From day one, Starbucks's incoming CEO Brian Niccol will have more power than his predecessor.
Niccol, who is leaving Chipotle Mexican Grill, will become CEO and chairman the moment he joins Starbucks on September 9. By contrast, Laxman Narasimhan spent more than five months as the CEO-in-training under company patriarch Howard Schultz and he never took on the board chairman position. Only after an intense period of shadowing Schultz did he gain the ability to set the company’s strategy.
The vastly different handovers underscore the two executives’ contrasting resumes - Narasimhan had no restaurant experience, while Niccol has spent 20 years as a leader at Chipotle and Yum! Brands Inc.
What’s more, Narasimhan joined a company still helmed by Schultz, who set aggressive sales growth targets before handing over the reins. Schultz continued to provide feedback during Narasimhan’s tenure, both privately and in public missives on LinkedIn. As problems piled up after Schultz’s departure, Narasimhan was forced to cut the company's financial forecasts three times in less than a year.
Niccol now steps into a job where sales targets are lower, his title carries more weight, and the shadow of Schultz - while not entirely gone - has diminished.
He “definitely has more authority, and I think that's by design,” said Eric Gonzalez, an analyst at KeyBanc Capital Markets. “His track record speaks for himself. So that just shows you the confidence that they have in him.”
Related: Starbucks’ New CEO Has to Contend With Crisis and Howard Schultz
The stock has gained 21% since the company announced Niccol would become CEO.
The company is fighting off slumping demand from inflation-battered customers in its biggest markets, the US and China. It’s working to cut long wait times at overwhelmed stores. And it faces activist investors, contract negotiations with unionised workers and boycotts about the brand’s perceived stance in the Middle East.
While Niccol has extensive experience in the restaurant industry, he’s never managed a company with the size and scope of Starbucks.
The world’s largest coffee chain operates in more than 80 markets while Chipotle is largely focused on the US. With headcount of about 381 000, Starbucks has more than three times as many workers as Chipotle and works with licensees around the world in addition to operating its own locations.
Those who have worked with Niccol say he’s up to the challenge. They say he’s a decisive, down-to-earth leader with a track record of stabilizing troubled businesses – and then turning them around. His experience has reassured Starbucks investors, though he’ll need to win over workers sceptical of how Chipotle responded to a unionication drive during his tenure.
Union History
In an internal meeting hours after Niccol’s appointment as CEO, board members and other senior leaders were asked about his history with unions and whether Starbucks would continue its ongoing contract negotiations, according to people familiar with the matter. Sara Kelly, the company’s human resources chief, said talks would continue in good faith.
Mellody Hobson, who has served as board chair since 2021 and will become lead independent director after Niccol joins, said in an interview with CNBC that Starbucks has made significant inroads with unionised workers and “will stay that course.”
A representative for Niccol didn’t provide comment. Narasimhan declined to comment.
Like other Starbucks leaders, whether external or promoted from within, Niccol will undergo what the company calls an “immersion” process that includes learning the culture and history, spending time in stores and manufacturing facilities, and more, according to a Starbucks spokesperson. But he’ll have the authority to immediately start guiding strategy. Hobson has said Niccol knows what to do and will have the wheel.
Niccol, who enjoys a caffè americano with a cookie on the side, is an assertive manager who gets along with other senior leaders, according to people who have worked with him. They say he doesn’t micromanage and tends not to raise his voice.
During his time at Taco Bell from 2011 to 2018, he used his marketing chops to help rebuild a brand that was reeling from product quality lawsuits. New dishes, such as Doritos Locos Tacos, harnessed the growing power of social media to drive demand among younger customers. He also expanded the breakfast menu and opened thousands of locations around the world. The brand remains one of the top performers at Yum.
In 2018, Niccol joined Chipotle amid food-safety issues that had damaged the brand’s reputation and sparked pressure from activist investors. He promptly moved Chipotle’s headquarters from Denver to Newport Beach, California, in what he has said was a bid to reset the company’s culture, and over time resolved the safety issues. Under his management, Chipotle accelerated service by creating a second burrito assembly line for digital orders, helping to relieve pressure on store employees. The company boosted sales by adding drive-thrus and pickup shelves for to-go orders.
Niccol also restructured some teams last year, which led to job cuts, and called corporate workers back to the office four days a week.
For investors, it was all a resounding success: Chipotle shares rose more than eightfold during his tenure.
Carrying Piglets
Former colleagues described Niccol as someone who listens intently and isn’t afraid to get his hands dirty.
While he took the private jet to visit a farm to learn about Chipotle’s supply chain, he offered to drive the rental car, according to a person familiar with the matter. On the way, they visited Chipotle locations, where Niccol helped to wipe down tables. When they got to the farm, workers asked for help moving newborn piglets. He didn’t hesitate to scoop one up, this person said.
Niccol said that when he joins a new team he seeks to build trust by inviting feedback before laying out a strategy, according to a podcast he spoke on earlier this year. “The first thing is take the time to understand who these people are before you start telling them what you want them to go do or what you believe we need to go do,” he said.
Then comes the pep talk. “If you’re here, it’s because I want you on the team,” he said. “I believe in you. Hopefully you believe in me.”
Starbucks is paying up for his experience. Niccol’s compensation package is worth around $113 million (R2 billion) , and he won’t be required to move to Seattle, though the company says that’s where he’ll spend most of his time. Regarding the challenges he faces, Hobson told CNBC that Niccol “is someone who, quite honestly, had been there, done that.”
BLOOMBERG