The Starbucks board made the decision to oust Narasimhan after it came under attack from activist investor Elliott Management and Howard Schultz, who spent three stints as the company’s leader, publicly criticised the management’s strategy.
Narasimhan oversaw Starbucks’ first decline in comparable sales since 2020.
Schultz, who built the Seattle coffee bean supplier into a global coffee shop brand, had publicly criticised the chief executive and privately expressed his opposition to a settlement with Elliott.
The activist investor had been holding talks with Starbucks over a number of demands, including board representation, the Financial Times reported previously.
Mellody Hobson, the chain’s longest-serving director, told CNBC on Tuesday that the board had begun a conversation about replacing Narasimhan in recent months. “I made an overture through someone to Brian and he took the call,” she said.
Elliott, which controls a sizeable minority stake, said it had engaged with the board for two months “regarding our perspectives on the company’s key issues” and described the CEO change as “a transformational step forward”.
As part of the changes announced on Tuesday, Hobson, who has called Schultz a close friend and has served on the board for 19 years, will be replaced as its chair by Niccol and become lead independent director.
“[Niccol] has my respect and full support,” said Schultz, who is the company’s biggest independent shareholder and retains board observer rights and other perks, in a press release issued by Starbucks.
“I thank Mellody and the Starbucks board for their deep commitment to shaping the future of this remarkable global phenomenon that is Starbucks.”
Niccol took over as Chipotle’s CEO in 2018.
Since then the burrito chain’s revenue has nearly doubled and its stock price has increased nearly 800%, Starbucks noted in its announcement of his appointment.
Chipotle’s sales increased by double digits in its latest quarter at a time when many other fast-food chains’ sales declined.
Narasimhan late last year rolled out a long-term strategy called “Triple Shot Reinvention with Two Pumps”. The plan included adding thousands of new cafés, doubling the number of members in its rewards programme and cutting billions of dollars in costs.
This year he unveiled a more short-term “action plan” for the more than 9,000 US cafés which featured fixing up stores and launching new products, such as a cool summer berry drink with flavoured pearls.
The chain also increased promotions and deals to boost customer traffic.
Starbucks’ share price has fallen about a fifth since Narasimhan took over from Schultz. Comparable sales fell in each of the past two quarters as inflation-weary consumers balked at the price of its drinks.
China, a crucial growth market, has been a particular challenge as the economy slows and competitors make inroads.
Starbucks has also struggled with the effects of boycotts against western brands over Israel’s war in Gaza.
A barista labour union that organised under Schultz has been pushing for higher pay and better work conditions as it negotiates a first contract at Starbucks cafés.
Written by: Maria Heeter, Gregory Meyer and James Fontanella-Khan in New York
© Financial Times
