 "After news of Starbucks CEO Laxman Narasimhan stepping down broke, the markets have responded positively to the changes at the top as the company's shares increased 24 per cent to hit their biggest intraday gain on record, adding over $20 billion in market capitalisation. AP")
In a stunning turn of events, Starbucks has dismissed its Indian-origin CEO, Laxman Narasimhan, just 18 months after he took the helm of the coffee empire.
On Tuesday, Starbucks parted ways with Narasimhan as he stepped down as the chief executive and as a member of the Starbucks board “with immediate effect,” said the company in a statement.
The statement further added that the Seattle-based coffee giant will be run by Brian Nicco, CEO of Chipotle, an international fast food chain brand, from September 9, with Starbucks chief financial officer (CFO) Rachel Ruggeri serving as interim CEO until then. Whereas, Mellody Hobson, Starbucks board chair, will become the lead independent director.
After news of Starbucks CEO stepping down broke, the markets have responded positively to the changes at the top as the company’s shares increased on S&P 500 by 24 per cent to hit their biggest intraday gain on record, adding over $20 billion in market capitalisation.
Meanwhile, Narasimhan’s abrupt exit has sparked discussions on social media platforms about what went wrong with the Indian-origin CEO and what his ouster means for Starbucks. Here’s a closer look
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Who is Laxman Narasimhan?**
Laxman Narasimhan, a 57-year-old from Pune, Maharashtra, began his career at McKinsey & Company in 1993 as a Director. After a 12-year stint with the consulting giant, he moved to PepsiCo, where he held roles as CEO of the South America division and Chief Commercial Officer for nearly five years. He then became CEO of Reckitt, a UK-based consumer health firm.
Narasimhan’s impressive track record led him to Starbucks in March 2023, where he was tasked with spearheading a major “reinvention” of the coffee leader. His appointment followed a period of collaboration with former Starbucks CEO and interim leader Howard Schultz.
Impact Shorts
More ShortsStarbucks said in its statement that the outgoing CEO, during his tenure, “improved the Starbucks partner experience, drove significant innovation in brand’s supply chain, and enhanced our store operations.”
Narasimhan holds an engineering degree from the College of Engineering, Pune, an MA in International Studies from The Lauder Institute at the University of Pennsylvania, and an MBA in Finance from The Wharton School at the University of Pennsylvania.
His sudden departure adds him to the growing list of CEO exits in the US, reflecting a broader trend where, out of 191 CEOs who left companies in the Russell 3000 Index this year, 74 were reportedly fired or forced out, according to exechange.com, a research provider that analyses public sources to track executive changes.
What’s behind Narasimhan’s ouster?
Starbucks has not disclosed specific reasons for Laxman Narasimhan’s departure, but speculation points to several factors. Reports suggest that the CEO’s exit was driven by the company’s underwhelming global performance and recent controversies during his tenure.
Just before the CEO change, Starbucks shares had dropped 20 percent this year, and the company experienced two consecutive quarters of declining comparable sales. The coffee giant also faced backlash related to the Israel-Palestine conflict last year, when Starbucks Workers United posted “Solidarity with Palestine” on social media platform X shortly after a Hamas attack on Israel, leading to protests and calls for boycotts in the US.
Additional challenges included weakening consumer sentiment, tough market conditions in China, and internal conflicts over labour issues. In May, former CEO Howard Schultz highlighted problems in US operations and said they were the “primary reason for its (Starbucks’s) fall from grace. He also stressed the need for senior leaders to engage more with workers.
Moreover, activist investors Elliott Investment Management and Starboard Value, which acquired a $2-billion stake in Starbucks had been pressuring the company to enhance its share price.
Neil Saunders, managing director at GlobalData, said in a statement, “The replacement of Laxman Narasimhan as Starbucks CEO is the result of growing dissatisfaction, particularly from activist investors, over the way the chain has been run. While some of the slowdown can be attributed to a more sluggish consumer cutting back, much is also the result of a worsening store experience and a lack of innovation in areas like food.”
Narasimhan’s recent comments to The Fortune magazine about his strict work-life balance, including leaving work by 6 pm, have also come to light following his exit, with many social media users pointing out it as a factor for his exit.
“I am very disciplined about balance. If there’s anything after 6 pm, and if I am in town, it’s got to be a pretty high bar to keep me away from the family. Anybody who gets a minute of time after that better be sure that it’s important. Because if not, it’ll just wait for another day,” Narasimhan had said during the interview.
With Brian Niccole taking the helm of the company, it hopes for a more promising future amidst evolving industry dynamics.
“Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” said Starbucks board chair Mellody Hobson in a statement as the company announced the leadership changes.
With input from agencies