The change at the top comes at a time when Starbucks’ business is in question, with sales slowing or even declining in recent quarters. While Niccol’s tenure has investors and analysts excited, he has a long list of operational issues to resolve to get the coffee giant back on track. Not only does the company need to find ways to win back customers, it’s also under pressure to improve operations and the mobile experience Starbucks helped pioneer years ago.

A perfect storm of headwinds

Starbucks isn’t the only quick-service restaurant struggling to attract customers this year. The company has tried to lure customers with various digital offers and promotions. In May, for example, the company held “Summer App-y Days,” a variation of a happy hour promotion that gave app users 50% off a drink every Friday.

There are several reasons for Starbucks’ decline in recent years, including supply chain problems, unionization efforts by baristas that led to tensions with management, and a general decline in demand for coffee purchased in the café due to the rising cost of living.

The coffee chain released its latest quarterly results earlier this month. Revenue fell 1% to $9.11 billion, compared to analysts’ expectations of $9.24 billion. In addition, customer traffic at its U.S. stores fell 6% year over year and in-store sales fell 2%.

On the recent conference call with analysts, CEO Laxman Narasimhan acknowledged a “difficult consumer environment.” He added that the company is “relentlessly focused on improving operational execution,” particularly in inventory management, wait times, employee scheduling and turnover. Still, Starbucks missed its profit targets last quarter. Former CEO Howard Shultz wrote in a LinkedIn post that the company needs to focus on the shopping experience and modernize its mobile ordering feature.

Brad Jashinsky, a senior analyst at Gartner, said Starbucks’ biggest challenge is that consumers are giving up nice extras like lattes. “That’s happening across the board in the fast-casual space,” he said. Other factors include increasing competition, not only from other coffee chains but also from the growing number of specialty cafes in neighborhoods.

All these problems could not be solved during Narasimhan’s tenure.

But ultimately, “a year and a half is not enough time to put your stamp on a company, and I think it’s more a matter of board impatience,” Jashinsky said of Narasimhan’s exit. “Many of these decisions are driven by activist investors, which impacts the stock price.”

At the same time, Starbucks was keen to hire someone with proven experience at a fast-casual chain, which contrasts with Narasimhan’s consulting background. Niccol brings a strong understanding of the customer and digital experience, Jashinsky said, and Starbucks has already laid a foundation for that.

Jashinsky said Niccol’s “operations experience at Chipotle” could help eliminate many inefficiencies in Starbucks’ stores and its overloaded ordering system. This is a particularly big problem for Starbucks right now, he added, especially with rising wages and pressure on baristas to quickly fulfill complicated orders via mobile devices.

A tough fight

Other analysts aren’t so sure Niccol can get Starbucks back on track with the same speed as previous companies. “The confidence in Brian Niccol is understandable, but Starbucks is no Chipotle,” Wedbush analyst Nick Setyan wrote in a note. In the six years Niccol was Chipotle’s CEO, he oversaw changes such as redesigning stores, investing more heavily in marketing and improving speed of service. He also oversaw the fast-casual chain’s digital growth during the pandemic. In 2021, digital sales rose 24.7% year over year to $3.4 billion, accounting for 45.6% of total revenue.

Some see Laxman’s departure as a sign that publicly traded companies are becoming impatient to give new leaders a chance to increase sales and profits.

Setyan noted that the move by Niccol, who joined Chipotle from Taco Bell in 2018, “made sense at the time because of his familiarity with the category.” Now Niccol is moving into the world of coffee and overseeing a menu that includes many breakfast items. While Chipotle is primarily based in the U.S., Starbucks is also a much larger company, operating in 86 countries. “His challenge (at Starbucks) is to attract a new customer,” Setyan said. “Aside from the power to change the direction of macroeconomic headwinds, we think shareholder euphoria is premature.”

With Niccol’s arrival, it will be an uphill battle to get Starbucks to generate revenue and improve margins. “It’s a constant battle to be able to offer sophisticated beverages at an affordable price,” Jashinsky said.