You can’t necessarily put a price on love. Unless you’re on Wall Street, that is.
And it’s clear that investors love Brian Niccol. Just look at what happened on Tuesday.
Starbucks announced that Niccol, the CEO of Chipotle, would be its next chief executive to replace Laxman Narasimhan. It was a big deal, a rare move in which one top 10 chain hired the chief executive of another top 10 chain. We do not know the last time that happened, but when it did, the industry was a lot smaller than it is today.
Investors reacted by pouring money into Starbucks and taking it out of Chipotle.
Starbucks stock rose nearly 25% Tuesday, more than wiping out the stock’s losses on the year with one (albeit significant) press release.
That increase added $21.4 billion to Starbucks’ market capitalization, an insane amount of money for one person.
Chipotle, meanwhile, was left reeling. Its stock fell 7.5% on the day as the burrito chain loses its chief executive. That culled $5.73 billion from the company’s market cap.
And so this one person, Brian Niccol, moved more than $27 billion worth of valuation. In one day.
To put that into perspective, the entire market cap of Restaurant Brands International, the owner of Burger King, Tim Hortons, Popeyes and Firehouse, is about $31 billion.
We will have a lot more to say on the Starbucks CEO situation later this week. But suffice it to say, an announcement like this probably should have happened two years ago, rather than now.
But in hiring Niccol, Starbucks added perhaps the only executive who would have elicited such a reaction.
Niccol was a clear, obvious hire in 2018 when Chipotle lured him away from Taco Bell and then moved its headquarters halfway across the country.
Niccol rewarded Chipotle and its shareholders by stabilizing the fast-casual chain after a tough couple of years. He then returned the company to its status as a Wall Street darling, engineering a massive stock split earlier this year.
Chipotle’s stock went up an ungodly 790% between his hiring and the announcement of his departure. Of course Wall Street loves the guy.
Much of Niccol’s experience at Chipotle will also come in handy at Starbucks.
At Chipotle, Niccol not only dealt with a stubbornly problematic sales problem, worsened by a social media environment that had turned against the company, he did so under the watchful eye of the chain’s founder and an activist investor.
At the time, the activist Bill Ackman had been agitating for change at Chipotle, given its languishing sales and stock price. Meanwhile, Steve Ells remained a major shareholder and voice at the company and was its chief executive. Ells had agreed to step into a chairman role when Niccol was hired. But he would remain with Chipotle for another two years.
Starbucks is dealing with a frustrating sales challenge. Its same-store sales slowed by 10 percentage points earlier this year and has stayed there, despite otherwise popular introductions like lavender drinks and boba-like Pearls.
Niccol will also need to contend with not one but two activist investors in Elliott Management and Starboard Value. And he will need to contend with the omnipresent Howard Schultz.
Schultz, unlike Ells, has a track record of agitating the company he ran for so long. Schultz lingered in the background of both previous CEO departures. Still, Niccol has experience dealing with a company founder. And he succeeded.
All of this gives Niccol a level of credibility, both with Starbucks and its shareholders, that his predecessor did not have.
Laxman Narasimhan had a strong track record of his own when he was hired and agreed to all the weird requirements Starbucks had of its incoming chief executive. He adopted Schultz’s “Reinvention” plan and then added to it with a “Triple-Shot” Reinvention a few months later. He went through a six-month cultural immersion.
But he was replaced shortly after his first major crisis as its CEO. The main criticisms: He apparently doesn’t work after 6 p.m. and came into the restaurant industry “cold.”
Expect Niccol to get a far longer leash, which is what you get when investors price their love for you at $27 billion.