Who is Laxman Narasimhan and why Starbucks fired its CEO after a year?

The abrupt removal of Indian-origin Starbucks CEO Laxman Narasimhan comes amid declining sales and mounting pressure from activist investors

Starbucks has announced the departure of its Indian-origin chief executive office (CEO) Laxman Narasimhan, who had been with the company for less than a year. Narasimhan, who took over as the chief executive in March 2023, has been replaced by Brian Niccol, the current chief executive of Chipotle Mexican Grill. The change is ‘effective immediately’, and Narasimhan will also step down from his position on Starbucks’ board of directors.

Who is Starbucks’ former CEO Laxman Narasimhan?

Narasimhan’s nearly 30-year career includes him taking on several prominent roles in global companies. Born on May 15, 1967, in Pune, India, Narasimhan holds degrees in Mechanical Engineering, German, International Studies, and Finance, having studied at institutions including the University of Pune and the University of Pennsylvania.

 

He spent nearly two decades at McKinsey & Company, where he advised businesses in various sectors, followed by a successful tenure at PepsiCo, where he held several high-profile positions, including global chief commercial officer.

Before joining Starbucks, Narasimhan served as CEO of Reckitt, where he focused on expanding the company’s e-commerce presence and supporting the workforce during the Covid-19 pandemic.

He also gained a reputation for prioritising work-life balance was highlighted in a recent interview, where he mentioned his practice of not working past 6 pm — a stance that resonated with many but may have been out of sync with the demands of leading a global brand like Starbucks.

74 of the 191 CEOs left their roles in 2023-24

Laxman Narasimhan’s exit adds to the growing list of CEOs leaving their posts this year, particularly among companies in the Russell 3000 Index, which measures the performance of the 3,000 largest companies in the United States. According to data from exechange.com, a research firm that tracks executive changes, 74 of the 191 CEOs who have left their roles this year were considered to have been forced out—the highest number recorded since the firm began tracking these departures in 2017.
 

Why was Laxman Narasimhan ousted as Starbucks CEO?

Starbucks has offered no details about Narasimhan’s departure, leaving many questions unanswered. This sudden leadership change comes as the coffee giant grapples with declining sales and increasing pressure from activist investors.

Under Narasimhan’s leadership, Starbucks has struggled to maintain its market position, with the company reporting two consecutive quarters of declining comparable sales. The situation was further exacerbated by a disappointing earnings report in April, which highlighted the impact of weakening consumer sentiment and difficult market conditions in China. This has been a tough year for Starbucks, with its stock price falling by 20 per cent before the announcement of Narasimhan’s exit.

Board Chair Mellody Hobson in an interview with CNBC said Narasimhan’s departure may not have been driven by external pressures, though the specifics remain unclear. This change also comes at a time when Starbucks is working to finalise contracts with its unionised stores, an area where Narasimhan had been seen as more open to unionisation efforts compared to his predecessor, Howard Schultz, according to a report by The New York Times.

Starbuck, among other major US-based companies, including McDonalds, had also faced significant controversy towards the end of 2023 tied to the Israel-Palestine conflict. There were many cries of boycott against the global coffee chain due to Starbucks’ alleged ties to Israel. This opposition to the coffee chain also affected its partnerships, most notably South Korean boy band NCT. NCT reportedly lost millions of followers in the month of May upon announcing its collaboration on merchandise with the firm. The news also led to fresh cries for boycott.

Who will replace Narasimhan as Starbucks CEO?

The decision to bring in Niccol as the new CEO appears to be driven by investor concerns, particularly those voiced by activist funds such as Elliott Investment Management. The fund, which has a stake in Starbucks, had been pushing for changes to boost the company's share price. Niccol, who has been at the helm of Chipotle since 2018, is credited with driving significant growth and increasing the chain’s profitability, making him an attractive choice for a company in need of revitalisation.
 

 

As Starbucks navigates this leadership transition, investors and industry watchers will be keen to see how Brian Niccol’s appointment influences the company’s trajectory.