Starbucks' New Boss, L Narasimhan, Is Used To Feeling Like An Outsider

Starbucks Corp.'s incoming boss is used to feeling like an outsider. Laxman Narasimhan, who will head the world's biggest coffee chain despite never having run a retail or restaurant business, was a newcomer when he took the helm at British consumer goods company Reckitt Benckiser Group Plc three years ago.

The first external CEO appointment in the Lysol and Nurofen maker's history, and with no background in consumer health care, he joined a company reeling from a turbulent decade where it had swung from one scandal and crisis to another and failed to meet financial targets.

Mr Narasimhan, 55, was not afraid to make changes quickly.

Within the first three months of officially starting, Mr Narasimhan had replaced the chief financial officer and dispensed with the services of the Hygiene Home division president, who had worked at Reckitt for 32 years. He hired a top executive from his former employer PepsiCo Inc., to fill a new role of chief transformation officer. As he prepares to leave, the entire executive management team at Reckitt is different to the one he started with in 2019.

By the six-month mark, Mr Narasimhan had come up with a strategy to turn around Reckitt's performance that has prioritized growth and investment in its health, nutrition and hygiene divisions while shedding noncore brands. Disposals included the Chinese division of infant formula maker Mead Johnson, an ill-fated top of the market $17 billion takeover by predecessor CEO Rakesh Kapoor that was more expensive than all of Reckitt's previous deals combined.

Analysts, investors and other people who know him do not expect Mr Narasimhan to shy away from large strategic moves at Starbucks. Still, he will be working closely with longtime chief Howard Schultz, who has upended the coffee chain's management and strategy since coming back to the helm for a third stint.

Fast Mover

Mr Narasimhan is a quick decision maker and didn't take long to impose the "huge turnaround strategy" for Reckitt, said Alicia Forry, an analyst at Investec.

"He only took about two quarters to come up with that, communicate it and roll it out. He's quite efficient," she said in a call with Bloomberg, adding that his biggest achievement was upgrading the company's whole supply-chain infrastructure.

The executive, who favors a single espresso shot a day, is given the greatest credit for changing the culture at Reckitt.

This was a company that was not only trying to digest a disastrous takeover when he started but was also recovering from a serious cyber attack, manufacturing problems, a failed product launch, and a health scandal where hundreds of people in South Korea died from fatal lung disease caused by exposure to a humidifier disinfectant sold by the group.

Mr Narasimhan met a committee representing survivors of the toxic air purifier scandal not long after joining and wrote a personal apology letter to the South Korean independent commission for social disaster investigation.

He visited factories and warehouses to get a better understanding of the business and improved Reckitt's relationship with its key retailer customers.

"After he joined in late 2019 he made it very clear at the third-quarter results that he was going around all the major markets speaking to people on the ground, speaking to the customers to see where the business needed increased investment," said Fulvio Cazzol, an analyst at Berenberg. "It proved he was very willing to get stuck in and understand the business."

Mr Cazzol adds that when Mr Narasimhan joined, he prioritized the focus on customer service to its biggest retailer partners, demonstrating the type of understanding he will need when running a consumer-facing business such as Starbucks.

Two-Bedroom Apartment

Mr Narasimhan, who holds a degree in mechanical engineering from the University of Pune, India, and an MBA from the Wharton School at the University of Pennsylvania, started at Reckitt less than a year before the world shut down as Covid-19 spread. Initially this kept him apart from his wife and grown-up children while he worked for Reckitt from a two-bedroom apartment in Britain that he shared with his elderly mother.

Early media calls with Mr Narasimhan were often punctuated by him stopping to help his mother answer the door for a grocery delivery, or him shutting the door when he talked about the performance of Reckitt's Durex condom brand.

In the midst of trying to bring about a turnaround, Mr Narasimhan, who speaks English, German, three Indian languages and conversational Spanish, then oversaw the explosive growth of its disinfectant Lysol during the pandemic. This was followed by an unprecedented surge in its infant formula business in the US, which has been up for sale, after a huge shortage developed earlier in the year.

However, Mr Narasimhan departs before Reckitt's turnaround is complete, leaving the company with a caretaker in charge as it looks for a permanent replacement. With ambitious growth targets and facing a period of unprecedented inflation and disruption, the final assessment of his short tenure at Reckitt may look different in a few years.

Not everyone is a fan of the executive, who will be facing significant challenges as he steps into a company that employs more than 383,000 people and is dealing with its first-ever unionization effort across the US. Bill Campbell from Paragon Intel, a management analytics firm, said due diligence it conducted when Mr Narasimhan took over at Reckitt showed he was a "strong strategist, but he is not an operator and lacks the ability to execute on a long-term strategy."

A renowned hard worker, Mr Narasimhan once fell down the stairs, breaking his elbow the night before Reckitt was due to report results -- and carried on with business as usual. Colleagues say it's not unusual to receive emails before sunrise. Mr Narasimhan can be a difficult taskmaster but endeavors to bring teams along with him.

"Laxman is definitely a class act. He is an excellent communicator," said Martin Deboo, analyst at Jefferies who said the whole Reckitt experience has been a "roller coaster ride" for Mr Narasimhan. "He's got a high degree of personal charisma and he clearly has a blue-chip CV having been at McKinsey and Pepsi. My instinct is that he will get on well at Starbucks."