Starbucks announced a major change in leadership on Tuesday after experiencing a significant decrease in sales. The coffee chain’s board of directors declared that Laxman Narasimhan has departed from his role as chief executive “effective immediately.” He will be replaced by Brian Niccol, the current CEO of Chipotle, in the near future.
This decision comes after growing pressure and speculation surrounding Narasimhan’s future with the company. Despite only being in the role for a year-and-a-half, Starbucks reported a 3% decline in global sales during its third quarter, which was higher than expected by analysts. This adds to a series of disappointing financial results for the company, with slumps in regions such as the US and the Middle East and a 14% drop in sales in China during the same period.
The decline in sales has been attributed to a combination of weaker demand and boycotts related to the ongoing conflict in Gaza. Narasimhan, who previously served as the chief executive of multinational consumer goods firm Reckitt, has faced criticism for his lack of experience in the restaurant sector. Despite undergoing extensive training, including working as a barista, he faced further pressure in May when his predecessor Howard Schultz published an open letter urging the company to make improvements.
In addition to external pressure, Starbucks has also faced pressure from activist investor Elliott Investment Management, who holds a $2 billion stake in the company and has demanded changes. As part of a major shake-up, Mellody Hobson, who has stepped down as chairman, will lead the board of directors. In an interview with CNBC, she admitted to pushing for Narasimhan’s replacement “a couple of months ago.”
Niccol, who has held senior positions at major US food brands including Taco Bell and Pizza Hut, will officially take over as chief executive on September 9th. Hobson expressed her excitement for his appointment, stating, “His phenomenal career speaks for itself.” Niccol is credited with turning around Chipotle’s fortunes, including a nearly 800% increase in stock price during his tenure.
Schultz, who welcomed the appointment, warned that Starbucks is at a “pivotal moment in its history.” The announcement of Niccol’s appointment resulted in a 20% increase in Starbucks’ stock price, while Chipotle’s stock fell more than 10%.
In the meantime, Starbucks’ chief financial officer, Rachel Ruggeri, will serve as interim chief executive. Niccol released a statement expressing his excitement for the new role and his belief in the company’s potential for growth. This change in leadership comes after Starbucks faced boycotts over their stance on the war in Gaza, which led to legal action against US union Workers United for using the company’s name and similar logo. Other major US companies, such as McDonald’s, have also seen a decrease in sales due to boycotts related to the conflict. In response, Starbucks stated their official position is to condemn the violence in the region.
