Why new Starbucks CEO Brian Niccol is worth the $85 million and remote California office
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Outgoing Chipotle (CMG) CEO Brian Niccol is a “beast.”
That’s what one former colleague from their Procter & Gamble (PG) days told me off the cuff this week.
Niccol the beast will have a lot of ground to devour — and fast — in what will be the most defining role of his career. As the CEO at Starbucks (SBUX), he’ll also be open to intense global scrutiny.
Nail the turnaround job, and the 50-year-old may end up being the governor of his home state — California — by age 60. Fail at the turnaround, and there go three decades of incredible work spanning P&G, Yum! Brands, and Chipotle — not to mention getting destroyed on social media, TV, etc.
“Brian is a phenomenal leader,” Brinker International (EAT) CEO Kevin Hochman told me on Yahoo Finance’s Morning Brief. “I personally learned a ton from him. It’s one of the reasons why I got into restaurants at Yum! Brands.”
Hochman had leadership positions at Yum! Brands-owned KFC while Niccol was rising through the ranks at Taco Bell. The duo worked together at P&G before joining Yum! Brands.
“They obviously got an amazing pick,” Hochman added, “and he’s going to do his normal Brian Niccol magic. And I can’t wait to see what they’re going to be about.”
Starbucks names Brian Niccol Chairman and CEO, here’s a look at this long tenure in the restaurant landscape. (Created by Yahoo Finance)
Those aforementioned risks and the gargantuan task of fixing Starbucks is why I believe Niccol is worth every penny of his splashy compensation package.
He’s getting $10 million in cash and $75 million in equity awards when he arrives to Starbucks on Sept. 9. If certain targets are hit, Niccol could earn around $117 million in total compensation in his first year.
At first, this dollar amount sounds absolutely ridiculous. And I get that interpretation.
But Niccol isn’t some lazy fat cat CEO trying to score one more lavish paycheck from a struggling company. This guy is in the prime of his career and has the track record to suggest he could deliver huge for Starbucks in under three years.
And Starbucks could use the help: The coffee chain is smack in the middle of several operational and culture crises that will require every skill Niccol has learned from top leaders at P&G and Yum! Brands (both of those places churn out the best of the best in leadership, same for PepsiCo (PEP).
Starbucks’ most recent quarter showed a 6% drop in North America transactions as consumers shunned the chain’s ever-pricier coffees and long wait times.
Story continues
International sales tanked 7% and Chinese comparable sales plunged 14%, spurring execs to say on the earnings call that they’re exploring strategic options for the business. Non-GAAP operating profits declined to 16.7% from 17.4%.
The other driver of the results is weak morale at the store level.
Starbucks management has used their heavy hand to try and squash out stores that want to unionize. It keeps putting stupidly complicated drinks on the menu that are nightmares for super busy baristas. And the app has become an endless customizable machine, further complicating the lives of Starbucks workers.
I was at an airport Starbucks recently and it took me 12 minutes to get a simple iced coffee in the morning. I took these notes while in line: 1) two people behind the counter; 2) the drink orders were way too complex; 3) jam-packed menu boards with weird new drinks that cause people to stare at them wondering if they want to try them.
The stores are a cultural hot mess thanks to the one-two punch of the prickly billionaire Howard Schultz and the other hand-picked successor he basically also booted, Kevin Johnson.
Niccol will not solve this overnight, over one month, or even six months. What will solve it is a revised total compensation program for workers, better-defined career advancement opportunities, and pulling a lot of useless crap from menu boards and the app.
Turning the Starbucks culture around could take a year or more.
Niccol is the guy to do it, though: This is a guy who has spent a good chunk of his earnings calls highlighting Chipotle store lifers advancing to leadership positions. This is a guy who has proven he would rather do right by employees than beat earnings estimates by a penny. He is the guy who split Chipotle’s stock 50-1 so that more people could afford to invest in its growth story.
“They seem to have gotten a very good guy in Brian,” leadership expert and former Medtronic (MDT) CEO Bill George said on my Opening Bid podcast (video above or listen in here). George personally knows both Howard Schultz and ousted Starbucks CEO Laxman Narasimhan.
Niccol is the guy worth $85 million, I think.
Three times each week, I field insight-filled conversations with the biggest names in business and markets on my Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the below Opening Bid episode, PayPal (PYPL) co-founder and Affirm (AFRM) founder Max Levchin unpacks his personal CEO journey.
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Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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