Struggling Starbucks Replaces Its CEO, Names Brian Niccol as Next Leader
In 2018, when Chipotle was reeling from multiple food poisoning outbreaks that had sickened 1,100 people, the company called Taco Bell CEO Brian Niccol to turn things around.
As Chipotle's chairman and CEO, Niccol beefed up marketing and product innovation, added a loyalty program and improved store operations. He also instituted employee benefits, like a program that pays employees’ college tuition costs at certain schools.
Chipotle's revenue since then has nearly doubled.
On Tuesday, Niccol answered another call, this time from Starbucks. The Seattle coffee giant named Niccol as its new chairman and CEO, hoping he can revive fading sales and re-establish Starbucks as a destination where customers are willing to pay premium prices.
“I am excited to join Starbucks and grateful for the opportunity to help steward this incredible company, alongside hundreds of thousands of devoted partners,” Niccol said.
Starbucks shares jumped 24.5 percent Tuesday on the news, recapturing all of their losses for the year.
However, Niccol faces far larger and deeper challenges at Starbucks, which has 38,000 stores worldwide compared to Chipotle's largely US-based chain of 3,500 restaurants. Niccol has to figure out how to get inflation-weary US customers back into stores for its pricey drinks.
“I will pay $9 for a burrito. I’m not sure I’m going to pay $9 for a cup of Venti shaken espresso,” said Nancy Tengler, CEO of Laffer Tengler Investments, which owns shares in Starbucks and Chipotle.
In the US, Starbucks has struggled to balance the demand for mobile orders and faster service with its more traditional role as an upscale cafe where customers can gather and relax. Tengler said long wait times and a deluge of mobile orders have damaged the in-store experience at Starbucks, and Niccol will have to develop a plan to flip that around.
Starbucks -- along with other big brands like McDonald's -- is also confronting US consumers who are increasingly looking for value and deals. Niccol will have to convince drinkers that a medium Starbucks iced coffee -- now more than $5 in Manhattan -- is worth paying for.
In China, Starbucks' second-largest market with 6,500 stores, customers are increasingly opting for coffee from lower-priced rivals. And in the Middle East and some countries in Europe, Starbucks is seeing boycotts related to the Israel-Hamas war.
Niccol replaces Laxman Narasimhan, who is stepping down immediately after spending a little more than a year in Starbucks' top job. Niccol will become Starbucks' chairman and CEO on Sept. 9. Starbucks Chief Financial Officer Rachel Ruggeri will be the interim CEO until then.
Narasimhan succeeded Howard Schultz, the longtime Starbucks leader and chairman emeritus, in March 2023. But investors and the company's board quickly soured on the longtime PepsiCo executive, who trained as a barista and worked monthly in Starbucks stores but had little retail experience.
Starbucks’ revenue dropped 2 percent in the first three months of this year, the first quarterly sales decline for the company since the end of 2020. The decline prompted a rebuke from Schultz, who wrote in a LinkedIn post this spring that company leaders should spend more time in stores and focus on coffee drinks.
Revenue fell again the next quarter. A new summer drink with boba-like raspberry “pearls” drove strong US sales, but the company had to pull back on marketing after it ran out of ingredients.
Andy Barish, an equity analyst at the investment bank Jefferies, said investors didn't feel Narasimhan was effectively addressing Starbucks' issues, including increasingly complicated operations for store employees and ineffective marketing. New products -- like a line of energy drinks -- were also lackluster, Barish wrote Tuesday.
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