Brian Niccol, the Chipotle chief executive, in Denver, on June 19, 2018.BENJAMIN RASMUSSEN/The New York Times News Service
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
While investors have quickly given the thumbs up to Starbucks’s choice for a new CEO, loyal latte lovers who may have found their visits to the iconic coffee chain’s stores a bit tepid recently should be cheering for this reason, too: He’s not a banker.
In luring Brian Niccol away from the top post at Chipotle Mexican Grill, Starbucks has tapped an executive with the chops to restore the brand to financial health with an intense focus on exactly the thing investors and customers say Starbucks has forgotten: an innovative, market-leading customer experience.
Mr. Niccol, whose move to replace current CEO Laxman Narasimhan was announced this week, has been there and done that in the quick-service restaurant world. Before becoming CEO of Chipotle in 2018, he was top dog at Taco Bell and held several executive positions with Yum Brands, including its Pizza Hut chain.
At Chipotle, he has overseen impressive growth. Revenue skyrocketed 800 per cent during his tenure. The company opened more than 270 stores last year and expects to nearly double its current total, to 7,000, in the near future.
More to the point, in choosing Mr. Niccol, Starbucks deftly sidestepped the trap that has entangled so many companies recently: putting money people in key operational management leadership positions. This is not a knock on those with financial expertise, but you wouldn’t ask a baseball player to fix a broken hockey team or a trumpet player to perform bypass surgery.
Boeing made that mistake, hiring Dave Calhoun, a banker, to fix its deep-seated manufacturing quality issues. He failed, and the cost of that failure went beyond Boeing’s balance sheet.
The Walt Disney Company’s former CEO Bob Chapek cratered the company’s value and reputation by putting bankers in charge of decision making, cutting creative talent and budgets and insulting loyal customers by treating them like numbers rather than family. At one point, Mr. Chapek told investors that members of Disney’s loyalty programs were costing the company too much money.
Starbucks, too, has lost touch with customers. The past three quarters have been particularly tough, with traffic and sales sagging.
The root cause: Starbucks failed to invigorate the same customer experience that made it a front-runner in QSR retailing. It was among the first companies to offer, on a wide scale, fresh coffee in a hurry made to each customer’s specifications.
It was the type of mass customization that propelled Burger King years before when the chain promised you could “have it your way,” a direct slap at rivals such as McDonald’s.
Starbucks took that a step further, adding some fun frills to its customer experience, such as calling servers baristas and writing the names of customers on coffee cups, an unexpected personal touch in a to-go world.
But the valley of death between the Starbucks brand and its core appeal has been the source of concern. Investors worried that its leaders did not focus enough on new products, had let some stores deteriorate in look and feel and failed to create a robust digital presence.
That, investors said, has made it increasingly difficult for the company to justify the price of its coffee, sometimes as high as US$6 a cup. In an inflationary environment, even loyalists have balked at those prices.
Starbucks’s stagnant financial performance and lack of compelling growth strategy have opened the door to activist investors such as Elliott Management, which has put pressure on the company to make changes.
Mr. Niccol is the right athlete for Starbucks right now. Just look at Chipotle’s advertising campaigns: The message is not just about convenience; it’s about the freshness of ingredients and the fact that so many products, such as guacamole, are handmade daily in stores.
He has also taken a hard line on putting the customer experience first. Recently, in response to consumer complaints, he called out a number of store managers who were skimping on portion sizes in an effort to save costs. Jeopardizing the customer by nickel-and-diming is not how Mr. Niccol rolls.
Would a money person take the same approach? More likely, their first instinct would be to look at ways to cut costs, not enhance the experience. As Mr. Chapek learned the hard way, no Disney patron ever said, “Gee, the return on invested capital on that ride really enhanced our family’s experience.”
Mr. Niccol’s challenge is significant: How to restore the Starbucks brand to its former glory as one of the coolest, most iconic and powerful QSR names in the world. He certainly has the résumé to do it.
There may be one hitch. Elliott has succeeded in adding yet another money guy to the Starbucks board. It’s the last thing Starbucks needs. Any further expansion of the board should be someone who speaks Mr. Niccol’s language.
Investors and customers can only hope the board allows Mr. Niccol to do at Starbucks what he did at Chipotle and not get hamstrung with decision making that puts dollars, not delighting customers, first.