- Starbucks announced a surprise CEO change Tuesday, picking Brian Niccol as its top executive.
- Starbucks has struggled lately with sluggish sales and operational issues.
Everyone from customers to activist investors agrees: Starbucks needs to make some changes.
Brian Niccol, the coffee chain's soon-to-be CEO, has a record of doing exactly that.
Starbucks said Tuesday morning that Niccol would take over its top executive job on Sept. 9. He's currently the CEO of Mexican grill chain Chipotle. Laxman Narasimhan, Starbucks' current CEO, will step down effective immediately from his roles as CEO and a member of Starbucks' board of directors, the company said.
The move comes as activist investor Elliott Investment Management is in discussions with Starbucks management about ways to boost the company's stock price, the Wall Street Journal reported last month.
A second activist investor, hedge fund Starboard Value, also took a stake in the coffee chain and is pushing for changes, the Journal reported on Friday.
It's unclear how Niccol's appointment will affect Starbucks' negotiations with either Elliott or Starboard. Neither investor responded to requests for comment on the change from Business Insider.
But Niccol is no stranger to breathing new life into restaurant brands that need a refresh.
In 2011, he became Taco Bell's chief marketing officer. On his watch, the chain debuted its "Live Mas" slogan as well as Doritos Locos Tacos, the Wall Street Journal reported in 2022.
When he joined Chipotle in 2018, the company's stock and sales had slumped after an E. coli outbreak at its restaurants that sent some customers to the hospital.
In his tenure at Chipotle, Niccol made a variety of changes.
He moved Chipotle's headquarters from Denver to Orange County, California, and he beefed up the chain's food safety measures.
He also oversaw an expansion of Chipotle's online ordering options just before delivery and pick-up became essential to the restaurant business in the early months of the pandemic.
In a few years, Chipotle customers went from having to order in-person at a restaurant to being able to place their order online before swinging by a drive-thru window just for online orders — dubbed a "Chipotlane" by the company.
All of that helped turn around Chipotle's financial results. The chain's stock price has tripled over the last five years. On Tuesday, it was trading 12% lower at $49.43 after news of Niccol's departure broke.
"Chipotle has outperformed the quick-service restaurant space the past several years, and we'd expect new products and advertising campaigns to be a focus early in his tenure at Starbucks," said R.J. Hottovy, Head of Analytical Research at location data company Placer.ai, which analyzes foot traffic at restaurant chains.
At Starbucks, Niccol will face some challenges similar to those he took on at Chipotle. Same-store sales for Starbucks' latest quarter slipped 2% in the US as the number of orders also fell.
Starbucks sales have also fallen lately in China, which is home to nearly one-fifth of all the chain's stores. Starbucks' second-quarter sales in China fell 14%.
There are also operational issues. In the US, Starbucks cafes are often crowded as patrons decide what to order based on an extensive menu and then wait around for their order.
The company is making some steps to improve operations at its stores, including initiating a revamp of its drink production process at thousands of locations called the Siren Craft System.
But Starbucks is hoping for more changes as it prepares to welcome Niccol.
"Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth," Starbucks Board Chair Melody Hobson said in the company's statement announcing the CEO change on Tuesday.
Starbucks' network of stores is more complicated than Chipotle's, BTIG analyst Peter Saleh wrote Tuesday. While Chipotle's roughly 3,500 stores are all company-owned, Starbucks has close to 39,000 locations globally, including a mix of company-owned stores and others that are licensed out to other operators.
Still, the surprise announcement represents "a significant victory for Starbucks," he wrote.
"Mr. Niccol has earned the respect and confidence of the investment community and will be given the much-needed leeway to make investments and time to turn around Starbucks," Saleh wrote.
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