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CNN
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In 2018, Chipotle was grappling with food safety fears after an E. coli outbreak, restaurants were considered messy and new menu items like queso were not popular with customers.
The company turned to Brian Niccol to solve its many problems. Niccol had already led a turnaround effort at Taco Bell, introducing breakfast to the chain, creative offerings like Doritos Locos tacos, nacho fries and new “Cantina” restaurants.
Niccol then successfully relaunched Chipotle, leveraging advertising, the addition of new menu items like quesadillas, carne asada and pollo asado, and digital and drive-thru ordering to position the brand as a premium fast-food restaurant. Chipotle’s revenue has jumped more than 800% over the past five years. In the most recent quarter, its sales at stores open at least a year increased 11%, despite tepid growth at competitors like McDonald’s and Wendy’s.
So starting next month, the fast-food giant will work to turn around Starbucks as its new CEO, the company announced Tuesday. Niccol will be Starbucks’ fourth CEO in two years, taking the helm amid a slowdown in business and pressure from employees and investors.
Investors welcomed the news. Starbucks closed up 25%, while Chipotle fell 8% after people heard about the CEO change.
“It’s really a similar story. The comparisons between Chipotle in 2018 and Starbucks today are pretty fair,” RJ Hottovy, an analyst at Placer.ai, told CNN.
People pay $15 for burrito bowls at Chipotle because they consider them to be good value, while $6 iced coffees at Starbucks are not.
Starbucks sales have fallen for two straight quarters as customers have expressed frustration with high prices, slow takeout orders on the Starbucks app and a lack of restaurant offerings. The company, historically seen as a progressive employer, has also seen a wave of unionization at its stores over frustration with working conditions, wages and benefits, and that will also be a challenge for Niccol on his first day on the job.
Niccol and Starbucks did not announce new strategies Tuesday, but restaurant experts say he will focus on improving Starbucks’ in-store operations and advertising to re-engage lost customers and attract new ones to the brand.
But more than that, they say it needs to bring back some of the image that Starbucks started with — a cool coffee shop and cafe, not just a quick place to get a little caffeine.
“He needs to reinvigorate the brand, give it some character and energy and make Starbucks hip again,” Tom Cook, a principal at restaurant consultancy King-Casey, said in an interview with CNN. “The brand is flat. It has no personality and no energy.”
Niccol will join Starbucks as the company strives to transition from a primarily brick-and-mortar business to an online one.
Orders through the mobile app and drive-through account for more than 70% of Starbucks’ sales at its approximately 9,500 company-operated stores in the United States.
Starbucks is facing increasing pressure from rival drive-in coffee chains on one side and boutique coffee shops on the other, and from customers who choose to make their morning cup of joe at home. Grocery prices have soared in recent years, but those costs have come down this year. At the same time, the cost of eating out has continued to rise, contributing to Starbucks’ image as overpriced, some analysts say.
Restaurant analysts say Starbucks, which has historically done less television advertising than its competitors, will use the marketing to try to improve customer perceptions of Starbucks’ brand and prices.
“Niccol’s marketing experience has been the backbone of Chipotle’s turnaround,” TD Cowen analyst Andrew Charles said in a research note to clients Tuesday. Niccol “will better leverage marketing to create buzz around the brand.”
Starbucks could also introduce new beverage options to lure customers into stores, analysts said.
Currently, cold brew coffees, teas and lemonades make up a larger percentage of sales than hot coffee, but Charles said Starbucks’ beverage innovation efforts have “failed to shake things up” since launching the Pumpkin Spiced line last year. Niccol has had success adding new items to Chipotle’s menu, and he “will allow Starbucks to be more successful with menu innovation,” Charles said.
