Starbucks Replaces Its CEO With Chipotle CEO After Year Of Low Sales: ‘Management Shakeup’

Customers order at a Starbucks in Manhattan Beach, California, on July 19, 2024. Starbucks is among the businesses impacted as Airlines, banks, TV channels and other businesses were disrupted worldwide on July 19 following a major computer systems outage linked to an update on an antivirus program. (Photo by ETIENNE LAURENT / AFP) (Photo by ETIENNE LAURENT/AFP via Getty Images)
(Photo by ETIENNE LAURENT/AFP via Getty Images)

OAN Staff James Meyers
10:11 AM – Tuesday, August 13, 2024

The coffee giant Starbucks is replacing its CEO with the former head of Chipotle to be in charge of the Seattle-based coffee chain, with hopes of reviving sales and appeal to outside investors. 

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Starbucks made the announcement on Tuesday, stating that Brian Niccol, whose been in charge of the burrito chain since 2018, will take over Starbucks as soon as next month.

Laxman Narasimhan, who was previously in charge of the coffee chain in March 2023, is also leaving the company. 

This comes after a Starbucks company spokesperson said in its recent quarterly results that its same-store sales declined by 3% overall globally and 2% specifically in North America. 

Meanwhile, the chain has also faced pressure from activist investors who want to restructure how the business is run. 

On the bright side, Starbucks’ share price increased by 20% in premarket trading after the company’s announcement. 

“There is a sense that Starbucks has been on the back foot for too long and that it has lost sight of the basics,” Neil Saunders, the managing director of GlobalData Retail, said in a note to clients early Tuesday. “This has led to a poor performance, particularly in the US.”

“While some of the slowdown can be attributed to a more sluggish consumer cutting back, much is also the result of a worsening store experience and a lack of innovation in areas like food.

“Because of this Starbucks has been losing share to smaller, independent coffee shops and other rivals for a while, and the failure of Narasimhan to address this convincingly has irked investors,” he said.

Chipotle has faced similar issues in the past, such as widespread customer complaints in regards to its increased prices as well as social media criticism over its noticeably smaller portion sizes. However, Chipotle has still been able to weather the storm, recently reporting strong earnings that helped them get through a broader industry slowdown. As of Tuesday, its stock was up over 20%. 

In the press release that announced the change, Starbucks uplifted Niccol and they noted how he “transformed” Chipotle for the better.

“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,” Starbucks said. It also added that Chipotle’s stock price had increased nearly 800% during his tenure, “all while increasing wages for retail team members, expanding benefits, and strengthening the culture.”

Additionally, Mellody Hobson, who stepped down as Starbucks’ chair to become the company’s lead independent director as part of Tuesday’s leadership change, told CNBC that the board had contemplated replacing Narasimhan for months.

“Our board, a couple months ago, started to engage in a conversation about the leadership of the company, and I made an overture through someone to Brian, and he took the call,” Hobson said on CNBC’s “Squawk Box” on Tuesday. “We thought we had the opportunity to engage with one of the biggest names in the industry, someone whose track record is just clearly proven, not only through the spectacular results that he’s had at Chipotle, but also before that at Pizza Hut and Taco Bell. He knows this industry, and we thought he would be the right leader for this moment.”

As for now, Starbucks CFO Rachel Ruggeri will take over as interim chief executive until September 9th, when Niccol will officially take over the position. 

Chipotle will put COO Scott Boatwright in charge as the interim CEO. Additionally, Chipotle CFO Jack Hartung, who was planning on retiring next year, will now stay on as president of strategy, finance, and the supply chain.

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