From day one, Starbucks Corp.’s new CEO, Brian Niccol, will have more power than his predecessor.
Niccol, who is leaving Chipotle Mexican Grill Inc., will become CEO and chairman when he starts at Starbucks on Sept. 9. Laxman Narasimhan, on the other hand, spent more than five months in CEO training under company patriarch Howard Schultz and never took the chairmanship. It was only after an intensive period of shadowing Schultz that he gained the ability to set the company’s strategy.
The starkly different handoffs underscore the contrasting histories of the two executives – Narasimhan had no experience in the restaurant industry, while Niccol spent 20 years as an executive at Chipotle and Yum! Brands Inc.
In addition, Narasimhan came to a company still led by Schultz, who set aggressive revenue growth targets before he handed over. Schultz continued to provide feedback during Narasimhan’s tenure, both privately and in public letters 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 takes on a job where sales targets are lower, his title carries more weight and Schultz’s shadow – if not entirely gone – has become weaker.
He “definitely has more authority, and I think that’s intentional,” said Eric Gonzalez, an analyst at KeyBanc Capital Markets. “His track record speaks for itself. That shows how much confidence they have in him.”
Starbucks is battling falling demand from inflation-stricken customers in its biggest markets, the United States and China. The company is working to reduce long wait times in crowded stores. It is also facing activist investors, collective bargaining with union members and boycotts over the brand’s stance in the Middle East.
Although Niccol has extensive experience in the restaurant industry, he has never led a company of the size and scope of Starbucks.
The world’s largest coffee chain operates in more than 80 markets, while Chipotle focuses mainly on the USA. Starbucks employs around 381,000 people, more than three times as many employees as Chipotle. In addition to operating its own stores, Starbucks works with licensees around the world.
Those who have worked with Niccol say he is up to the challenge. They say he is a decisive, down-to-earth boss with a track record of stabilizing troubled companies — and then turning them around. His experience has reassured Starbucks investors, though he has yet to win over workers who are skeptical about how Chipotle responded to the union drive during his tenure.
Trade union history
In an internal meeting hours after Niccol’s appointment as CEO, board members and other executives were questioned about his history with unions and whether Starbucks would continue ongoing collective bargaining, people familiar with the matter say. Sara Kelly, the company’s chief human resources officer, said talks were continuing in good faith.
Mellody Hobson, who has served as board chair since 2021 and will become lead independent director after Niccols joins, said in an interview with CNBC that Starbucks has made significant progress with unionized workers and “will stay that course.”
A representative for Niccol did not comment. Narasimhan declined to comment.
Like other Starbucks executives, whether promoted from outside or from within, Niccol will go through what the company calls an “immersion process,” which includes learning the culture and history, spending time in stores and manufacturing facilities and more, according to a Starbucks spokesperson. But he will have the authority to start setting strategy immediately. Hobson has said Niccol knows what to do and will be in the driver’s seat.
Niccol, who enjoys a coffee Americano with a biscuit, is an assertive manager who gets along well with other executives, say people who have worked with him. They say he doesn’t resort to micro-control and tends not to raise his voice.
During his time at Taco Bell from 2011 to 2018, he used his marketing skills to rebuild a brand that had suffered from product quality complaints. New menu items like Doritos Locos Tacos leveraged 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 Yum’s top performers.
In 2018, Niccol joined Chipotle when food safety issues were damaging the brand’s reputation and drawing pressure from activist investors. He promptly moved Chipotle’s headquarters from Denver to Newport Beach, California, to what he said was a refocusing of the company’s culture, and over time resolved the safety issues. Under his leadership, Chipotle sped up service by adding a second burrito assembly line for digital orders, which helped ease pressure on store employees. The company increased sales by adding drive-ins and pickup racks for takeout orders.
Niccol also restructured some teams last year, resulting in job cuts, and called corporate employees back to the office four days a week.
For investors, the whole thing was a complete success: Chipotle’s share price rose more than eightfold during his tenure.
Carrying piglets
Former colleagues described Niccol as someone who listens carefully and isn’t afraid to get his hands dirty.
While traveling by private jet to a farm to learn about Chipotle’s supply chain, he offered to drive the rental car, according to a person familiar with the matter. Along the way, they visited Chipotle branches, where Niccol helped wipe down tables. When they arrived at the farm, workers asked for help moving newborn piglets. He didn’t hesitate to take one, this person said.
According to a podcast he spoke on earlier this year, Niccol tries to build trust when joining a new team by getting feedback before presenting a strategy. “The first thing you have to do is take the time to understand these people before you tell them what to do or what you think we need to 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. I hope you believe in me.”
Starbucks is paying for his experience. Niccol’s compensation package is about $113 million, and he doesn’t have to move to Seattle, although the company says he’ll spend most of his time there. As for the challenges ahead, Hobson told CNBC that Niccol “is someone who, quite frankly, has done it all.”
