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Starbucks has fired its chief executive Laxman Narasimhan and replaced him with Chipotle’s Brian Niccol, as the world’s largest coffee chain responds to falling sales and pressure from an activist investor, unionized baristas and its former boss.
Narasimhan will leave his post immediately, while Niccol will leave burrito chain Chipotle Mexican Grill at the end of this month and begin his new role on Sept. 9, Starbucks said Tuesday. Chief Financial Officer Rachel Ruggeri will lead the company on an interim basis.
Niccol’s appointment triggered strong reactions in the share prices of both companies, with Starbucks up more than 20 percent and Chipotle down 9.5 percent as of midday in New York.
The abrupt change comes less than two years since Starbucks hired Narasimhan from U.K.-based consumer products company Reckitt, and makes Niccol its fourth chief executive in four and a half years.
Starbucks’ board of directors made the decision to oust Narasimhan after coming under fire from activist investor Elliott Management and Howard Schultz, who spent three terms as the company’s leader and publicly criticized management’s strategy.
Narasimhan oversaw Starbucks’ first comparable sales decline since 2020. Schultz, who built the Seattle coffee bean supplier into a global coffeehouse brand, had publicly criticized the chief executive and privately expressed opposition to a deal with Elliott. The activist investor had been in talks with Starbucks over a range of demands, including board representation, the Financial Times said. previously reported.
Mellody Hobson, the network’s longest-serving director, told CNBC on Tuesday that the board had begun a conversation about replacing Narasimhan in recent months. “I made a proposal to Brian through someone and he took the call,” she said.
Elliott, which controls a sizeable minority stake, said it had been in contact with the board for two months “regarding our views on key issues facing the company” and described the CEO change as “a transformational step forward.”
As part of the changes announced Tuesday, Hobson, who has called Schultz a close friend and has served on the board for 19 years, will be replaced as chairman by Niccol and become lead independent director.
“[Niccol] “He has my full respect and support,” said Schultz, who is the company’s largest independent shareholder and retains observer rights on the board. and other benefitsin a press release issued by Starbucks. “I thank Mellody and the Starbucks Board of Directors for their deep commitment to shaping the future of this remarkable global phenomenon that is Starbucks.”
Niccol took over as ChipotleChipotle’s CEO in 2018. Since then, the burrito chain’s revenue has nearly doubled and its stock price has risen nearly 800 percent, Starbucks said in its announcement of his appointment. Chipotle’s sales rose by double digits in its most recent quarter at a time when sales at many other fast-food chains were declining.
Last year, Narasimhan launched a long-term strategy called “Reinventing Triple Dose with Two Pumps.” The plan included adding thousands of new coffees, doubling the number of members in its rewards program and cutting billions of dollars in costs.
This year, it laid out a shorter-term “action plan” for its more than 9,000 U.S. coffee shops, including refurbishing facilities and launching new products, such as a refreshing summer berry drink with flavored pearls. The chain also ramped up promotions and deals to boost customer traffic.
Starbucks’ share price has fallen by about a fifth since Narasimhan took over from Schultz. Comparable sales have fallen in each of the past two quarters as consumers, tired of inflation, have become reluctant to accept the price of their drinks. China, a crucial growth market, has been a particular challenge as the economy slows and competitors advance.
Starbucks has also had to deal with the effects of boycotts against Western brands in the wake of Israel’s war in Gaza. A barista union organized under Schultz’s leadership has been pushing for higher wages and better working conditions as it negotiates a first contract at Starbucks cafes.