Starbucks is appointing the head of Chipotle, Brian Niccol, as its new CEO to address declining sales and investor concerns.

Starting next month, Niccol, who led the burrito chain since 2018, will replace Laxman Narasimhan, who became Starbucks CEO in March 2023. Starbucks shares surged 20% following the announcement, while Chipotle shares fell over 10%.

The coffee giant has faced weak sales in the U.S. and China, alongside customer complaints about service quality and rising prices. Activist investors pressured the company for changes, leading to a nearly 20% drop in Starbucks shares this year.

Starbucks CEO Laxman Narasimhan replaced by Chipotle's Brian Niccol | The Seattle Times
Laxman Narasimhan, just last year, succeeded Howard Schultz, former Starbucks CEO who was responsible for the coffee chain’s explosive growth over the past few decades.

Chipotle also experienced criticism over price hikes and portion sizes but managed better than Starbucks, recently reporting strong earnings and a 20% rise in stock value this year. Starbucks credited Niccol with transforming Chipotle through people and culture focus, brand innovation, and digital transformation, resulting in an 800% stock price increase during his tenure.

Former Starbucks chair Mellody Hobson, now lead independent director, mentioned the board considered replacing Narasimhan for months, ultimately choosing Niccol for his proven industry track record. Despite Narasimhan’s efforts to reduce turnover and address supply chain issues, the board believes Niccol is better suited to turn around the business.

In a statement, Starbucks chairman emeritus and former CEO Howard Schultz, who had been critical of the company’s recent performance, praised Niccol’s leadership and retail excellence, emphasizing his fit for Starbucks at this critical juncture. Rachel Ruggeri, Starbucks CFO, will serve as interim CEO until Niccol officially assumes the role on Sept. 9. At Chipotle, COO Scott Boatwright will be interim CEO, and CFO Jack Hartung will stay on as president of strategy, finance, and supply chain.