The surprising CEO swap gives Starbucks a much-needed lifeline â but where does it leave Chipotle? Hereâs what weâre watching... [Derby City Daily logo](
[Derby City Daily logo]( August 14, 2024 [Massive Executive Shakeup: Where SBUX and CMG Go from Here]( By Andy Swan Starbucks (SBUX) surprised the market yesterday with a massive executive shakeup, appointing Brian Niccol, the former CEO of Chipotle (CMG), as its new CEO. The pivotal decision comes amid growing pressure from activist investor Elliott Management, which recently purchased a significant stake in Starbucks. Elliott is the same firm that helped to re-invigorate [Pinterest (PINS)]( shares by guiding the company into opening up its platform to third-party advertising. PINS traded from $20 to $40 in the two years following its investment. Starbucks needed this lifeline â and you can see why on the chart below why. Rising labor costs, unionization, boycotts, and increasing competition in key markets like the U.S. and China are just a few of the missteps that landed SBUX [in hot water]( this year. The stock lost nearly 25% of its value during the tenure of the previous CEO, Laxman Narasimhan. Now, Niccol will be tasked with spearheading a much-needed turnaround for the struggling coffee giant. The former Taco Bell hero is credited with successfully revitalizing Chipotle after a series of food safety scandals. (He saved Chipotle's queso, among other wins.) The leadership change sent Starbucks shares soaring by over 20% yesterday, while Chipotle's stock dropped sharply by 9%, reflecting investor concerns about the future without Niccol at the helm. Source: TradingView SPONSORED AD [Elon Muskâs PRIME Is Set to Shock the World]( Eric Fry, the legend who picked 41 plays that jumped 1,000%+... [Just recorded this video outside Elonâs headquarters...]( Exposing his crazy A.I. experiment known as PRIME. [Click here to see the details]( because it could change humanity as we know it... And make a lot of people wealthy in the process. Where Does This Leave SBUX and CMG? CMGâs Challenges One thing is for certain: While Niccol has spent years building up Chipotle's brand value, the current upward trajectory isn't guaranteed. LikeFolio has been detecting signs of consumer resistance to Chipotleâs ever-increasing prices and seemingly shrinking portion sizes. In short, what used to be a $5 burrito complete with a free drink [now costs over $9]( and that drink is no longer included. This sharp increase (more than 80%) in the cost of its flagship item has driven consumer discussions about Chipotle's pricing power â with many expressing their discontent. According to the latest LikeFolio data, Chipotle's Consumer Happiness levels are down 4% year over year: With Niccolâs departure, itâs uncertain where Chipotle goes from here. SPONSORED AD [$60,000 in Extra Income Over the Next 12 Months?]( CRITICAL: Newly upgraded A.I.-powered income system recently paid out a $3,375 windfall in a one-month timeframe... $4,650 in three months... $11,925 in five months... $16,875 in 11 months... Finding at least $60k in yearly income, no matter the size of your account. [Click here]( to learn more about this incredible cash generator. SBUX's Opportunities In contrast, SBUX faces mounting competition â but it also has an opportunity. Americans drink more coffee than they have in 20 years. Two-thirds of U.S. adults drink coffee daily, according to the National Coffee Association. And Starbucks is still THE name to beat in this arena. To get its groove back, the company needs to make headway in a few key areas. The first order of business to tackle? Speed. Starbucks is on track to reach higher efficiency goals, thanks to technology like the Siren Craft System, a streamlined beverage sequencing system, and The Clover Vertica, a paper-filter-less coffee grinder/brewer. Source: stories.starbucks.com Next: Waning traffic. Starbucksâ global same-store sales declined 3% in the most recent quarter, driven by a 6% drop in transactions. But the company has a highly loyal app user base that can be activated with personalized recommendations â and it wants to attract "occasional" users to its app to encourage more frequent visits. A quick look at web views shows some improvement in April-June compared to February-March levels: And lastly... Innovation will be key. Starbucks has struggled to bring new and exciting drinks to the table. Its Oleato drink â a controversial concoction of coffee and olive oil launched earlier this year â was deemed one of Starbucks' top flops. Not only do they taste bad, but the olive oil added an extra 120 calories on top of an already sugar-packed drink. Starbucks needs a hit. Bottom line: With Niccolâs track record, weâre excited to see where the coffee giant can go from here. New leadership at this juncture could be just the spark Starbucks needs to turn its ship in the right direction. Until next time, [Andy Swan's signature]
[Andy Swan's signature] Andy Swan
Founder, LikeFolio Discover More Free Insights from Derby City Daily Here's what you may have missed from Derby City Daily this week... ✓ [ONONâs Profit Potential Just Kicked into High Gear]( ✓ [Meet the Disruptors Coming for Google Chromeâs Throne]( ✓ [NVDA at $100 Is a Gift (3 Reasons Why)]( © 2024 TradeSmith, LLC t/a Derby City Insights. All Rights Reserved.
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