Starbucks Shakes up its Management in a Big Way

Starbucks Corp. Howard Schultz is stepping down as chief executive of the Starbucks Corp so he can devote all of his time to a new strategic initiative of opening high-end coffee shops for the 45-year-old company. 

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Mr. Schultz, 63, is handing over the reins to President and Chief Operating Officer Kevin Johnson, who served as a board member of the company for several years before joining its executive team two years ago. 

Mr. Schultz will remain chairman of Starbucks and said he has no plans to step away from the company or run for political office, as many have speculated in the past due to his vocal stance on such issues as veterans' rights and jobs creation. 

"I don't have any time horizon that would limit my engagement in the company," he said in an interview. "This gives me the entrepreneurial freedom to do what I think I do best." 

The move is aimed at refreshing the Starbucks brand, which has been facing increasing competition from specialty roasters such as Stumptown and Intelligentsia as well as from mass coffee purveyors like Dunkin' Donuts, which has been introducing more high-end drinks such as cold brewed coffee. 

Mr. Schultz said the approach could also help protect Starbucks from an inevitable loss of traffic from people who order more goods online, instead of making mall trips. He decided that opening high-end coffee shops that would provide a luxurious experience would entice people to leave their homes. 

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Two years ago the company opened its first such store, the Seattle Reserve Roastery and Tasting Room, a 15,000-square-foot store where coffee is roasted and people can buy $12 cups of small-batch "reserve" coffees made with a siphon brewing technique. 

Starbucks is planning to open 20 to 30 more of the high-end stores , including one twice its size in Shanghai next year. The company plans to build up to 1,000 smaller stores similar to the Roastery, minus the on-site roasting, under the "Starbucks Reserve" brand with a logo that consists of just a gold star and the letter "R." 

Starbucks is also remodeling many of its stores with Reserve-branded coffee bars where customers can get the same kind of coffee education and different brewing methods offered in the Reserve stores. The company also plans to test out new drinks and food at those stores and then introduce them in its traditional coffee shops that don't contain Reserve bars. 

Mr. Schultz has shepherded Starbucks through many changes since he joined the coffee company in 1982 as its marketing director. 

After leaving the company after a dispute with its owners, Mr. Schultz in 1986 opened his own coffee shop, which he named Il Giornale, and later bought the Starbucks retail unit from its owners. He renamed his shop Starbucks and went on to expand the brand to more than 25,000 stores across the globe.