Starbucks Shakes (Up) Its Moneymaker

A round of changes at the top of Starbucks has focused on the company's plans for the future.

Jan 30, 2014 at 6:05PM

Yesterday, Starbucks (NASDAQ:SBUX) announced a series of organizational changes at the top. All of them flow down from the biggest change, which involves the day-to-day of CEO Howard Schultz. Starting next month, Schultz is going to expand the Willy Wonka aspect of his role, focusing more on "next generation retailing and payment initiatives," the latter likely being Square.

Further down from Schultz, all sorts of Oompa Loompas are shifting around as well. Tory Alstead is making a move to the newly created role of chief operating officer. Alstead seems to be taking over the daily chores that Schultz will be leaving behind. Each of the changes points toward a part of the company's overall strategy and gives an insight into 2014.

Starbucks and the next-generation retailer
"Next generation" is an abused term. No one agrees on what next-generation retailers actually do -- omnichannel, customer tracking, interactive marketing, etc. -- but it sounds like the right thing to be.

Starbucks doesn't shed any new light on its definition in the announcement, saying only that it will have something to do with "digital, mobile, card, loyalty and e-commerce." More important will be Schultz's focus on payment initiatives.

All the way back in 2012, while most of the world was still in awe of electricity, Square and Starbucks were joining forces to change the way we pay for coffee. As it turns out, 2014 rolled around and we still pay for coffee with cash or cards, but now Square processes the transactions. The molasses-in-winter adoption rate may be the reason Schultz is jumping into the fray. More likely, it's a rumored IPO that the market is expecting sooner rather than later. 

If Square is in the spotlight, what happens to Starbucks?
With Schultz shuffling over to work on these side projects, Alstead is going to have to take the lead on normal operations. Starbucks has had a great run recently, but the pressure is still on, and Alstead's role isn't going to be straightforward.

Competitors like Dunkin' Brands and Panera are increasingly focusing on their coffee offerings. Dunkin' said in its last earnings call that it's "focusing on a strategy that enhances our coffee credentials and product innovation." The focus has helped the company push up comparable-store sales recently, and has made Dunkin' Donuts' coffee a rival of Starbucks.

Alstead is stepping into the new role after 22 years at the company, with time spent in finance, global operations, and the international expansion team. For investors, the hope is that Alstead can continue to push Starbucks' international plan without losing focus on the North American business.

Challenges ahead
That would be my one fear -- North America gets overlooked due to Starbucks' impressive hopes. A similar thing has happened over at Coach recently, and has put the brakes on much of that company's growth. I don't imagine this will be a problem for Starbucks, as it has so much experience growing multiple businesses at once.

Starbucks still looks well set up for 2014 with Alstead at the daily helm. More interesting will be watching the story unfold at Square as the company gets closer to an IPO and as Schultz puts in more time with the brand. As a Willy Wonka leader, Schultz is making his rounds through the factory, and each new product is looking more interesting than the last.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coach, Panera Bread, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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