Brian Niccol becomes CEO Starbucks He took over the job on Monday as the coffee giant’s sales slumped and its stock price sank.
Starbucks appointed Nicole to replace him in August Laxman Narasimhanholding this position from March 2023. Chipotle Mexican BBQ Since 2018, the fast-casual chain has turned things around after a series of foodborne illness outbreaks and steered it through the pandemic. Prior to Chipotle, Niccol was CEO of Taco Bell, the Yum Brands have.
that day Starbucks announces Nicole’s appointmentthe coffee giant’s shares soared more than 24%, marking the stock’s best day ever. Wall Street analysts also cheered the newscalling him a “dream employee” and a “hall of fame restaurant CEO.”
A Starbucks spokesperson said in a statement: “Bryan has a deep understanding of brands, operations and innovation, and remains committed to supporting the retail teams who serve customers in stores. We look forward to what Brian will bring to our business. idea.
Nicole has a background in marketing and began his career at Procter & Gamble. He then moved to Yum Brands where he held various marketing positions before rising to lead Taco Bell. That marketing expertise came in handy when he joined Chipotle, and will likely be valuable at Starbucks as well.
But when Nico took over Starbucks, he was dealing with a much larger and more complex business than Chipotle. Last year, the taco chain had sales of $9.9 billion; Starbucks will have $36 billion in revenue in fiscal 2023.
Turning around Starbucks’ massive business won’t be easy.
Nicol is expected to share more details about the chain’s plans during the company’s fiscal fourth-quarter earnings call, which is likely to be held in late October.
Here are six issues Niccol needs to address at Starbucks:
value equation
In Atlanta, Georgia, Starbucks coffee customers use the mobile app to pay.
Jeff Greenberg | Universal Image Group | Getty Images
Like most restaurant chains, Starbucks has been raising prices in recent years to combat inflation. Last year, the coffee giant seemed to be able to shake off consumers’ price sensitivity, much like other restaurant companies, such as the owner of Outback Steakhouse blooming brand.
However, the past two quarters have shown that Starbucks is seeing fewer customers. Executives say they occasionally lose customers who are looking for value. These consumers can cut their budget for Starbucks coffee and instead purchase cheaper beverages at home or from competitors such as Dunkin’ or McDonald’s.
Starbucks has been trying to win back customers this summer with promotions, such as half-off on any customized drink on Fridays. But discounts eat into profits, making it difficult for restaurants to find the right balance.
As CEO, Nicole must find a way to lower the price or convince consumers that a latte is worth $6.
Bringing Generation Z back
People picket outside a Starbucks store in New York’s East Village on November 16, 2023.
Spencer Pratt | Getty Images
In recent years, Starbucks has attributed the cold coffee craze to younger consumers, which has increased its revenue and profits. Meanwhile, Gen Z is leading a boycott of what was once seen as a progressive coffee brand.
For decades, Starbucks has cultivated an image as a caring employer and corporate ally, touting its superior benefits for baristas and its support of liberal causes like same-sex marriage. That identity is beginning to change, however, as the company begins 2021 in an effort to contain a union movement affecting its cafes.
The baristas who lead the union are relatively young and are willing to share their views on social media. The union fight has also sparked other controversies, such as one over store managers Remove pride decoration or confusion about the company’s stance on Israel’s offensive in Gaza, which lead to boycott.
Earlier this year, the Starbucks Workers Union terminated its relationship with the company and resumed contract negotiations. But many younger consumers now have a different image of the company, creating an identity crisis for the brand that Nicoll and his team need to address.
Mobile App Frustration
Mobile ordering and Uber Eats and Doordash delivery pickup areas at Starbucks coffee shops in Queens, New York.
Lindsay Nicholson | Underground CG | Universal Image Group | Getty Images
Mobile orders account for about one-third of Starbucks’ U.S. orders. However, in many Starbucks stores, they seem to have completely taken over; Frustrating customers and baristas Same.
Chipotle recognized the rise of digital ordering early, investing in a secondary assembly line dedicated to online ordering and other ways to maintain operational efficiency. But Starbucks didn’t make the same investment, leading to operational problems and a worse customer experience. The company has been rolling out new equipment to automate some beverage-making tasks, but progress has been slow.
