Starbucks has a new CEO.
The Seattle coffee giant on Tuesday named Brian Niccol, who led Chipotle for the past six years, as its new chief executive officer.
Niccol, the company’s third CEO in the past two years, replaces Laxman Narasimhan, who was under scrutiny as Starbucks has struggled with declining sales and increasing activist investor campaigns.
Starbucks’ stock was up more than 20% following the announcement.
Niccol, who was CEO at Chipotle, helped lead a turnaround at the burrito behemoth in part by focusing on digital innovation, including the launch of Chipotle’s rewards program and a rethinking of its digital sales arm, which represented 35.3% of total food and beverage revenue in the second quarter.
“I also recognized that Chipotle would greatly benefit if it could harness the power of digital,” Niccol wrote in Harvard Business Review in 2021. “Our fledgling mobile app would be a plus for customers only if we reconfigured our restaurants to allow for skip-the-line pickup. So we created grab-and-go shelving next to the cash registers in every restaurant, and we educated customers about how to find their food.”
Chipotle created a second cooking area in the back of restaurants focused exclusively on online orders and added a new computer system that surfaced those orders, Niccol wrote.
He also said Chipotle’s rewards program helped the company gather data from customers “to better understand what motivates them to come into a restaurant to eat or to place and pick up an order, and how we can encourage them to do both more often.”
That experience could prove useful for Starbucks, which generates 31% of total transactions from its U.S. company-operated stores from the company’s mobile app and has nearly 34 million loyalty program members that account for 60% of total spend.
Starbucks was an early leader in mobile order-ahead technology among food and beverage retailers, debuting the “Mobile Order & Pay” feature a decade ago within its smartphone app.
The company has been pushing new in-app offers in a bid to boost sales, which fell 4% in its most recent quarter.
Howard Schultz, the former longtime CEO and chairman at Starbucks, published a LinkedIn post in May suggesting that the company rethink its mobile ordering strategy.
“Senior leaders — including board members — need to spend more time with those who wear the green apron,” Schultz wrote. “One of their first actions should be to reinvent the mobile ordering and payment platform — which Starbucks pioneered — to once again make it the uplifting experience it was designed to be.”
Schultz, who remains a meaningful shareholder in the company, famously championed the “third place” concept for Starbucks, the idea that the company’s coffee shops were a community gathering spot, away from home and work.
In his post on LinkedIn, Schultz advised: “Through it all, focus on being experiential, not transactional.” He added: “The answer does not lie in data, but in the stores.”
Narasimhan, who joined Starbucks in 2022, said in April that Starbucks is investing $600 million over the next three years to “further digitize our stores and better target customers in more personalized ways.”
Chipotle more recently has been testing kitchen automation tech, including robots that build burrito bowls and prep guacamole. The company has also used tech to help with food forecasting and worker recruitment.
Under Niccol’s tenure, Chipotle nearly doubled sales and profits increased almost sevenfold. The company’s stock is up nearly 800% since he took over as CEO.
“Absent the return of Howard Schultz, Niccol is probably as good of a pick as exists for Starbucks’s new leader,” Sharon Zackfia, an analyst with William Blair, wrote in a note to investors Tuesday. “While we cannot help but be more optimistic on today’s news, we suspect the path to recapturing lost sales will be less linear than it was at Chipotle, which did not face boycott pressures, perceived value questions, or material speed of service issues in 2018.”
Niccol, who joined the Walmart board this year, previously led Taco Bell as CEO. He starts at Starbucks on Sept. 9 and was also named chairman. Starbucks CFO Rachel Ruggeri is serving as interim CEO. Mellody Hobson, Starbucks’ board chair, will become lead independent director.
“Having followed Brian’s leadership and transformation journey at Chipotle, I’ve long admired his leadership impact,” Schultz said in a press release. “His retail excellence and track record in delivering extraordinary shareholder value recognizes the critical human element it takes to lead a culture and values driven enterprise. I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support.”
Previously: As Starbucks slumps, Howard Schultz says coffee giant should ‘reinvent’ mobile ordering
https://ift.tt/JLOh90k August 13, 2024 at 02:27PM GeekWire
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