Brian Niccol revitalized Chipotle Mexican Grill Inc. over the past six years by driving menu innovation, improving speed of service and boosting the company’s digital sales.
Now, Starbucks Corp. wants his playbook.
Niccol, chief executive since 2018, is leaving the Newport Beach-based chain for Starbucks, effective Aug. 31. He will start as CEO and chairman of the Seattle-based coffee powerhouse on Sept. 9, replacing Laxman Narasimhan, who was ousted after less than two years in the role.
Wall Street took notice of the leadership disruption.
When the Niccol hire was announced Aug. 13, Starbucks (Nasdaq: SBUX) saw its shares surge 24% – its market cap increased by $21 billion to $108.6 billion. By contrast, Chipotle shares fell 7.5%, losing $6 billion in market cap to $70.9 billion (NYSE: CMG).
“It looks like this was quite a shock to Chipotle,” veteran restaurant analyst Mark Kalinowski told the Business Journal.
In a note to investors, Raymond James analyst Brian Vaccaro said Chipotle’s stock tumble was a “knee-jerk reaction often seen when rock star executives leave a company.”
Calling Niccol a corporate rock star is no exaggeration.
Under his leadership, Chipotle’s market cap increased nearly 10 times from $8.2 billion at the end of 2017 to the current $70 billion.
“That’s a really good track record,” Kalinowski, of Kalinowski Equity Research, said.
Staying in Newport Beach
Chipotle is the most valuable publicly traded company based in Orange County and is the third most valuable restaurant chain in the country, following McDonald’s Inc. and Starbucks.
While Starbucks’ headquarters is in Seattle, Niccol will remain here, and the company agreed to open “a small remote office in Newport Beach,” according to an SEC filing.
Golden State Foods, an Irvine-based supplier of products to both Chipotle and Starbucks, knows Niccol’s capability well.
“Brian set a fantastic track record,” Golden State Foods CEO Brian Dick told the Business Journal. “Brian will be very successful. He likes to drive sales. He likes to build things. Chipotle will do well because it has a lot of smart people.”
Niccol, who received a $10 million signing bonus, will have an annual base salary of $1.6 million and then a bonus up to 450% of the salary. He’s also eligible for annual equity awards that start at $23 million in his first year.
Niccol also may be compensated for up to $75 million in shares he might forfeit at Chipotle.
Culture Carrier
Starbucks clearly wants Niccol’s magic touch, restaurant industry consultant John Gordon told the Business Journal.
“I think he’s going to be extremely store focused,” said Gordon, founder of San Diego-based Pacific Management Consulting Group.
Niccol, who served as chief executive of Irvine-based Taco Bell from 2015 to 2018, is known for his ability to identify and solve store-level and marketing challenges.
At Taco Bell and Chipotle, Niccol championed menu innovation that resonated with next-gen-eration consumers – an approach Starbucks struggles with, Gordon said.
Niccol joined Chipotle in 2018 under circumstances similar to those he now faces at Starbucks.
At that time, Chipotle had lost its financial footing and the confidence of consumers after a series of food safety scandals. At Starbucks, Niccol will be dealing with a brand that has lost its “cool factor,” Gordon said.
“Starbucks is very strong among certain older generations,” he said. “But it’s very weak with the youngest age groups—the millennials and Gen Z.”
Mellody Hobson, Starbucks board chair, called Niccol “a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth.”
“He understands that a remarkable customer experience is rooted in an exceptional partner experience,” Hobson said in a statement. “Our board believes he will be a transformative leader for our company, our people and everyone we serve around the world.”
Digital Powerhouse
When Niccol took over as Chipotle’s CEO, he emphasized a “maniacal” focus on enhancing the brand’s visibility among digitally savvy consumers.
He hired top-flight software developers to build an application for easy use on cell phones.
Digital sales now represent 35% of Chipotle’s total sales, up from nearly 9% when Niccol started at the company.
In 2019, Niccol started Chipotle’s Rewards program, which now has more than 36 million members. The gold-standard loyalty program allows customers to schedule orders, access exclusive menu items and earn rewards.
To appeal to eco-conscious Gen Z and young millennial consumers, the brand introduced the Real Foodprint tracker in 2020, which shows the environmental impact of their digital orders.
Chipotle also pioneered the strategy of offering consumers exclusive meals through its digital channels. In 2019, Chipotle launched Lifestyle Bowls, online-only custom meals tailored to diets like paleo and keto.
One of Niccol’s most significant innovations was introducing Chipotlanes, mobile drive-thru lanes that allow customers to pick up orders without entering the store.
This contactless option proved invaluable during the pandemic, prompting Chipotle to build hundreds more at new stores. Today, more than 800 of Chipotle’s over 3,500 restaurants feature a Chipotlane.
Kalinowski said digital innovations like Chipotlanes were a “massive” success for the brand.
