In a surprising turn of events, Starbucks announced that Brian Niccol, the current CEO of Chipotle Mexican Grill, will take over as Chairman and Chief Executive Officer, replacing Laxman Narasimhan.The coffee chain faced pressure from Elliott Investment Management, an activist investor with a substantial stake, which has been pushing for enhancements in performance and stock value.
Why was Narasimhan sacked by Starbucks ?
Laxman Narasimhan, who was appointed as CEO in March 2023 with a goal of transforming Starbucks, stepped down after a brief 18-month tenure. During his time, the company’s stock value declined by nearly 25%.
Narasimhan succeedeed Howard Schultz, who had temporarily returned to the company as interim CEO in 2022 after retiring from his previous role as chairman emeritus.
However investors rapidly lost confidence in Narasimhan as the company’s sales declined and struggled with various challenges, including competition from cheaper rivals in China and boycotts in the Middle East and other regions due to its perceived stance on Israel.
Mellody Hobson, chair of Starbucks’ board of directors, praised Niccol for transforming Chipotle since he took over as CEO in 2018, highlighting his emphasis on menu innovation, operational excellence, and digital transformation.
“Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” Hobson said in a statement, PTI reported.
“Like all of us at Starbucks, he understands that a remarkable customer experience is rooted in an exceptional partner experience.” Schultz also expressed his longstanding admiration for Niccol.
In a recent interview with Fortune Magazine, the 57-year-old executive shared insights on his work-life balance. He revealed that he typically wraps up his workday by 6 pm, noting that staying later is reserved for only “very important” matters.
Niccol’s appointment a major win for Starbucks?
Niccol’s appointment is a major win for Starbucks. Under his leadership, Chipotle’s annual sales have soared since he joined in 2018, and the company’s stock has more than tripled over the past five years.
“This is a significant victory for Starbucks. 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,” noted BTIG analyst Peter Saleh.
Starbucks had faced pressure from Elliott Management, which had acquired a $2 billion stake in the company. Elliott had recommended expanding Starbucks’ board and appointing its executive Jesse Cohn as a director, but did not insist on a change in CEO.
Sources close to Starbucks indicated that former CEO Howard Schultz had been advocating for solutions to the company’s challenges without offering a board seat to the activist investor.