Starbucks is undergoing a leadership change as CEO Laxman Narasimhan steps down just a year into his role, amid declining sales. The coffee chain announced Tuesday that Brian Niccol, the CEO of Chipotle and a corporate turnaround expert, will take over as chairman and CEO on September 9. This marks the fourth CEO change for Starbucks in just two years.
Niccol has been with Chipotle since 2018, during which he has driven significant growth, with the company’s revenue increasing nearly 800%. Starbucks’ new lead independent director, Mellody Hobson, praised Niccol as a “culture carrier” with extensive experience in innovation and growth, believing he will bring a transformative approach to the company.
Following the announcement, Starbucks’ stock surged nearly 19%, erasing prior losses, while Chipotle’s stock saw a 9% drop. This reaction positions Starbucks for one of its largest single-day percentage gains since going public in 1992.
Narasimhan, who is also resigning from the board, began his tenure in March 2023 but faced challenges, including a recent 3% decrease in global sales for established stores. This trend reflects broader consumer fatigue with high prices across the food industry and reveals difficulties in Starbucks’ business model, which has transitioned from a traditional coffee shop to a drive-thru and mobile-focused entity.
Hobson acknowledged Narasimhan’s efforts during tough conditions, wishing him success in future endeavors. Niccol’s departure from Chipotle comes as the company’s chief operating officer, Scott Boatwright, steps in as interim CEO.
Niccol previously led Taco Bell from 2015 to 2018 and has held various positions at Pizza Hut, bringing valuable experience to Starbucks. Analysts anticipate that his background in driving customer engagement through menu innovations and marketing will be pivotal as Starbucks seeks to reinvigorate its brand.
The leadership change coincides with falling stock prices and ongoing talks with activist investor Elliott Investment Management. Starbucks faces increasing competition from low-cost rivals and has struggled to maintain market share in China.
Retail analyst Neil Saunders noted that Narasimhan’s failure to address declining customer satisfaction and operational issues contributed to investor discontent. He believes Niccol’s expertise in the food service industry will be crucial in navigating the challenges ahead.
Former CEO Howard Schultz expressed his support for Niccol, emphasizing the need for effective leadership to address the company’s current struggles.