Following recently disappointing quarterly earnings reports, American coffee giant Starbucks has committed to a new change in leadership.
Starbucks has now ousted former CEO Laxman Narasimhan effective immediately and announced his replacement as Chipotle CEO Brian Niccol who will take over on September 9.
Starbucks Announcment
On Tuesday, Starbucks announced the sudden switch up in senior leadership in a press release published on their website, naming Rachel Ruggeri as interim CEO.
“[Starbucks] today announced that Brian Niccol has been appointed chairman and chief executive officer. Niccol will start in his new role on September 9, 2024,” the statement said. “Laxman Narasimhan is stepping down as CEO and as a director effective immediately. Rachel Ruggeri will serve as interim CEO.”
Excitement for Niccol
In their statement, Starbucks extolled the virtues of Niccol, who they saw as an innovator and value creator.
“Niccol has transformed Chipotle,” the statement said. “His focus on people and culture, brand, menu innovation, operational excellence, and digital transformation have set new standards in the industry and driven significant growth and value creation.”
Revenue Generator
Starbucks also highlighted his financial accomplishments in his role at the restaurant brand which did not come at the cost of sacrificing worker benefits.
“Revenue has nearly doubled, profits have increased nearly sevenfold, and the stock price has increased by nearly 800% during his leadership, all while increasing wages for retail team members, expanding benefits, and strengthening the culture,” said the Starbucks statement.
Phenomenal Career
Mellody Hobson, who was named lead independent director, gushed praise and was thankful for the opportunity to work with Niccol.
“We are thrilled to welcome Brian to Starbucks. His phenomenal career speaks for itself. Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” Hobson said.
Experienced Business Leader
According to the statement, Niccol currently serves on the board of directors for Walmart and previously he was on the boards for KB Home and Harley-Davidson.
Before becoming the Chipotle CEO in 2018, he served as Chief Executive Officer for the Mexican-inspired food chain Taco Bell from 2015 to 2018.
Niccol’s Statement
Niccol was quoted in the Starbucks statement as excited to join, mentioning a long-held admiration for the brand.
“I am excited to join Starbucks and grateful for the opportunity to help steward this incredible company, alongside hundreds of thousands of devoted partners,” said Niccol. “I have long-admired Starbucks iconic brand, unique culture and commitment to enhancing human connections around the globe.
Thanking Laxman
While Starbucks is moving on from its current CEO, Hobson took a moment to thank Narasimhan for his efforts and blamed “challenging headwinds” for the company’s latest struggles.
“On behalf of the board, I want to sincerely thank Laxman for his contributions to Starbucks, and his dedication to our people and brand,” said Hobson. “In the face of some challenging headwinds, Laxman has been laser focused on improving the business to meet the needs of our customers and partners. We all wish him the very best and know he will do great things in the future.”
Best Stock Day Ever
CNBC reports that the decision to axe Laxman Narasimhan sent Starbucks stock soaring to its best day ever, gaining 24.5%.
By contrast, the news negatively affected Chipotle’s stock, which fell by 10% as news that their CEO would be leaving broke.
Starbucks’ Struggles
The coffee giant has been struggling with sales in recent months, with their latest earnings report showing a 3% decline in same-store sales globally, the second straight quarter of global decline.
This Starbucks sales slump has been driven by declines in the United States and China, which are its two largest markets.
Pricing Backlash
As some customers struggle with tough economic conditions, many are choosing to cut back on eating out and preferring to brew their coffee cheaper at home.
In April, analysts from Deutsche Bank found that 45% of Starbucks customers are buying less or no longer buying from Starbucks at all, with the top reason reported being “it’s become too expensive.”
Schultz Open Letter
In May, former Starbucks CEO Howard Schultz, who had handpicked Narasimhan to succeed him, pinned an open letter criticizing the company’s direction and offered advice going forward.
“At any company that misses badly, there must be contrition and renewed focus and discipline on the core. Own the shortcoming without the slightest semblance of an excuse,” said Schultz in the letter.
