CEO Brian Niccol replaces with Laxman Narasimhan || Latest Update
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00:00We've got some breaking news to bring you, and this is big.
00:02Starbucks' CEO, Laxman Narasim, is now stepping down as CEO and director.
00:08That is effective immediately.
00:10The company has named Chipotle's CEO, Brian Nichol, as chairman and CEO.
00:14That's going to be effective September 9th.
00:16In the meantime, the company's CFO, Rachel O'Jerry, is going to be serving as interim
00:21CEO.
00:22This is big news in the world of both Starbucks and, of course, in the world of investments,
00:28There have been a number of activist investors around this.
00:30Melody Hobson, the current Starbucks chair, will become lead independent director.
00:35And we're going to be able to break all of this down, hopefully, in just a couple of
00:38minutes.
00:39She's going to join us on the show, but we've been talking about Starbucks for quite some
00:43time.
00:44Laxman taking over the company about a year ago, the stock down since he took over.
00:49Just in the past year, you're looking at the stock down about 23, 25 percent.
00:52By the way, the news here, up now, putting the stock up about 8 percent on the back of
01:00this news.
01:01I wonder what Chipotle is doing.
01:02Chipotle is down 7 percent.
01:03We should also take a look at Chipotle as well.
01:06And we're going to have to see who's going to ultimately run that company.
01:09But you can see the confidence that people have in Brian.
01:12Keep in mind what has happened to Chipotle's stock since Nichol took over in 2018.
01:16Yeah, it's incredible.
01:17March 2018, it took over.
01:18The stock was split adjusted roughly five bucks compared to where it is now.
01:24So that is the kind of operator he has been.
01:26They've been able to fight inflation with price increases, innovation to the menu, also
01:30a lot of technology improvements, the autocado, which automatically scoops out the avocado.
01:35So a lot of things like that.
01:37If he can impart some of that to the Starbucks story, which has had so many different problems
01:42for the first time offering a $5 pairing menu now, because they have to join the fight in
01:47terms of, you know, consumers just pushing back on prices at this point.
01:51That's what Narasimhan has not been successful at.
01:54And so this is really seen as it's amazing that they got a box.
01:58It's amazing.
01:59It really is.
02:00It was a must.
02:01They must be paying him a lot.
02:02I want to read from Howard Schultz.
02:04Of course, Starbucks is founder is the chairman emeritus.
02:06He was apparently consulted on this hiring.
02:09He says, having followed Brian's leadership and transformational journey at Chipotle,
02:12I've long admired his leadership impact, his retail excellence and track record in delivering
02:16extraordinary value, recognize the critical human element it takes to lead a culture
02:21and values-driven enterprise.
02:23And I'm underlining those words, because if you think about some of the criticism that
02:29Howard Schultz has leveled towards, actually, this management, I believe he is the leader
02:33that Starbucks needs at a pivotal moment in its history.
02:36He has my respect and full support.
02:39He then goes on to thank Melody and the Starbucks board for their deep commitment to shaping
02:43the future.
02:44One of the big questions now is going to be what the activist investors, Elliott and Starboard,
02:49which are taking positions, think of this.
02:52Are they going to still pursue trying to get seats on that board?
02:56What other kind of pressure points are they going to push?
02:58Or are they going to say, you know what, these are the operational decisions and moves that
03:02have to be made?
03:03We've said for a very long time this is a company that would struggle in many ways.
03:07There's not a financial engineering program that you can put into place at this company.
03:11This is an operational issue.
03:13Some people have talked about, do you spin off China, do you franchise the business?
03:18I'm not sure any of those things are now going to be on the table, and maybe this is going
03:21to give them some room to try to figure it out.
03:23Chipotle has its own release out about who is going to resume the role here.
03:28So far, it looks like an interim CEO, Scott Boatwright, who's the current chief operating
03:32officer.
03:33But Jack Hartung, who had been the president or CEO of Chipotle prior, he had retired,
03:39will stay on indefinitely with the organization as president of strategy.
03:43So...
03:44That's stuck down almost 10%.
03:45Yeah.
03:46Wow.
03:47It is a blow.
03:48But this is a huge move in the world of fast food.
03:58I'd call it something else.
03:59Brian Nichols probably, and I'm going to go out on a limb here, is one of the best operators
04:03in the business.
04:04In the business.
04:05And probably one of the best CEOs out there.
04:08And it's interesting that Howard Schultz had to be brought in to give his approval,
04:13because he has been sort of the, I don't want to say the third person in the room all the
04:19time, but always sort of second-guessing, right?
04:21I mean, he had that open letter that was published saying that he didn't like the direction which
04:26Starbucks was going.
04:28And so he has a say, even if he's away from the company.
04:31And to your point, the great things that he did at Chipotle, aside from technology and
04:36being a great operator, was always doing things that made Chipotle feel special.
04:41They were doing sort of, you know, in that context, high-end things, special menu offerings
04:46that made it not just another commoditized maker of rice bowls and burritos.
04:50And that's exactly what Starbucks needs.
04:52Right.
04:53There's a reason why people are willing to pay 20 bucks for a bowl.
04:56And they still feel like, oh, we're getting Chipotle, that's special.
04:59So can you do that with a cup of coffee?
05:01And that's the question.
05:03We've discussed it.
05:04We were discussing this yesterday.
05:05Yeah.
05:06And your point of, should they just make, you know, just to get people in the store,
05:09you know, 99-cent coffee, just to get, and Brian would probably go the other direction.
05:13No.
05:14Yeah.
05:15Probably try to move up market and make it more special.
05:17I think the question, the question is how do you make it special?
05:20Right.
05:21Right.
05:22And the costs right now, unfortunately- Are too high.
05:23For Starbucks is too high.
05:24And so- For this macro environment.
05:25What is the kind of product that you can bring in?
05:27And also, what is the experience?
05:29Going back to that third place idea.
05:30The experience.
05:31It's all about the experience.
05:32And the human interaction.
05:33And we've all lost it because we're buying everything on our phone.
05:36And you know, they've had a lot of trouble, by the way, just even fulfilling the orders.
05:40You go, and look, the good news is there's long lines.
05:42The bad news is there's long lines.
05:44And so how do you fix that?
05:46How do you fix the experience in the stores?
05:48How do you clean up some of the stores?
05:49I mean, I think there's a lot of work to be done, but he has a lot of respect in the business
05:54and we're going to continue to talk about this story in just a moment.
05:58Yeah.
05:59And again, if you're just joining us, Brian Nickell, the former CEO of Chipotle, joining
06:02Starbucks.
06:03The stock is up 10.5%.
06:04Chipotle is down by 9%.