Starbucks has a new CEO. Chipotle’s Brian Niccol is taking over
Starbucks Chief Executive Officer Laxman Narasimhan will step down immediately following just one year in the job as announced by the company on Tuesday.
By Jordan Valinsky
Aug 13, 2024 01:44 PM
New York CNN —
The Starbucks CEO’s rotating door spins as the company fights with declining sales.
Laxman Narasimhan has resigned immediately following just one year in the position the company announced on Tuesday. The coffee chain that is struggling has hired Chipotle Chief Executive Officer and Corporate fix-it-it expert Brian Niccol to be its new CEO and chairman, starting on September 9.
Niccol is Starbucks fourth CEO within just two years has been in charge of the Mexican-inspired restaurant chain since the year 2018. Starbucks stated that he has established “new standards in the industry and driven significant growth and value creation,” and pointed the company’s revenue increasing around 800% in his time.
“Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” said Mellody Hobson, Starbucks’ new lead independent director, in a statement. “Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world.”
Starbucks’ ( SBUX) stock surged by around 19% before the time of opening while Chipotle’s ( CMG) dropped 9percent. The announcement on Tuesday has nearly wiped off the losses that Starbuck has suffered through the year.
Narasimhan who is departing from the board, assumed control of Starbucks on March 20, 2023 and has seen the chain suffer under his control. In the last few months the company’s sales decreased by 3% worldwide when stores are that have been open for at least one year, which included a percent drop in its own North America market.
Starbucks struggles reveal consumer tiredness from high prices in restaurants, food chains and shops after years of price increases. They also expose weaknesses in Starbucks its business model which has changed due to consumer demand, from an predominantly a sit-down café to a majority drive-thru and mobile takeaway chain.
“In facing tough challenges, Laxman has been laser determined to make the business better to meet the demands of our partners and customers. We wish him all the best of luck and believe the company will continue to grow in the near future,” Hobson said.
Who is Niccol?
Niccol was hired by Chipotle in February of this year in order to help turn around Chipotle following the ashes of an E. coli nightmare that injured 22 people and hospitalized them. Niccol has added more menu items and improved the digital ordering and rewards program, and Chipotle’s stock is up over 800%..
Chipotle issued an announcement that Niccol will be leaving the company on August 31, and that Chipotle’s chief operating officer, Scott Boatwright, will be the interim CEO.
Niccol stated”that “it’s hard to leave such a great company and all of the talented people I’ve had the pleasure to work with, but I depart knowing the business is in great shape and poised for growth with a strong, experienced leadership team.”
Niccol has an extensive background in fast food restaurants, which includes a previous time as the Chief Executive Officer at Taco Bell from 2015 to 2018 before joining the rival Chipotle. He also held several leadership roles in Pizza Hut, another chain operated by Yum! Brands before becoming a part of Taco Bell.
Why Narasimhan left
The sudden shift in the upper echelons comes amid the stock’s slide and ongoing talks with the activist investors Elliott Investment Management.
“While some of the slowdown can be attributed to a more sluggish consumer cutting back, much is also the result of a worsening store experience and a lack of innovation in areas like food,” said Neil Saunders, retail analyst and managing director of GlobalData Retail, said in a statement.
“Because of this Starbucks has been losing share to smaller, independent coffee shops and other rivals for a while, and the failure of Narasimhan to address this convincingly has irked investors,” Saunders said.
Saunders stated Niccol’s “deep foodservice experience will be useful as Starbucks navigates a cocktail of challenges including increased costs, labor issues, operational inefficiency, and a growing dissatisfaction among customers.”
Another reason that could have led to Narasimhan’s demotion was discontent from the former Starbucks Chief Executive Howard Schultz. Narasimhan all but attacked his successor’s leadership in an infamous LinkedIn letter from May, stating that Starbucks’ US operations were an “primary reason for the company’s fall from grace.”
Schultz declared in an announcement for The Wall Street Journal that Niccol has his “respect and full support.”