Dive Brief:
- Starbucks has appointed Brian Niccol, CEO and board chairman at Chipotle, as its CEO and chairman, effective, Sept. 9, the company said Tuesday. Laxman Narasimhan, who has been CEO since last year, has stepped down from his post effective immediately.
- CFO Rachel Ruggeri will serve as interim CEO until Niccol’s start date.
- Niccol has served as the top executive at Chipotle since 2018. As CEO, Niccol could help get the coffee giant back on track as it continues to face traffic and comparable sales declines — metrics that were up at Chipotle last quarter.
Dive Insight:
Starbucks has faced ongoing criticism from activist investor Elliot Management Group and the chain’s former CEO Howard Schultz amid lackluster financial results. The chain has rolled out several new beverages, but they haven’t been enough to move the needle on consumer demand, and the chain has seen declining traffic from non-rewards members.
“The replacement of Laxman Narasimhan as Starbucks CEO is the result of growing dissatisfaction, particularly from activist investors, over the way the chain has been run,” Neil Saunders, managing director of GlobalData, said in an emailed statement. “There is a sense that Starbucks has been on the back foot for too long and that it has lost sight of the basics.”
Niccol has extensive experience turning a brand around. He joined Chipotle around the time it was facing extensive pushback from consumers over food safety issues after guests fell ill from eating at the chain.
Not only did he improve food safety, but he also stewarded menu innovation, which hadn’t been a focus at the chain prior to his tenure. He improved operations, most recently updating Chipotle’s labor model to consistently include an expeditor to improve service times. The chain now emphasizes digital sales, which now make up over a third of total food and beverage revenue.
The burrito chain also adopted a mobile pickup lane to many of its stores, dubbed Chipotlane, which have delivered consistently higher AUVs than traditional Chipotle restaurants. This experience with mobile orders and a drive-thru-style setup could come in handy at Starbucks, which drives a lot of orders through these channels. Earlier this year, Starbucks management said its mobile ordering was so popular, that it was slowing order fulfillment times.
“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,” Saunders said. “However, given the scale of the challenges it would be unreasonable to expect a change of leadership to yield immediate results.”
Under Narasimhan, Starbucks and Workers United agreed to a framework for bargaining contracts at the hundreds of locations that have voted for union representation since late 2021. Chipotle, under Niccol’s leadership, faced two union drives, one in Maine, which ended in a store closure, and a second in Michigan, where the International Brotherhood of Teamsters won a majority of votes. The union drives at Chipotle did not spread across the company the way they did at Starbucks.
Aneurin Canham-Clyne contributed to this report.
