In a management shuffle intended to counteract pressure from activist investor Elliott Investment Management, Starbucks chose Brian Niccol of Chipotle Mexican Grill as its new CEO on Tuesday.
Niccol takes over as CEO from Laxman Narasimhan, who was lured away from Lysol manufacturer Reckitt to lead the largest coffee chain in the world through a “reinvention” that began in April of last year.
During the previous five years, Starbucks stock has lost around 20% of its value, while the S&P 500 as a whole has risen more than 80%. The company’s revenues in July were below projections because of waning demand in China and the US.
Elliott, a major stakeholder, has been putting pressure on the business to raise its stock price and perform better, suggesting that Starbucks increase the size of its board and strengthen its governance.
Mellody Hobson, the chair of the Starbucks board, responded negatively to a question on CNBC on activist Elliott’s consultation regarding the shakeup. “We look forward to engaging with all of our shareholders about this new development,” she stated.
At the coffee giant, which recently changed its business strategy to concentrate on mobile pickup and delivery orders rather than shops set up for extended stays, Niccol inherits significant problems. Starbucks has faced competition in China from competitors offering lower coffee costs, and in the midst of the Israel-Hamas conflict, some pro-Palestinian boycotts have affected its stores across the Middle East.
