Grab yourself a burrito and a cup of coffee and let’s talk about Brian Niccol.
Niccol has been CEO of coffee-bar giant Starbucks (SBUX) for a little over a year and he’s feeling pretty good.
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“The thing I’m really delighted about is that a lot of the things that we said we were going to do with the ‘Back to Starbucks” strategy we’ve actually executed on,” he told the New York Times.
“And I think for the most part it’s been very well received by both our partners and our customers and we’re seeing the feedback that says ‘do more of what you’re doing.’”
“Back to Starbucks” is Niccol’s turnaround strategy to return the Seattle java giant to its core identity as a coffee-first company by, among other things, simplifying the menu, renovating the stores, and encouraging more personalized interactions between baristas and customers. The company calls its staff partners.
The Philadelphia native had come to the world’s largest coffee chain from the top spot at Chipotle Mexican Grill (CMG) , which at that time was struggling with food-safety issues, long lines of customers and other challenges.
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Starbucks CEO: committed to China business
Niccol is credited with spearheading the fast-casual Mexican food chain’s digital transformation, introducing new menu items like the chicken al pastor and enhancing the employee experience.
“Over the past few years Chipotle has illustrated how a business can be revitalized through refocusing on its original core values — in our case, culinary excellence and great customer service,” he wrote in the Harvard Business Review.
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Chipotle’s stock gained more than 700% during Niccol’s tenure as profit and revenue soared.
When Niccol took the helm at Starbucks, succeeding Laxman Narasimhan, the company was contending with slowing sales, long wait times and mobile order issues, declining international performance, increasing competition, and pressure from activist investors.
“As I embark upon this journey, I am energized by the tremendous potential to drive growth and further enhance the Starbucks experience for our customers and partners, while staying true to our mission and values,” he said in a statement last year.
The Starbucks journey has not been easy. Same-store sales have gone down for six quarters in a row, the company has lost significant ground in China, the world’s largest branded coffee shop market, and Luckin Coffee (LKNCY) and Mixue, two Chinese competitors, are expanding in the U.S.
Mixue has surpassed Starbucks in store count both in China and worldwide, becoming the world’s largest food and beverage chain by number of outlets.
“We remain committed to our China business and want to retain a meaningful stake,” Niccol said during the company’s earnings call in July. “The intense interest in partnering with us is a testament to the great team, strong brand, and long-term opportunity for Starbucks in China.”
Veteran trader raises concerns about Starbucks
TheStreet Pro’s Ed Ponsi reviewed Niccol’s performance at Starbucks in his recent column.
“Losing Niccol may have impacted Chipotle, as the stock has fallen by 31% over the past 12 months,” Ponsi said. “But Niccol’s new employer has also underperformed the broader market, with Starbucks shares declining by 12% over that span.”
Related: Starbucks shares bold plan to change in-store experience
He bluntly stated that Chipotle’s chart “looks terrible” and the stock recently reached its lowest price since late 2023. CMG shares are down nearly 34% this year and off 32% from 2024.
Chipotle CEO Scott Boatwright told analysts during the company’s second-quarter earnings call that “our restaurant teams did an extraordinary job of executing in a challenging environment.”
Ponsi, managing director of Barchetta Capital Management. said that many consumers are cost-conscious and that McDonald’s (MCD) CEO Chris Kempczinski recently acknowledged that the burger giant’s prices needed to come down to attract customers to the golden arches.
“For the most part, Starbucks’s clientele is less concerned about price, and more focused on the experience — the tastes, smells and sounds of a Starbucks,” Ponsi said. “History shows consumers are willing to pay up for that experience.”
He noted that tariffs are a bigger problem for Starbucks as Brazilian coffee imports are subject to a 50% tariff, and Brazil is the largest coffee exporter to the U.S.
“Chipotle has battled to keep up with the rising cost of ingredients like beef and avocados,” Ponsi said. “Like Starbucks, Chipotle is a premium experience, as customers are willing to pay more for fresh, often locally sourced ingredients.”
Still, the veteran trader said that he will defer to the chart.
“While I might enjoy the occasional burrito bowl from Chipotle, or even a rare Cafe Americano from Starbucks, I won’t be buying shares of either company for a while,” Ponsi said.
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