Starbucks' CEO, Laxman Narasimhan, has been ousted less than two years into his role, following a period of declining sales and customer boycotts linked to the company's perceived support for Israel.
The global coffee chain announced Narasimhan's departure on Tuesday, with his resignation taking immediate effect. He is being replaced by Brian Niccol, the former CEO of Chipotle, who is credited with revitalising the Mexican fast-food chain.
The leadership change comes amidst a turbulent period for Starbucks. The company has experienced two consecutive quarters of declining sales, with a 4% drop in the first three months of the year and a further 3% decline in the following quarter.
This downturn is attributed to several factors, including customer reluctance to spend on the chain's premium coffee amid the cost-of-living crisis. However, the company has also faced significant backlash over its alleged ties to Israel, with many consumers participating in boycotts.
These boycotts have drawn the attention of activist investor Elliott, which has built a substantial stake in Starbucks and put pressure on the board to address the company's performance.
Starbucks shares have plummeted by approximately 25% in the past 12 months, but regained around 20% on Tuesday following the announcement of Narasimhan's departure.
The coffee chain has been embroiled in controversy over the past year, with accusations of supporting Israel amidst the conflict in Gaza. Tensions escalated when Starbucks sued the Starbucks Workers United (SWU) union for trademark infringement in Iowa. This action was a response to the union expressing solidarity with Palestine in a social media post following Hamas' attacks on October 7th.
In March, Starbucks' Middle Eastern franchisee announced plans to lay off thousands of employees due to a significant drop in sales attributed to boycotts linked to the war in Gaza.
Despite these challenges, Starbucks has consistently maintained that its supposed support for Israel is based on misinformation circulating online. The company insists that it has never provided financial support to the Israeli government or military.
Narasimhan assumed the role of Starbucks CEO in March 2023, having previously led the consumer goods giant Reckitt, owner of the Durex brand. He stepped down from Reckitt midway through a three-year turnaround project.
Niccol will take over as CEO of Starbucks on September 9th, with Rachel Ruggeri, the company's Chief Financial Officer, serving as interim CEO until then.
Starbucks Chairman, Mellody Hobson, expressed confidence in Niccol's ability to lead the company, stating: "Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world."