Starbucks announced the resignation of CEO Laxman Narasimhan, after just one year in the job. It added that it has appointed Brian Niccol, the current CEO of Chipotle, as the new president and CEO of Starbucks, to begin his duties on September 9.
This move comes at a time when Starbucks is facing major challenges due to declining sales and increasing external pressures, including the impact of the boycott, according to CNN.
Declining sales and the impact of the boycott
The change comes at a time when Starbucks is facing significant challenges in its core markets, as the company under Narasimhan’s leadership saw a 3% decline in global sales, with a 2% decline in the North American market, according to Bloomberg.
These figures reflect a broader sense of consumer fatigue with high prices at food chains, a feeling that is growing after years of continuous price increases across the industry.
While some of the slowdown can be attributed to consumers downsizing, “a lot of it is down to the deterioration of the in-store experience and a lack of innovation in areas like food,” said Neil Saunders, retail analyst and managing director at Global Data Reel. Starbucks has lost market share to smaller coffee shops and other competitors, a trend Narasimhan has not been able to address convincingly, he added.
Continuous boycott
In addition to operational challenges, Starbucks faces external pressures that have eroded its market position, as the company has been a target of boycott movements due to its political positions related to the Israeli war on the Gaza Strip, which has affected consumer sentiment and sales, especially in key foreign markets.
The company’s shares fell 12% in market trading last May.
While the company laid off about 4% of its total workforce of about 50,000 people earlier this year, the layoffs were mostly concentrated in Starbucks branches in the Middle East and North Africa, according to Reuters.
Starbucks also faces increasing competition in the Chinese market from lower-cost rivals, further complicating the company’s challenges. This leadership change comes at a time when it is in negotiations with an activist investor, adding another layer of complexity to its existing challenges.
