(Image source from: Indiatimes.com)
Starbucks announced Tuesday that Chipotle CEO Brian Nicol will become the coffee chain's new CEO. It has been over a year since current President Laxman Narasimhan took office. Starbucks said in a statement that Narasimhan is “immediately” resigning as chief executive officer and member of the Starbucks board. Shares of Starbucks rose about 21 percent in early afternoon trading, while shares of Chipotle Mexican Grill fell about 8 percent. The leadership change comes at a time when Starbucks is trying to rebuild its business amid a massive drop in sales in recent financial results. The company also delivered a disastrous earnings report in April that hit its shares hard and prompted Mr. Narasimhan promised a restructuring. Starbucks has previously cited weak consumer sentiment and difficult market conditions in China as factors in its problems. The company is also battling pressure from Elliott Investment Management, an activist fund that has invested in the chain and is looking for ways to boost its stock price. Meanwhile, the coffee giant is working on finalizing contracts with Union stores.
“We look forward to continuing to work with Starbucks to resolve outstanding issues and reach a fair agreement in the coming months,” union President Lynn Fox said in a statement. “The replacement of Starbucks CEO Laxman Narasimhan is the result of growing dissatisfaction, particularly among activist investors, with the way the chain is being run,” Global Data CEO Neil Saunders said in a statement. “While some of the economic slowdown is due to a slowdown in consumer activity, it is largely due to a deteriorating shopping experience and a lack of innovation in areas such as groceries,” he added. Investors may be hoping that adding Nicol to the board will improve day-to-day operations. “Brian is a cultured leader who brings a wealth of experience,” Starbucks Chairman Melody Hobson said in a statement.
Nicole has been CEO of Chipotle since 2018. In naming Starbucks' new CEO, the company cited Chipotle's performance as a "significant growth and value driver" as revenue nearly doubled and profits increased. Narasimhan, a veteran of PepsiCo and other consumer brands, will take the top job in 2023 after previously working alongside Starbucks CEO and interim chairman Howard Schultz. During his tenure, Narasimhan drove innovation in the brand's supply chain and strengthened store operations, the statement said. Nicole is scheduled to begin her new role on September 9th, and Starbucks CFO Rachel Ruggeri will serve as interim CEO until then.
