Starbucks announcement on August 13, 2024 to replace CEO Laxman Narasimhan was unexpected. Laxman Narasimhan, who had only been in the role since March 2023 faced immediate termination. Narasimhan’s tenure at Starbucks was by challenges in driving sales growth in the US and China, Starbucks’ two largest markets. During his time the company reported a 3% decline in same-store sales.
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Brian Niccol, who has been the CEO of Chipotle since 2018 will officially take over as Starbucks’ CEO on September 9, 2024. Until then Starbucks CFO Rachel Ruggeri will serve as interim CEO.
Niccol’s tenure at Chipotle has been by remarkable success with the company’s stock soaring 773% under his leadership.
He is credited with Chipotle through its foodborne illness crisis and successfully leading the company through the pandemic.
Niccol’s experience in the restaurant industry is seen as an asset by Starbucks’ board, which has been seeking a leader with a proven track record in turning around businesses and driving growth in challenging environments.
Starbucks has been facing challenges in its core markets of the US and China. The company has struggled to maintain sales growth leading to a 21% decline in its stock during Narasimhan’s tenure excluding the surge following the announcement of Niccol’s appointment.
Former CEO Howard Schultz, who had handpicked Narasimhan as his successor expressed his support for Niccol, stating that he believed Niccol was the right leader for Starbucks at this moment.
The announcement of Niccol’s appointment had an immediate impact on Starbucks’ stock, which soared 24.5%, its best day ever.
Investors responded positively to the news, showing confidence in Niccol’s ability to turn around the company. Chipotle’s stock fell by over 10% following the announcement.
Laxman Narasimhan began his career at McKinsey & Company in 1993, where he served as a Director for 12 years. His experience in consulting provided him with a solid foundation in planning and corporate management.
He later joined PepsiCo, where he held several positions including CEO of the South America division and Chief Commercial Officer.
His tenure at PepsiCo was by huge growth and innovation in the company’s operations. Before joining Starbucks, Laxman Narasimhan was the CEO of Reckitt, where he led the company through various challenges including the COVID-19 pandemic and focused on the company’s product portfolio and operational efficiency.
When Laxman Narasimhan took over at Starbucks, the company was at a critical juncture. The coffee giant was struggling with various challenges including changing consumer preferences, increasing competition and the need for a reinvention to maintain its market leadership.
Laxman Narasimhan was seen as the right leader to steer the company through these tough times, especially given his track record of driving innovation and operational improvements.
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Starbucks acknowledged Narasimhan’s efforts to innovate and improve the brand’s supply chain, which is crucial for a company that relies heavily on consistent product quality and timely delivery across its global operations.
He was also credited with enhancing store operations, which is a critical aspect of Starbucks’ business model. Effective store management directly impacts customer experience, which is central to Starbucks’ brand identity.
Laxman Narasimhan’s tenure at Starbucks was cut short. The company’s official statement praised his efforts but provided no specific reasons for his departure.
One of the reasons speculated for Narasimhan’s exit is Starbucks’ disappointing global performance during his tenure.
The company faced two consecutive quarters of declining comparable sales.
Laxman Narasimhan’s tenure was also marred by several controversies. Starbucks faced backlash over a social media post by Starbucks Workers United, which expressed solidarity with Palestine shortly after a Hamas attack on Israel.
Activist investors including Elliott Investment Management and Starboard Value, who acquired a $2-billion stake in Starbucks were reportedly dissatisfied with the company’s performance.
These investors were pressuring the company to enhance its share price and overall performance which may have contributed to the decision to replace Laxman Narasimhan.
In a July 7 interview with Fortune magazine, Laxman Narasimhan addressed the importance of maintaining a strict work-life balance, stating that he almost never worked past 6 pm.
He added that if anyone wanted a minute of his time after 6 pm, it had to be something important enough to keep him away from his family.
Just before the CEO change Starbucks shares had dropped 20 percent this year. The market responded positively to the news of Laxman Narasimhan’s exit.
Starbucks shares surged 24 percent on the S&P 500, the biggest intraday gain on record for the company. This increase added over $20 billion in market capitalization.
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