WHEN: Today, Wednesday, March 16, 2022
WHERE: CNBC’s “Squawk Box”
Following is the unofficial transcript of a CNBC exclusive interview with Ariel Investments President & Co-CEO and Independent Starbucks Board of Directors Chair Mellody Hobson on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Wednesday, March 16th about Starbucks CEO Kevin Johnson’s plan to retire and Starbucks Founder Howard Shultz returning as interim CEO. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
BECKY QUICK: We also have breaking news from Starbucks. This is important. CEO Kevin Johnson is retiring. He’s going to be transitioning from his role on April 4th. The company announcing this ahead of its annual shareholder meeting that is taking place later today, and Starbucks Founder Howard Schultz will become the interim CEO until the company names a successor. Joining us right now in an exclusive interview is Starbucks Independent Board of Directors Chair Mellody Hobson and Mellody, good morning. This is some really, really big news.
MELLODY HOBSON: Good morning.
QUICK: So, what happened? Why, why is Kevin standing down? I think that comes as a huge surprise to investors to anybody who’s been watching the company.
HOBSON: It’s not a surprise to the board. Over a year ago, Kevin signaled to us that he was starting to think about his future and starting to think about retiring. And he told us he thought the waning days of the pandemic might be the perfect bookend to his five-year, now five-year career as CEO. And so that time has come, the day is now here and the board wants to respect that decision. He’s done a great job for us at Starbucks and really wants to move on to do something else now. And then we have this MVP, one of the greatest players in the game on the bench. So the board called them up. We called and said Howard, would you help us out during this period? And he agreed to do so. We thought at this moment, he’s the perfect person, certainly the perfect culture carrier. And so he’ll help us transition, help us onboard a new leader, and we get all that for $1. He’s gonna do it for free.
QUICK: He’s going to be doing this for free for a donation of $1 to do it. Look, Kevin Johnson, under his tenure, it’s been very impressive stock, up more than 41%, but under Howard Schultz, the tenure of his stock price was up by 21,000% and the stock right now, up by about 6% on this news, it has to be because Shultz is coming back in.
JOE KERNEN: Mellody, I tried to look at the chart and you know I’m so old, but I remember this this is like a deja vu all over again because there was a time when Starbucks had lost its way a little bit and Howard came back. It was probably, god, what is it probably 15 years or something. Do you know exactly when because and then it just—
HOBSON: 2008.
KERNEN: It just ignited. He’s such a good operator and has such a feel for culture an area that like you said.
QUICK: We had a longer-term stock plan back in 2008.
KERNEN: Yeah, I tried to look and we won’t be able to see it because we need to do it, probably do a log, log chart or something to actually see it. But it had, it had really not done well for a while and he came back in and that was all it took and it was just right back on the growth track after, maybe that’s it.
QUICK: There it is, see it.
KERNEN: Yeah, and it just came right back so I’ve seen this movie before.
HOBSON: Well, you know, Howard brings a certain kind of energy to anything that he does. It’s infectious. He certainly has an entrepreneurial spirit that is so deep. But this company never stands still. It he has infected us with that idea of moving forward no matter what. 2008 is what you’re referring to. This is not back to the past. It’s back to the future. He’ll be here for an interim period. We fully expect to have a new CEO here in the fall. But in the meantime, we’re going to take advantage of all of that great energy, those ideas, he’ll help us reaffirm, recommit, reconnect to our culture in a way that I think will be very useful and a great transition to the next leader.
QUICK: Mellody, if you knew a year ago that that Kevin was going to be stepping down, why not start the search for a new CEO already? Or was this a situation where you thought we want to have Howard back in the chair?
HOBSON: Well, we had no date certain first of all, the Howard idea was not, did not come up last year. It was very recent. And I would say that remember, we’re looking for a CEO during a pandemic. We started to step up our process and thinking about succession planning. We put together a working committee, we’ve engaged Russell Reynolds Associates, we spent a great deal of time thinking about what do we want the next leader to be? What kind of characteristics should he or she have? And so, there’s been a lot but we’re not going to hire a CEO over Zoom. I can tell you that. There were times we couldn’t even travel. Our board couldn’t get together. We have board members who are all over the world. There’s a lot. There have been fits and starts, but we’ve been on a path and this is not news to us. We’ve been very deliberate, thoughtful, and considered all of our options in this process.
QUICK: If you’re anticipating that you will have a new CEO by the fall, what would Howard, Howard’s role be beyond that? Is he going to be working with this new CEO, will he be spending time kind of training them showing, them the ropes, teaching them the culture?
HOBSON: Certainly, that’s something that we want and that’s what we’ve asked him to do and he said yes, which is great. We want him to help onboard that next leader. He’ll join our board again, and be a voice I think, which will be very, very helpful. We want to lean on all of Howard’s expertise and all of his brilliance. And again, he said yes, we want a leader that that wants to tap into that. We have a great slate of candidates. People want this job, and we’re fully confident we’ll have a new leader in the fall.
KERNEN: He’s a baby. He’s gotta be the interim and the next Mellody you can make that happen. Give him three, three years anyway.
HOBSON: He’s not gonna stay for three years. I can tell you that. We get him until the fall, full stop. Trust me he’s not gonna do it.
KERNEN: What’s he doing? What’s he doing that is so important?
