that are happening at Starbucks and the volatile commodity markets taking shape globally.
SBUX was at $82.92 on 9/2/22 after the CEO transition was announced. It subsequently grew to $92.70 on 9/14/22. After hitting this top price in September, SBUX didn’t start moving upward again until November. The SBUX price increased by seven points from $84.68 to $91.86 on 11/3/22, and since then, the stock price has continued on an upward trend. Going up to $102.20 per share on 11/30/22, and climbing to $105.05 on 12/2/22.
Upon the news of selecting Narasimhan to lead the American-established global coffee brand, there was some significant chatter about Indian-origin CEOs operating multi-national corporations (MNCs), as Starbucks now joins the list of Chanel, Twitter, Bata, Google, Microsoft, and others, of companies with Indian-origin CEOs. Money Control
In an interview with CNBC, founder of Starbucks Howard Schultz accompanied incoming CEO Laxman Narasimhan to explain this CEO transition at Starbucks. He called Narasimhan “a number one draft choice” not only because of his outstanding leadership background but also because of his humility, “I’m never coming back again, because we found the right person.”
This official announcement from Schultz was big. But the Starbucks Investor Day held on 13 September 2022 was even bigger.
At the event, there were several key clarifications made on the future growth and strategy of the world’s leading coffee chain, including the rollout of Starbucks Connect, inventory automation and the implementation of the Siren System, expansion of cold-beverage options for Gen Z consumers, and growing the company’s global footprint — particularly in China where the company projects it will open 3,000 new stores by 2025. Restaurant Dive
There is also an intense focus on expanding delivery services in Japan and the United Kingdom (UK). By connecting customers in those locations to a Starbucks mobile-ordering system, the company plans to bring about an American-style shift to drive-thru cafe services in Japan and UK.
While in the United States, the focus on partnerships with other global brands demonstrates how Starbucks is enlarging its customer loyalty and rewards program. For instance, the Starbucks Rewards-Delta SkyMiles partnership came into force on 12 October 2022. This agreement allows Starbucks customers to earn more Delta SkyMiles when purchasing a beverage at Starbucks. For every $1 spent, customers will earn 1 mile at Delta Air Lines. And on the days that members have a Delta flight, they will earn double the amount of rewards on their Starbucks orders.
It’s evident that technology is playing a primary role in the company’s operations. Just look at the example of coffee customization, for which Sarah Jean Callahan claims, “one pump of extra syrup pumps up the profits for the coffee company.” She was referring to Starbucks mobile-ordering platform, which collects data on each customer’s preferences and entices them to spend more money on unique combinations of flavors based on their prior purchases.
Now, lets look at the future complexities of the geographic areas in which Starbucks has grown accustomed to operating in.
Michael Conway is the Starbucks group president of International and Channel Development. He has been responsible for carrying out many of the strategic partnerships and global initiatives the company is undergoing during a period of transformation in global markets. I have provided a list of them below:
- Starbucks opens a branch in an iconic coffee supply area of Antigua, Guatemala
- $50,000 worth of grants were given to the Philippine FoodBank Foundation and Gawad Kalinga in the Philippines
- First-ever Tata Starbucks store was relaunched in Mumbai, India, at the first Starbucks Reserve store in India
- Deal between Nestle and Starbucks to sell Seattle’s Best Coffee brand
All of those deals and partnerships have been led under the tutleage of Starbucks’ Michael Conway. It will be interesting to see how the company continues on their global pursuit under the executive leadership of Narasimhan going foward. The alliance between Starbucks and India’s TATA Coffe has been a major success in the Indian market, so I expect there will be come changes to the company’s China market strategy.
In a previous TWB about Wal-Mart and John Deere, I discussed how Wal-Mart’s competition with Amazon revolved around gaining exposure to the Chinese and Indian markets. Interestingly, in the case of Starbucks, the company already has a wide exposure to both the Chinese and Indian markets, so it’s not surprising that the company is coming up with creative ways to expand into other global markets.
Heading into 2023 the world is expecting further volatility in global commodity markets and geopolitical trends. Starbucks has perfected its global footprint by offering customers advantages in price affordability and preferences. But the values and culture of the company mean so much more to the consumers. That’s why founder Howard Schultz admitted to the Harvard Business Review (HBR) in 2010, “We had to own the mistakes.”
I offer this anecdote about the company because it takes us back in time to when the United States was hit with the 2007–2009 Global Financial Recession (GFC). Starbucks was able to bounce back from the GFC, by investing in its brand strategy — i.e., by putting more emphasis on the company’s sustainability goals and environmental stewardship. This movement has been spearheaded by former CEO Kevin Johnson. As early as 2020, Johnson announced a new environmental sustainability program at Starbucks.
How will the complexities of those geographic areas, mixed in with technology investments, affect Starbucks’ environmental, socal, governance (ESG) strategy in the future? I think in order to understand the importance of ESG, we should look to Starbucks as one of the early pioneers. They really hit the ground running on ESG, formulating ideals and incorporating technology investments to reach those sustainability goals through the decades since 2010. As more and more MNCs hop on board the sustainability drive, eyes will be on Starbucks to lead the way.
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