Blog: Our Take: Starbucks’ New CEO

Our Take: Starbucks’ New CEO 

The recent CEO transition at Starbucks, replacing Laxman Narasimhan with Brian Niccol, former CEO of Chipotle, caught many by surprise. This decision represents a bold shift, which may have been based more on Niccol’s achievements at Yum! Brands and Chipotle, rather than the unique value he can bring to Starbucks. While Niccol’s experience and accolades in the Quick Service Restaurant (QSR) industry are impressive, the Starbucks challenge is one of a different nature—one that extends beyond the traditional QSR playbook. 

The Starbucks Dilemma 

Starbucks is a global brand built on the promise of self-expression and self-indulgence. The company has cultivated an experience that customers have come to expect: a clean, welcoming environment, eco-friendly practices, personalized orders, smooth jazz in the background, and a sense of indulgence. These attributes are deeply intertwined with the brand’s identity and justify its premium pricing. Niccol’s primary challenge will be to reinvigorate these feelings in consumers while also focusing on Starbucks’ expansion, particularly in China. So far, Niccol’s fly-to-work on a private jet agenda seems at odds with Starbucks’ eco-friendly branding, a potential disconnect that could undermine the brand’s core values. 

Fortifying & Leveraging Strategies 

To elevate the brand, I believe Niccol will need to employ strategies that not only strengthen Starbucks' existing market position but also broaden its market recognition beyond coffee. Drawing on insights and examples from Kellogg on Branding, there are three effective strategies that can be deployed: modernizing, laddering, and leveraging. 

Modernizing involves subtly evolving the brand’s image to capture new market share or protect existing share. A relevant example is Special K, which redefined its brand from focusing on “thinness” to “athleticism” in response to changing consumer attitudes toward body image. Starbucks could similarly modernize its brand by emphasizing sustainability and ethical sourcing in ways that resonate with contemporary consumers. Enhancing the Starbucks Rewards program to include partnerships with other ethical, premium brands could create a robust referral ecosystem, deepening customer loyalty. 

Laddering focuses on highlighting a company’s differentiators with supporting evidence. For instance, Pantene successfully laddered its functional benefits (shinier hair) to emotional benefits (health and confidence) by promoting its “ProV” ingredient. Starbucks could employ laddering by emphasizing the quality of its coffee, the expertise of its baristas, or introducing new healthier options, reinforcing the emotional connection customers have with the brand. 

Leveraging utilizes the brand’s strong recognition to broaden their frame of reference or extend their point of difference into new categories. An example of this is Oreo’s expansion into the snack category with mini Oreos, which transformed the brand from a treat found in the cookie aisle to a snack available at checkout counters. Starbucks could similarly broaden its frame of reference by expanding its food offerings. Starbucks is not typically recognized for its food options, which presents a prime growth opportunity. Emphasizing fresh, daily-made food items could enhance the brand’s appeal and boost overall store revenue. Strategic partnerships with a renowned gourmet chef or a national supplier could help elevate the quality and consistency of these offerings. Introducing drive-thru snack options or fresh meal selections could shift consumer perception of Starbucks from just a coffee shop to a go-to destination for breakfast and lunch. 

Forming partnerships with elite chocolatiers, like Lindt, for their mocha drinks could also help reinforce Starbucks’ premium positioning in the coffee market. 

The China Expansion Opportunity 

Niccol’s appointment may also be a strategic move for Starbucks’ expansion in China, where competition with Luckin Coffee is fierce. With 16,000 stores across China, Luckin Coffee poses a significant challenge to Starbucks’ growth prospects. A unique opportunity for Niccol could be to leverage his experience with Yum! Brands and forge a strategic partnership with KFC in China. Though not aligned with Starbucks' "premium" brand, KFC does, however, operate over 10,000 locations in China, and could benefit from offering Starbucks coffee during early-morning hours while Starbucks could tap into KFC’s extensive reach to bolster its presence in this critical market. 

Conclusion 

Brian Niccol steps into the role of CEO at Starbucks at a crucial time. The challenges are many—rising competition, inflation, changing consumer habits, and the need to maintain margins without compromising quality. While same-store sales are down at Starbucks, this trend is not unique to the company; even McDonald’s has reported lower same-store sales growth in the second quarter of 2024. Consumers are increasingly sensitive to perceived value, weighing the cost of Starbucks against alternatives like home-brewed coffee or local coffee shops. 

For Niccol, the key will be to understand the intricacies of the Starbucks brand and apply his marketing knowledge to help propel the brand. By focusing on strategic partnerships, reinforcing the brand’s luxury image, and leveraging his marketing expertise, Niccol may help Starbucks elevate its status. However, if the focus remains solely on cost-cutting and price increases, Starbucks may find itself constrained by a ceiling of its own making.