Starbucks hires Chipotle boss Brian Niccol as next CEO as pressure from activist investors grows
Starbucks said Tuesday it is replacing embattled CEO Laxman Narasimhan with Chipotle boss Brian Niccol — a surprise move that comes after months of slowing sales and growing heat from activist hedge funds.
The company said Niccol — who has been widely praised for a turnaround at Chipotle that has boosted the burrito chain’s stock by more than 50% over the past year — will assume the executive position on Sept. 9.
Narasimhan will be stepping down from his CEO and board director positions immediately. Starbucks chief financial officer Rachel Ruggeri will serve as interim CEO until Niccol starts.
Starbucks shares jumped 25% to $95.90 on the news, a record percentage increase, while Chipotle shares dropped 7.5% to $51.68.
Although Niccol’s appointment drew a giddy reaction from Wall Street, some took to social media to poke fun at the CEO over complaints he shrunk portion sizes at Chipotle — an allegation Niccol has denied.
“Milk is extra, is that ok?” one market researcher quipped on X.
In an X post headlined “Starbucks in the Brian Niccol era,” financial newsletter writer Sam Ro penned a dialogue with a barista asking a customer, “Room for milk?” When the customer replies “Yes,” the barista “hands over a half-filled cup of coffee.”
During Niccol’s tenure, Chipotle sales doubled to about $10 billion in fiscal 2023 as the company added nearly 1,000 new stores globally.
Niccol, who has focused on modernizing the burrito chain’s digital and mobile ordering platforms, is credited with introducing digital order pick-up lanes, called Chipotlanes.
The shakeup follows a 20% stock drop for Starbucks since Narasimhan took the reins of the company a year and a half ago, succeeding former CEO Howard Schultz.
When reports came in July that activist investor Elliott Investment Management had built a large stake in Starbucks, the coffee chain’s stock soared.
Starbucks has been making changes to its service protocols as it tries to placate Elliott, headed by billionaire Paul Singer, and Starboard Value.
Neither of the hedge funds was notified about the CEO switch and it’s unclear whether they will continue to pressure the company. Elliott and Starboard didn’t immediately respond to requests for comment.
Mellody Hobson — the company’s executive chairwoman since 2021 — will become the lead independent director.
Hobson told The Journal that the company began discussions about a leadership change and reached out to Niccol two months ago.
She said the decision to choose Niccol was made exclusively by Starbucks’ board, though Schultz was brought into the conversation about a week ago.
“As I embark upon this journey, I am energized by the tremendous potential to drive growth and further enhance the Starbucks experience for our customers and partners, while staying true to our mission and values,” Niccol said in a statement.
Niccol — who also won praise for a turnaround at Taco Bell before he joined Chipotle — will be the company’s sixth chief executive. He will be the second CEO to join Starbucks from outside the company, following Narasimhan.
Schultz, who built the chain into a global behemoth in the 1990s, slammed Narasimhan’s management style on LinkedIn in May.
“Having followed Brian’s leadership and transformation journey at Chipotle, I’ve long admired his leadership impact,” Schultz said of Niccol in a statement. “I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support.”
Elliott has been pushing Starbucks – which has faced criticism from frustrated customers over long wait times – to find new ways to boost its stock price, according to The Journal.
Starbucks’ stock price took a hit in April when the company – the world’s biggest coffee company by location and sales – reported its first drop in same-store sales in nearly three years.
“The brand is incredibly resilient, but it’s clearly not business as usual,” Schultz posted on LinkedIn after the disappointing earnings.
As sales have slumped, Narasimhan has been forced to lower earnings estimates several times since he took the helm last April.
Starbucks’ market value plunged under his lead – from nearly $115 billion under Schultz to about $87 billion on Tuesday.
“Senior leaders – including board members – need to spend more time with those who wear the green apron,” Schultz said in the LinkedIn post.
Along with customer complaints about long lines – with some saying they have been forced to wait as long as 40 minutes for a cup of joe – Starbucks has also been dealing with a widespread unionization effort since 2021.
