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Brian Niccol took charge of Chipotle Mexican Grill in 2018 as the burrito chain was struggling. A series of food safety breaches had driven away customers, and investors were deserting the shares of a company still led by its founder.
After overseeing a turnaround that sent Chipotle’s stock price almost 800 per cent higher, the 50-year-old was tapped on Tuesday to lead Starbucks, another business in need of revival with a self-described founder who casts a long shadow over the business. Investors, hopeful for a repeat performance, drove the coffee chain’s shares up almost 25 per cent.
“He is a guy who likes to fix things and solve problems,” said Craig Cappozzo, a friend and former colleague of Niccol. “He is kind of walking into the same situation at Starbucks.”
Chipotle has stood out for its resilience this year. Comparable sales for the Newport Beach, California-based company increased 11 per cent in its latest quarter, compared with declines at fast-food competitors such as McDonald’s and KFC as diners eat more meals at home to offset surging restaurant inflation.
It is a stark contrast with the crisis Niccol inherited at the fast-casual chain, where hundreds of customers had become ill after eating its food, some with norovirus, in a public relations disaster that led to a $25mn fine from federal prosecutors.
Niccol arrived at the burrito chain with a reputation for understanding digital technologies, restaurant operations and branding, having served as chief executive of Yum Brands’ Taco Bell chain and begun his career at consumer products group Procter & Gamble.
Analysts such as Bernstein’s Danilo Gargiulo credit Niccol with having made Chipotle relevant again, launching marketing that highlighted the quality and freshness of its ingredients and upgrading its social media strategy. As inflation raged on most restaurants’ menu boards, Chipotle was less aggressive with its price rises, Gargiulo added.
Cappozzo, who was Niccol’s manager when Niccol was a young intern at P&G, said his friend sometimes ordered three or four items when they ate out together at Chipotle so he could inspect how it was served. When Cappozzo once texted him about a 15 minute-long queue at his local branch, Niccol texted back 10 minutes later to say he had talked to staff and taken care of the problem.
“He is clearly a great operator. He knows the details of the business are critical,” Cappozzo said. When Walmart nominated Niccol to its board this year, it hailed him as “a dynamic leader with a passion for excellence”.
There are similarities between Chipotle in 2018 and Starbucks in 2024. Niccol took over the CEO role at Chipotle from its founder Steve Ells, but Ells stayed on as executive chair. At Starbucks he is replacing Laxman Narasimhan, who since starting the job early last year has not escaped public critiques from his predecessor Howard Schultz, the pioneer who built Starbucks into the world’s largest coffee chain.
By 2018, Chipotle had attracted the attention of an activist investor in the shape of Bill Ackman’s Pershing Square. This year, activist Elliott Investment Management has taken a stake in Starbucks and made a similar push for changes.
But there are also significant differences between the two companies. Chipotle owns more than 3,500 restaurants and has about 116,000 employees, almost all in the US. Starbucks has nearly 40,000 cafés, employs close to 400,000 people and operates in dozens of countries, including China.
In the US, more than 470 Starbucks locations are now represented by a labour union. Chipotle has one unionised branch.
Chipotle’s menu is relatively simple and stable, offering patrons a cafeteria-style selection. Niccol’s mainstay meal is a burrito with white rice, chicken, mild salsa, corn salsa, fajita veggies and cheese with a side of guacamole and chips, according to a company proxy statement. That same filing disclosed that Niccol’s total pay hit $22.5mn last year — 1,354 times the median employee’s pay — and valued his unrealised gains from past equity incentive grants at more than $82mn.
Starbucks specialises in drinks, not food, but they are known for their fiendish complexity. The growing popularity of takeout and app orders has complicated the job of baristas, leading to longer wait times and frustrations on either side of the counter.
The task of simplifying operations has been one of many challenges uppermost in Starbucks investors’ minds. They have yet to hear Niccol’s plans for tackling inflation-wearied US consumers, tougher competition in China, boycotts of western brands over Israel’s war in Gaza, negotiations with unionised baristas or Schultz’s critiques.
For now, however, they are betting that he can repeat at least some of the success he enjoyed at Chipotle.
The announcement of Niccol’s arrival added $21bn to Starbucks’ market capitalisation on Tuesday, bringing it to $108.7bn. Chipotle lost almost $6bn in value to close with a market cap of $71bn.
“Right now he’s considered to be almost the LeBron James or the Tom Brady or the Messi of the restaurant industry,” Gargiulo said.
