In less than a year and a half, global chain coffee giant Starbucks has once again changed its leadership.
Prior to the stock market on August 13th local time, Starbucks' official website announced that Brian Niccol will take over as Chairman and CEO of Starbucks from Laxman Narasimhan starting from September 9th. Prior to this, Starbucks CFO Rachel Ruggeri will serve as interim CEO until the aforementioned appointment takes effect.
Affected by the above news, 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%, marking the largest single day increase in the company's history.
According to Starbucks' announcement, the new CEO Nicole has a background in business administration and extensive experience in brand management. Since 2018, he has served as the Chairman and CEO of Chipotle, an American Mexican chain restaurant brand. During this tenure, Nicole helped the company achieve doubled revenue growth, while profits increased nearly sevenfold and the stock price rose nearly 800%. In addition, he also increased the salaries and benefits of retail team members and further strengthened the corporate culture. Before that, Nicole's career began in the brand management related positions of P&G, and later served as a leader in Taco Bell and Pizzahut under Yum.
Howard Schultz, founder and honorary chairman of Starbucks, stated in this announcement that "Nicole's outstanding performance in retail and the value he creates for shareholders are key human resources needed to lead a culture and value driven enterprise. I believe he is the leader Starbucks needs at a critical moment in its history
This announcement states that Hexian immediately resigns as CEO and board member of Starbucks. It is reported that Eslite joined Starbucks in October 2022 and officially took over the position of CEO from founder Schultz in March 2023.
However, in less than a year and a half, Starbucks' development also faced difficulties, including a double-digit decline in stock price, weak performance in the two major markets of North America and China, and insufficient shareholder confidence.
Specifically, as of the close of the US stock market on August 12th, Starbucks' stock price has fallen by over 17% so far this year, and Starbucks' stock price has fallen by nearly 20% during its tenure at Haytham. According to foreign media, Starbucks has also been under pressure from activist investor Elliott Investment Management due to a slowdown in performance and a sluggish stock price.
Elliott Investment Management announced on August 13th that it has become one of Starbucks' largest investors due to its confidence in Starbucks' long-term value creation opportunities. Over the past two months, Elliott has been in communication with the Starbucks board of directors regarding key issues for the company. Elliott believes that today's announcement is a transformative step forward for the company and looks forward to continuing to work with the Starbucks board to achieve Starbucks' full potential.
In addition, foreign media have pointed out that another factor that led to the downfall of Eslite is the dissatisfaction of its founder Schultz with him. In an open letter in May, Schultz criticized the leadership of his successor, Haytham, and stated that Starbucks' US business was the "main reason for the company's decline".
As of June 30, 2024, Starbucks achieved a total net revenue of $9.114 billion in the third quarter, a year-on-year decrease of 0.6%. The net profit attributable to the parent company was 1.055 billion US dollars, a year-on-year decrease of 7.6%. Starbucks' global same store sales decreased by 3% in the quarter, with a 2% decline in the domestic North American market. Affected by the 9.9 yuan coffee price war in the Chinese market, Starbucks' same store sales in China decreased by 14% in the quarter, with an average ticket price and same store transaction volume both decreasing by 7%.
In the past year, the industry has experienced unprecedented store expansion and large-scale price wars, even at the cost of sacrificing same store sales and profitability, which has caused significant and permanent changes to the market environment.
According to Neil Saunders, a global data retail analyst and managing director, cited by foreign media, although some of Starbucks' performance slowdown can be attributed to weak consumer spending, it is largely the result of a decline in store experience and a lack of innovation in areas such as food. Smaller independent coffee shops and other competitors pose a threat to Starbucks, and former CEO Haytham has failed to convincingly address this issue, leaving investors dissatisfied. New CEO Nicole's extensive experience in food and beverage brand management may be useful for Starbucks to address a range of challenges.
It is worth noting that Chipotle's US stock price closed down 7.5% on the 13th due to Nicole's resignation, with a market value of over $70 billion. When Nicole took over in March 2018, the market value was only $8.9 billion.