Starbucks announced the replacement of its global CEO.
On August 13th, Starbucks announced that current global CEO Laxman Narasimhan will resign from his positions as CEO and member of the Starbucks board of directors, effective immediately. Meanwhile, Starbucks announced the appointment of Brian Niccol as Chairman and CEO, who will take office on September 9, 2024. Prior to Niccol's official appointment, Starbucks CFO Rachel Ruggeri will serve as interim CEO.
Regarding this personnel change, on August 14th, Starbucks China told Interface News, "The personnel adjustment at Starbucks headquarters does not involve the Chinese market
After the above news was released, Starbucks' stock price rose by more than 17% before the opening on the 13th, and surged by more than 20% at one point after the opening, with a total market value of over 100 billion US dollars. As of the close on August 13th, Starbucks was trading at $95.9 per share, up 24.5% - the largest daily increase since Starbucks went public.
He has been sitting as the global CEO of Starbucks for just over a year now.
Naxi Han will take office in March 2023. Starbucks announced this news in September 2022, and in October, Naxi Han officially joined the company. His predecessor was Howard Schultz, the founder of Starbucks.
Prior to Starbucks, Southan was the CEO of fast-moving consumer goods giant Reckitt é s. After taking office as Starbucks Global CEO for two months, he immediately visited the Chinese market and made it clear in interviews with media outlets such as Interface News that Starbucks would not open up franchising. Subsequently, this company also maintained a relatively calm attitude in the price war of Chinese coffee.
But compared to Eslite, Starbucks' newly selected candidates have more experience in the food and beverage industry.
Niccol first served as brand management in P&G, and he also served as CEO, chief marketing and innovation officer of Yum! Brands' "Taco Bell", and had corresponding leadership experience in Pizzahut. Niccol is currently the Chairman and CEO of Chipotle, a Mexican restaurant chain brand listed in the United States. He took over Chipotle in 2018, and public information shows that as of June 30, 2024, Chipotle had a total of 3500 restaurants.
Starbucks really needs someone who can turn the tide now.
He is the leader that Starbucks needs at a critical historical moment, "Schultz said of Niccol in a public announcement.
The current Starbucks crisis is looming, as it faces challenges in its two major markets, North America and China. As of the third quarter financial report as of June 30, 2024, Starbucks' global performance has experienced two consecutive quarters of decline.
Among them, in the second quarter of 2024, the revenue decreased by 2% year-on-year to 8.56 billion US dollars, the net profit was 772 million US dollars, a year-on-year decrease of 1.496 billion US dollars, and the same store sales declined for the first time since 2020, with a decline of 4%. Same store sales in the United States and China decreased by 3% and 11% respectively.
In the third quarter of 2024, Starbucks achieved a consolidated net revenue of $9.114 billion, a year-on-year decrease of 0.6%, and a net profit attributable to shareholders of $1.055 billion, a year-on-year decrease of 7.6%. Global same store sales decreased by 3%, with same store sales in North America and China decreasing by 2% and 14%, respectively.
The common challenge faced by this giant in the Chinese and American markets is the changing consumer environment in both regions. The price war in the coffee industry in the Chinese market needs no further elaboration. In the US market, Starbucks is also facing this competition. In the context of high inflation, consumers have become more cautious.
After the release of the quarterly financial report, some analysts believed that as the cost of dining out increases, Starbucks is facing competition from more affordable competitors such as "DeliSpeed Coffee" and home coffee machines in the United States.
Investors' confidence in Starbucks has also begun to loosen - Starbucks' stock price has dropped from a high of $115 per share in mid May 2023 to $74 per share in early August 2024, and under the leadership of Haytham, Starbucks' stock price has fallen by over 20%.
Starbucks hopes to find someone who can turn the tide.
Niccol may be able to take on the task in a crisis. His strengths include business digital transformation and menu innovation. Starbucks announced that during Niccol's leadership of Chipotle, the company's revenue nearly doubled, profits nearly sevenfold, and stock price rose nearly 800%.
Public information shows that Chipotle was once embroiled in a public opinion vortex in 2015 due to food safety issues, resulting in a significant decline in performance. Since then, in order to reduce operating costs and lower prices, and simplify production processes, this has created a vicious cycle. After taking over Chipotle, Niccol used menu innovation, product upgrades, and other methods to free Chipotle from the price war of the past, and thus "rescued" the brand from food safety public opinion.
In addition, he also led the company's digital transformation, including the launch of an online ordering mobile app and corresponding store models. How to further digitize, attract consumers through innovation, and avoid getting caught up in a price war is exactly what Starbucks needs now.
In fact, the replacement of Starbucks' global CEO is not without warning signs.
Although in Starbucks' announcement this time, the company also acknowledged former global CEO Simon Yam, stating that it has "enhanced the experience of store partners, driven significant innovation in Starbucks' supply chain, and improved store operations.
But after the release of the second quarter financial report this year, facing declining performance, Schultz expressed some of his views on social media. He did not mention the names of any senior executives or the company itself in the article, but stated that Starbucks' decline was due to the unsatisfactory US market, and that "stores need to focus on consumer experience from the perspective of merchants
Starbucks Chairman Mellody Hobson revealed that the process of replacing the global CEO only began a few months before the official announcement, and the final candidate was a rigorous decision made by Starbucks directors. At the critical moment of final decision, Schultz participated in the discussion and met with Niccol.
After gaining Schultz's approval, Niccol ultimately took the position of Starbucks' global CEO.
Regarding the evaluation of the new CEO, Schultz revealed that he admires Niccol's experience at Chipotle and has received his full support. His focus on personnel and culture, brand, menu innovation, operations, and digital transformation has set new standards for the industry, driven significant growth, and created value, "Starbucks said. Board Chairman Mellody Hobson also stated in an interview that she believes Niccol's experience in the food and beverage industry can help Starbucks.
In addition, Starbucks welcomed new investors at the end of July and held a significant minority stake in the US investment management company Elliott Investment Management (hereinafter referred to as "Elliott"). According to foreign media reports, Elliott had negotiated with Starbucks to retain the position at Hays. After the announcement of personnel changes, Mellody Hobson revealed in an interview with CNBC on August 13th that the board has not yet discussed the decision with Elliott.
But later that day, Elliott issued a statement expressing support for Starbucks' move.
Niccol is the second external "parachuted" CEO of Starbucks, following Eslite. Although he has experience in the catering industry, whether these experiences are applicable to the coffee industry, especially the highly competitive Chinese coffee market, remains to be verified by the market. However, judging from the current reaction of the capital market, people have high expectations for this new CEO.