Starbucks named the Chipotle Mexican Grill head, Brian Niccol, as its new CEO on Tuesday in a surprise management shake-up as it tries to fend off pressures from the activist investor Elliott Investment Management.
Niccol replaces Laxman Narasimhan, who was tapped in 2022 from the Lysol maker Reckitt to undertake a “reinvention” of the world’s biggest coffee chain.
Starbucks stock soared on the news – spiking 20% before noon. The company’s share price has sunk in recent years, losing roughly 20% of its value over the last five years when the broad-market S&P 500 has gained more than 80%. In July, the company fell short of sales expectations due to weakening demand in the United States and China.
Elliott, which owns a sizable stake, has been pressuring the company to improve its performance and stock price, proposing the company expand its board and improve its governance. Elliott’s offer was reported to be part of an effort to allow Narasimhan to keep his job as CEO.
When asked if Elliot was consulted about the shake-up, the Starbucks board chair, Mellody Hobson, said it had not been.
“We look forward to engaging with all of our shareholders about this new development,” she said on CNBC.
It is unclear what will happen with negotiations with Elliott with the appointment of Niccol.
Elliott was seeking to add Jesse Cohn, an equity and managing partner in the firm, to the Starbucks board, Reuters reported on Monday, citing sources.
In May, days after Starbucks cut its annual sales forecast, the former CEO Howard Schultz wrote on his LinkedIn account that its US operations were the “primary reason for its fall from grace”, and that senior leaders need to spend more time with workers.
Niccol has spearheaded the Chipotle burrito chain, which in its most recent quarter topped Wall Street estimates for quarterly results on strong demand.
The change comes as Starbucks appears to be inching closer to an agreement with staff who have fought for years to organize unions at the chain’s stores. In February the company agreed on a new organizing framework with Starbucks Workers United and held several contract negotiations to reach an agreement. More than 470 locations have voted to unionize since late 2021.
The change was a reversal from the company’s efforts to dissuade unionizing efforts and fend off hundreds of labor law violation allegations filed by workers with the National Labor Relations Board.
Chipotle too has faced backlash over its efforts to thwart union drives. Under Niccol, Chipotle has opposed unionization since the first location unionized in Lansing, Michigan, in 2022. The union had criticized Niccol for paltry five-cent wage increase offers amid negotiations to secure a first union contract with workers.
In 2023, the company agreed to pay $240,000 to former employees to settle unfair labor practice charges that the company closed a location in Augusta, Maine, in retaliation for union organizing. Chipotle also settled other unfair labor practice charges in 2023 filed by workers in Kansas who alleged they were retaliated against for filing to unionize.
Chipotle also paid to settle child labor law violations at its locations in recent years in Washington DC, New Jersey and Massachusetts.
Starbucks said Niccol would start in his new role on 9 September and that the CFO, Rachel Ruggeri, will serve as interim CEO until that time.
Chipotle said its board had appointed Scott Boatwright, chief operating officer, as interim CEO.
Reuters contributed reporting
