Starbucks orders at Chipotle for new CEO
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Starbucks today poached Chipotle's heralded boss as its new CEO, hoping to replicate the same sort of turnaround that he executed at the fast-casual Mexican chain.
Why it matters: Starbucks has been reeling from a slowdown in sales and facing pressure from activist investors to make changes.
Driving the news: Starbucks Tuesday appointed Brian Niccol as its chairman and CEO effective Sept. 9.
- Niccol leaves the top post at Chipotle and replaces Laxman Narasimhan, who is stepping down immediately after being handpicked by Starbucks legend Howard Schultz as his successor in March 2023.
The big picture: Niccol is "a hall of fame restaurant CEO" who will use his savvy marketing lessons from Chipotle to "create brand buzz" at Starbucks, TD Cowen analyst Andrew Charles said in a research note.
- "He appreciates what makes a premium brand special," Charles wrote.
Flashback: Niccol was appointed CEO of Chipotle in 2018, when the company was still reeling from an outbreak of food-borne illnesses that ultimately led to a settlement with the Department of Justice to resolve criminal charges.
- The episode severely damaged Chipotle's reputation and sales.
- But Niccol swooped in and implemented new safety protocols, modernized the chain's ordering, introduced new ingredients and opened new locations.
- Chipotle's sales more than doubled from 2018 to 2023.
Zoom in: Long wait times and supply chain issues have been dogging Starbucks in the post-Schultz era.
- At the same time, Schultz remains a powerful force at the company while it faces challenges from activist Starboard Value and Elliott Investment Management.
- Both hedge funds have been pushing for changes at the company.
💠Our thought bubble: Having charted a successful path at Taco Bell and then Chipotle, Niccol has the food industry experience to identify where Starbucks has gone wrong.
- The big question is whether he'll clash with Schultz — and whether the activists will back off now that he's in charge.
- One of them, Elliott, called Niccol's appointment Tuesday "a transformational step forward" for the coffee chain.
The bottom line: Starbucks shares soared and Chipotle's stock plunged after the news, illustrating the immediate jolt of faith Niccol's appointment has given investors.