HOBSON: He’s got a lot to do. He’s, you know, Howard never stops dreaming and thinking and wanting to change the world. And that which that is what makes him so special and so great. And everything that he believes is possible, I believe is possible knowing him so I know he has lots of things he wants to do. He’s been very active philanthropically and thinking about all of the ills in our society and things that he can do to impact and affect change for everyday people. And, and that’s how Starbucks was born. That was the whole idea of leading through the lens of humanity. It’s the connection to our people and our partners that he puts so front and center, and, you know, I know he’ll do amazing things. But just for a short time with us.
QUICK: He’s doing this as you mentioned for $1. You know, a $1, so he’s basically donating his time for all this. He’s still a big shareholder?
HOBSON: Yes, he’s a shareholder, and he’s doing it for his love of the company. And we’re really grateful.
QUICK: What, what areas does he plan to focus on first and I ask this because yesterday, we talked about this shareholder group, they’re a small shareholder group. I think they only have about $1.2 billion in stock, but they brought up this idea that they would like to see Starbucks work differently with the unions, and it’s been an issue recently, but Starbucks has a long history of having employees who really love working there. You all did things first under Howard’s leadership just in terms of paying for college, not just full time, but part time workers, for bringing in healthcare plans. It’s going to be a different relationship right now given some of the union issues that you that you’ve seen to this point. What do you say and how do you deal with this new investor group?
HOBSON: So first of all, every investor matters, you know that. I’m an investor, I run Ariel Investments as co-CEO. And so, the investor voice is very important. All stakeholder voices are important, and that’s our job to manage that. At the same time, you’ve been very clear the union conversation is one that is front and center, is one where we acknowledge it has been a hard time in the world. It has been a hard time in our industry and has been a difficult time in our country, in our company. But I want to tell you right now, we are not hanging on COVID as an excuse. We made some mistakes here. We didn’t listen, and we need to do that. We are bargaining with the, negotiating with the union right now. We want a constructive relationship. And Howard, of course will be about that. But really, when you think about again why we’re leaning on Howard in this moment, it’s that connection with our people and where we think, where we think he is singularly capable of engaging with our people in a way that I think will make a difference.
KERNEN: Well, he’s a high-minded guy as well and it is, there are tough decisions to be made right now, Mellody. I mean you have a huge market in China and the Chinese people deserve to have lattes. There’s no doubt about it. But then you see some of the actions of the regime and especially now with what we’re seeing whether they continue to back Putin and everything else. So Howard is going to have to decide, do we, is it okay to satisfy a billion people with their coffee needs? Or do we take a stand and say, look, we just can’t, we can’t do this there anymore.
HOBSON: Well, this is what I would say to you. I think that, you know, this company has navigated a lot of issues over the years. We’re 50 years old. We’ve had issues. One of my favorite lines is from Warren Buffett, “Champions adapt,” and we’ve always adapted, we’ve never set still. Our China Business is a really important great business and we’ve loved building the business there and have had a great relationship there. And we believe we will continue to do so. The world doesn’t have to be so binary and black and white. And I think that would make that would lead to us having a better world in fact.
KERNEN: There are some businesses where I, you know, if you’re funding China, if you’re, there’s a difference between serving the consumers in China and as opposed to enabling the regime if you will, an evil regime so I don’t you know, I say that it’s a tough thing to thread but you’re right. Chinese people love lattes. Give them, give them lattes, but it’s a tough, it’s tough to navigate this world.
HOBSON: But we want to give them lattes. We’re serving coffee.
QUICK: Mellody, China was 12% of Starbucks revenue for the full year 2021. We’re seeing these lockdowns now in Shenzhen, other major cities, even provinces. Has that impacted business?
HOBSON: Well, we’re watching the situation very, very closely. We’re in our board meeting yesterday and we heard from our China team and so we’re, we are ebbing and flowing with the situation as we’ve done throughout the pandemic. The one thing that we can say consistently is after these lockdowns, we see demand return and so we will just, you know, keep ebbing and flowing with the situation as it plays out. There’s nothing we can do other than that.
QUICK: We’re also dealing with inflation everywhere. You’ve got the Fed meeting today trying to figure out what to do next. We’re expecting the first rate hike since 2018. How is Starbucks handling inflation? And where are the biggest issues? Is it labor or is it some commodity?
HOBSON: Well, I would tell you that like all companies right now, this is, there’s no manual. This is the first in 40 years that we’ve seen this kind of inflation. You know this all too well. You report on it every day. There’s a lot of scenario planning. There’s plan A, B, C, D, we might be an E, I don’t know. But certainly, we are looking at all of our options. We made the biggest investment in our company’s history in the last year in wage and it’s being scaled in. It’s starting last year and into this year. It was the best investment we believe that we can make whenever we invest in our people, it really does pay off. So we think that makes a lot of sense. We also understand that our partners are feeling the effects of inflation, it’s hitting their pocketbooks and we have to respond in some way to be able to help them with that. So we’re doing the right thing, and we will manage through it. We always have.
QUICK: And is it safe to assume that the new CEO, the one you plan to have in place by the fall, will be coming from outside the company?
HOBSON: We are looking at all possibilities. So we just want the best player and we will leave no stone unturned but as I suggested we have a really good slate of potential candidates.
QUICK: Mellody, I want to thank you for being with us this morning. This is huge news. Kevin Johnson retiring, something he told the board about a year ago, but the market is responding right now to the idea that Howard Schultz is coming back as the interim CEO, that stock up by about 5%, and Mellody, thank you very much. Mellody Hobson is the chair of the board there. Thank you.
HOBSON: Thank you.