Copycats soon followed with Shake Shack, Chick-fil-A, Taco Bell and Sweetgreen opening drive-thru lanes dedicated for mobile orders.
Last year, Niccol boosted revenue by 14% to $9.9 billion and increased shareholder value by 62%, adding $24 billion in market capitalization, according to the company’s proxy. He signed Chipotle’s first ever agreement to open restaurants in the Middle East, beginning in Dubai and Kuwait.
Chipotle’s second quarter operating profit margin was 18.2%, which is about two to three times better than most rivals.
While his annual total compensation package ranged from $17 million to $22 million in the past three years, Niccol also owns shares worth an estimated $58 million.
Ironically, those shares lost about $5.7 million in value on the day his departure was announced.
Niccol was the Business Journal’s Business Person of the Year in 2020.
Corporate Reset
Internally, Niccol made some bold moves to reset Chipotle’s culture.
He relocated Chipotle’s headquarters to Newport Beach from Denver, the chain’s home base since Steve Ells founded the burrito brand in 1993.
Niccol placed his headquarters in Orange County’s most expensive real estate – Newport Center, where rents are comparable to mid-town Manhattan.
Niccol, who lived in Orange County at that time, said the relocation was necessary to bring in top talent to shape the future of the company. Some of the nation’s biggest fast-food chains have headquarters in Orange County, including Taco Bell, In-N-Out Burger Inc. and BJ’s Restaurant Inc.
“We are transforming our culture and building world-class teams to revitalize the brand and enable our long-term success,” Niccol said in 2018.
He brought on several executives he had previously worked with at Taco Bell, including Chief Brand Officer Chris Brandt and Tressie Lieberman, vice president of digital marketing and off-premise. Lieberman departed Chipotle last year to become chief marketing officer at Yahoo!
Niccol’s marketing team increased the brand’s relevance through national campaigns celebrating the company’s 51 fresh ingredients. In the 2020 Rose Parade, Chipotle spotlighted young farmers with a float decorated with its ingredients.
The brand also earned street credibility with young consumers by launching celebrity-inspired menus available only through the company’s digital channels. Exclusive online menu items are now commonplace at fast-food chains like McDonald’s and Taco Bell.
Though Orange County is losing the leader of its most valuable publicly traded company, Kalinowski said Chipotle will survive because Niccol is leaving behind a deep bench.
Seven-year Chipotle veteran Scott Boatwright, chief operating officer, will lead the brand as interim CEO.
Chief Financial Officer Jack Hartung paused his previously planned retirement and will remain indefinitely with Chipotle as president of strategy, finance and supply chain. Scott Maw, Chipotle’s lead independent director, has been named chairman of the board, taking over for Niccol.
“I think Chipotle will be just fine,” Kalinowski said.
Nancy Luna is a veteran restaurant industry writer who lives in Orange, Calif. She can be reached at fastfoodmaven@gmail.com
Brian Niccol’s Secret Salsa
Chipotle’s annual proxy shows off the clever marketing side of CEO Brian Niccol.
The proxy has all the board directors list their “How I Chipotle.”
Niccol’s favorite is “Burrito with white rice, chicken, mild salsa, corn salsa, fajita veggies, cheese with a side of guacamole and chips.”
The 50-year-old Niccol first became a rising star at Yum! Brands, the parent company of Taco Bell, Pizza Hut and KFC.
From 2005 to 2011, Niccol held leadership roles at Pizza Hut, including general manager and chief marketing officer.
In 2011, Niccol came to Irvine-based Taco Bell as chief marketing and innovation officer. He then served as brand president from 2013 to 2014 and then rose to Taco Bell’s CEO from 2015 to 2018.
During his tenure at Taco Bell, he was instrumental in pushing menu innovation with the introduction of breakfast and mash-up items such as the Quesalupa.
Taco Bell’s store economics and brand strength flourished under Niccol, restaurant consultant John Gordon told the Business Journal.
Niccol stepped into the CEO role in March 2018 and didn’t waste a minute making bold changes.
In his first year, he relocated Chipotle’s headquarters to Newport Beach to attract top talent and spearheaded the launch of Chipotlanes. Niccol launched a successful loyalty program and digital ordering system, significantly increasing digital sales from 9% to 35.3% of total sales.
He led impactful marketing campaigns, including the “For Real” initiative and high-profile menu collaborations with celebrities and social media influencers.
Niccol introduced a sustainability impact tracker within the Chipotle app and launched Lifestyle Bowls to cater to specific dietary needs.
To meet demand for online orders, Niccol retrofitted stores with digital makelines for preparing delivery and takeout meals.
He increased Chipotle’s store count from 2,400 to 3,500 with a goal of hitting 7,000.
At Starbucks, Niccol will lead a brand with more than 39,000 stores worldwide.
