SEATTLE (Diya TV) — Starbucks announced a major leadership shakeup Tuesday, appointing Brian Niccol, the current CEO of Chipotle, as its new chief executive officer, effective September 9. The move, which comes just over a year after Laxman Narasimhan took the reins, has sent Starbucks’ stock soaring by more than 20%, marking its best day since the company’s initial public offering in 1992. Meanwhile, Chipotle’s stock fell over 10% in reaction to the news of Niccol’s departure.

Narasimhan’s sudden resignation as CEO and board member was effective immediately. Until Niccol officially takes over, Starbucks Chief Financial Officer Rachel Ruggeri will serve as interim CEO.

Narasimhan’s tenure, which began in March 2023, was marred by declining sales in Starbucks’ two largest markets, the United States and China. In the most recent quarter, the company reported a 3% decrease in same-store sales, signaling a difficult year for the coffee giant. The company has struggled to attract customers back into its stores, a challenge exacerbated by weak consumer sentiment and market conditions in China.

Under mounting pressure from activist investors, including Elliott Management and Starboard Value, Starbucks’ board began contemplating a leadership change several months ago. Mellody Hobson, Starbucks’ board chair, revealed that the board approached Niccol through an intermediary, recognizing his successful track record in the restaurant industry.

“Our board, a couple of months ago, started to engage in a conversation about the leadership of the company, and I made an overture through someone to Brian, and he took the call,” Hobson said during an interview with CNBC. “We thought we had the opportunity to engage with one of the biggest names in the industry, someone whose track record is clearly proven.”

Niccol’s impressive tenure at Chipotle, where he served as CEO since 2018, has been marked by a remarkable turnaround. During his leadership, Chipotle’s stock soared by 773%, and the company successfully navigated through a foodborne illness scandal, the COVID-19 pandemic, and a shift in consumer behavior toward digital ordering. His ability to drive innovation and adapt to changing market dynamics made him an attractive candidate for the top job at Starbucks.

“Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth,” said Hobson in a statement. “We believe he is the leader Starbucks needs at this pivotal moment in its history.”

While Narasimhan brought significant expertise from his previous role as CEO of Reckitt, he faced challenges due to his lack of direct experience in the restaurant industry. Despite his efforts to address supply chain issues and reduce employee turnover, Starbucks’ sales continued to decline under his leadership, prompting the board to seek a change.

The leadership transition also underscores Starbucks’ intention to avoid a deal with activist investors. Elliott Management, which recently acquired a stake in Starbucks, had engaged with the board in recent weeks. However, the board’s decision to replace Narasimhan without prior consultation suggests a firm commitment to its chosen path forward.

As Starbucks looks to regain its footing, Niccol’s appointment is being hailed as a transformative step. Former CEO Howard Schultz, who had handpicked Narasimhan as his successor, expressed his support for Niccol, stating, “I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support.”