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Originally published January 29, 2014 at 1:03 PM | Page modified January 30, 2014 at 2:09 PM

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Starbucks restructures leadership as Schultz focuses on big picture

Starbucks said that Chief Financial Officer Troy Alstead will step up to the newly created position of chief operating officer, allowing Chief Executive Howard Schultz to focus on innovation and big-picture strategy.


Seattle Times business reporter

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Starbucks is reshuffling its senior leadership to give Chief Executive Howard Schultz time to chart a digital path through the retail industry’s increasingly challenging waters.

Chief Financial Officer Troy Alstead will step up to the newly created role of chief operating officer (COO), overseeing the day-to-day operations of the world’s largest coffee company.

Schultz will concentrate on the big picture — particularly, how to make Starbucks’ brand thrive as people increasingly spend time online and rely on mobile devices to interact with the world around them. The changes will be effective Feb. 3.

“The addition of a COO will provide me with more time to focus on innovation and strategic initiatives,” Schultz said in a conference call with analysts Wednesday.

The leadership moves come as Starbucks endeavors to keep growing even as traditional brick-and-mortar retailers suffer from the migration of consumers toward online shopping.

Even though its core business — selling coffee drinks in stores — cannot be displaced by a digital equivalent, Starbucks acknowledges it isn’t immune to the online migration, which cost it some customers as mall traffic dropped during the holidays.

Schultz’s new mission indicates that the company will seek to make its digital presence a key part of its business, hitherto centered on a sprawling coffeehouse empire. That means building upon Starbucks’ successful mobile payments system, as well as coming up with pilot programs such as “tweet-a-coffee,” in which Twitter users can send $5 Starbucks cards to their friends through the popular social-media platform.

The objective is to remain relevant to consumers who are increasingly shopping and working and playing online, executives said.

The shuffle also brings Schultz, who made Starbucks into a global phenomenon, back to what analysts say is one of his core strengths: figuring out new ways of making money.

In a way, the situation hearkens back to when Schultz stepped aside as CEO in 2000, remaining chairman and focusing on the more creative side of the business, said Dan Geiman, an analyst with McAdams Wright Ragen. But that ended badly: Schultz returned in 2008 to a lead a company gone astray.

This time, though, that Schultz remains CEO means “he will have his hands a little more on operations than he had” as chairman, Geiman said.

In the conference call, Schultz stressed that his new focus and Alstead’s promotion are not about succession planning, nor do they presage dramatic changes such acquisitions.

He’ll keep a close eye on the financial and operational discipline of the business, Schultz said, and his working relationship with Alstead, a 22-year veteran of the company, is unusually close.

“We can finish each other’s sentences in regards to the business,” he said.

Starbucks’ experiments with payment methods have been playing an increasingly important role in the company’s business as more consumers embrace mobile technologies.

Digital payments and loyalty cards represent a third of U.S. transactions, Schultz said in an earnings call last week.

Loyalty cards left Starbucks with a record treasure trove of $1 billion in deferred revenue in the latest quarter.

More than 10 million customers use its digital payment app, which accounts for 5 million transactions each week.

Starbucks’ digital fever is not new. In 2012 Starbucks struck a deal with Square, which included a $25 million investment in the San Francisco startup and an agreement that Square would process Starbucks’ credit and debit-card transactions. After the deal Schultz took a seat at Square’s board, which he relinquished in late 2013.

Alstead, 50, will be replaced as chief financial officer by Scott Maw, who is now senior vice president of corporate finance. Maw, who joined Starbucks in 2011, will report to Alstead.

Clifford Burrows, head of Americas and the Teavana business, and John Culver, head of the company’s fast-growing China and Asia Pacific division, as well as of channel development and emerging brands, will also report to Alstead. Alstead will also take over the company’s Europe, Middle East and Africa business segment, now under Burrows.

As part of his promotion, Alstead will be paid a base salary of $900,000, a bonus target equal to 120 percent of his salary, and an equity grant worth $1.25 million, Starbucks said in a securities filing.

The company also announced that Craig Russell, who is Starbucks’ senior vice president for global coffee and leads the company’s oversight of coffee quality and its relationships with farmers and distributors, will be promoted to executive vice president. He will continue reporting to Schultz, the company said.

Ángel González; 206-464-2250 or agonzalez@seattletimes.com. On Twitter: @gonzalezseattle



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