The CEO of Chipotle will take over as CEO of Starbucks in an effort to boost the company’s declining revenues and win over outside investors.
Brian Niccol, who has been in charge of the burrito business since 2018, will take over the coffee giant beginning next month, Starbucks said on Tuesday morning.
Following his appointment as CEO of Starbucks in March 2023, Laxman Narasimhan is leaving the organization.
Early trading saw a 20% increase in Starbucks shares while Chipotle shares dropped more than 10%.
The behemoth in coffee has had a difficult year due to poor sales in China and the United States. Also, it was receiving more and more complaints from clients regarding deteriorating customer service and escalating costs. Recent pressure to make changes had come from so-called activist investors who had bought sizable interests in the corporation. As of Monday’s market closure, Starbucks’ shares have dropped by almost 20% in 2024.
Similar complaints have been made against Chipotle, which earlier this year boosted pricing and received a backlash on social media for serving portions that were not uniform. However, Chipotle has fared better through those problems; most recently, it revealed impressive profits that defied a general slump in the industry. Its shares had gained more than 20% so far this year as of Tuesday.
However, Starbucks said in a press release announcing the move that Niccol had “transformed” Chipotle.
“His emphasis on people and culture, brand, innovative menu items, operational excellence, and digital transformation has revolutionized the sector, resulting in notable expansion and value generation,” said Starbucks. Additionally, it stated that during his leadership, Chipotle’s stock price had climbed by around 800% “all the while boosting pay, broadening benefits, and fortifying the company culture for retail team members.”
In light of Tuesday’s leadership transition, Mellody Hobson, the chair of Starbucks, resigned to assume the role of lead independent director. She revealed to CNBC on Tuesday that the board has been considering Narasimhan’s replacement for a number of months.
Hobson stated on CNBC’s “Squawk Box” on Tuesday, “Our board started having discussions regarding the company’s leadership a few months ago. Brian answered the phone after I reached out to him through someone else.” “We believed we had the chance to speak with one of the biggest names in the business, a man whose reputation is unquestionably solid, as evidenced not just by his incredible achievements at Chipotle but also by his prior success at Pizza Hut and Taco Bell. We felt he would be the ideal leader at this time because he is knowledgeable about the field.
Hobson said that although Narasimhan had no prior restaurant experience, he still had to overcome certain obstacles when he joined Starbucks. He also addressed supply chain problems and reduced employee attrition. It seems, though, that the board is more optimistic about Niccol’s ability to quickly turn the company around.
However, what we observed about Brian was someone who had, to put it bluntly, “been there, done that” — through a variety of market conditions and cycles. “I know what to do,” he remarked to me when we spoke,” according to Hobson.
Howard Schultz, the former CEO and chairman of Starbucks commended the move in a statement. Schultz has previously expressed dissatisfaction with the company’s recent performance.
“Having followed Brian’s leadership and transformation path at Chipotle, I have always appreciated his leadership effect” Schultz remarked. “His success in retail and his history of creating exceptional shareholder value acknowledges the vital human component required to steer a company toward a culture and set of values. He is, in my opinion, the leader Starbucks needs at this critical juncture in its development. He has my utmost regard and backing.
As an interim CEO, Starbucks CFO Rachel Ruggeri will serve in that role until September 9, when Niccol will formally assume the position.
Scott Boatwright, the COO of Chipotle, will take over as the company’s temporary CEO. Jack Hartung, the CFO of Chipotle, has decided to continue in his role as president of strategy, finance, and supply chain, instead of leaving next year.