On the surface, digital ordering offers customers a more convenient way to purchase drinks. But baristas complain they can overwhelm stores, especially during sales. Customers are also more likely to order more complex drinks on apps, adding syrups, foam and other add-ons that can boost profits but take longer to make. And those who prefer to order in person will wait longer as baristas balance assembling digital orders.
Perhaps most importantly, the shift toward mobile ordering has weakened Starbucks’ in-store experience, exacerbated by what longtime Starbucks CEO Howard Schultz called a “third place” between home and work. The brand has an identity crisis.
Weak innovation
starbucks ice energy drink
Courtesy: Starbucks
The perennial bestseller Pumpkin Spice Latte returns in August, Traffic congestion has been reported The growth of Starbucks. But recent additions to the menu don’t spark the same excitement.
Its foray into iced energy drinks failed to attract customers, possibly because the drinks were only available in Starbucks’ large “venti” sizes. Spicy extensions of its popular Refreshers have also drawn negative reactions online. Narasimhan said that while the chain’s lavender line was “very successful,” its popularity wasn’t enough to reverse a decline in U.S. traffic in the fiscal third quarter.
At Chipotle, Niccol expanded the chain’s new product line with popular limited-time items such as BBQ and long-awaited additions like tortillas. While it’s a far cry from Taco Bell’s crazy menu innovations, it’s a significant change for Chipotle that could help increase traffic at its restaurants and convince consumers to pay more for protein options.
At Starbucks, Nicole must take the lead in figuring out which new foods and beverages will get customers excited again.
China problem
An employee serves customers in front of a Starbucks mobile coffee cart in Xihu, Hangzhou, Zhejiang Province, China, June 7, 2022.
Long Wei|Visual China Group|Getty Images
China is Starbucks’ second-largest market, but it may be the coffee chain’s biggest headache right now. Starbucks said same-store sales in China fell 14% in the latest quarter.
The country’s slow recovery from the epidemic has been followed by a sluggish consumer environment and an increase in local competitors, factors that tend to drive down Starbucks prices. For example, rival Luckin Coffee has fully recovered from its accounting scandal and has surpassed the Seattle-based company to become the largest coffee chain in China.
In late July, facing pressure from activist investors such as Elliott Management Company, then CEO Narasimhan said that Starbucks was exploring establishing a strategic partnership with China. This step could mean partnering with a technology company or forming a joint venture with a local partner that can handle day-to-day operations.
Now, with Narasimhan out of office and activists reassured, Niccol will have to decide what to do with the company’s China operations. After 25 years, can the chain regain its former glory in the market, or should it retreat?
Howard Schutz’s Drape
On March 29, 2023, on Capitol Hill in Washington, the United States, former Starbucks CEO Howard Schultz testified before the Senate Health, Education, Labor and Pensions Committee hearing, answering questions about the company’s compliance with labor laws. , drinking water from a Starbucks cup.
Julia Nicholson | Reuters
On and off for about a quarter of a century, Schulz Once in charge of Starbucks, the Seattle-based company became a global coffee giant under his leadership. After serving as interim CEO from 2022 to 2023, he vowed never to serve as CEO again and gave up any official role in the company.
Still, the coffee chain has long struggled to shed his influence, even though Schultz hasn’t officially moved into the C-suite.
He has been outspoken about the chain’s recent woes, first voicing his views in a public LinkedIn post and then in a three-hour show. Get Podcast. Mellody Hobson, who relinquished her position as Starbucks board chair to Niccol, kept Schultz informed about ousting his handpicked successor, Narasimhan, and hiring The Chipotle CEO took over his discussion. Schutz also owns 2% of Starbucks.
In the past, Schutz’s influence has been blamed for the company’s succession problems, similar to those at Disney. Despite his retirement, investors remain concerned about his level of involvement in the company, weighing on the stock.
Niccol joins Starbucks as CEO and Chairman with six years of experience Lead the catering company after the founder steps down. Only time will tell if that’s enough to overcome Schultz’s shadow.
