Leadership reshuffles at bigger chains: Will specialty coffee follow suit?

CEO switch-ups in the food and beverage industry are strikingly high this year. So far in 2024, over 24 companies have changed their chief executives – an above-average figure, especially among publicly-traded companies.

Amid declining sales, restaurant brands are seemingly banking on fresh faces and new ideas to bolster market performance. The coffee industry is no exception to this trend either. Most noticeably, after shares fell by a record 16% in May, Starbucks appointed a new CEO with a background in fast food service to revive the brand’s “coffeehouse culture”.

It’s no secret that these leadership changes are part of a wider strategy to boost revenues as companies grapple with high costs and ever-evolving consumer preferences. In the specialty market, we have also seen a few key players appoint new leaders, but the narrative behind some of these changes is ostensibly different.

As specialty coffee brands look to scale, leadership reshuffles can be wise decisions. So, should we expect more in the coming years?

Spencer Turer, Vice President of Coffee Enterprises, provides his insight.

You may also like our article on how De’Longhi’s acquisition of La Marzocco is part of a wider consolidation trend in specialty coffee.

Why coffee chains are switching up their CEOs

High costs of living mean consumers are more price-conscious than ever before, and food and beverage companies have felt the repercussions. To pivot their strategies and adapt to changing demand, many have appointed new chief executives.

CEO changes are relatively frequent in the food and beverage industry, particularly in restaurants and big chains. According to consulting firm Russell Reynolds, the average tenure for global CEOs is 8.1 years.

However, 2024 is shaping up to be an above-average year for these business moves, and Starbucks is a good case in point. The chain has experienced a turbulent string of CEO switch-ups following the pandemic. It grappled with operational inefficiencies, boycotts, and price-sensitive customers who are no longer willing to buy high-priced drinks.

Howard Schultz has been a pivotal figure in Starbucks’ growth. The American businessman and author served as chairman and CEO from 1986 to 2000 before returning in 2008 during the Great Recession. In 2017, Schultz helped drive annual revenue from less than US $10 billion to nearly US $23 billion and promptly retired.

But as the company faced fresh challenges during the pandemic, Schultz returned for a third stint as interim CEO. In 2022, Starbucks conducted an extensive search for a new leader and hired former PepsiCo executive Laxman Narasimhan, who spent six months in training.

As living and business costs remained high, the chain reported significant losses in May 2024, particularly in key US and Chinese markets – causing shares to drop by a record 16% that month. Concerned about consecutive months of poor sales performance, the board abruptly fired Narasimhan and replaced him with Brian Niccol, former CEO of Chipotle and previous executive at Pizza Hut and Taco Bell.

Is new leadership the silver bullet that chains are looking for?

Starbucks has struggled with a number of challenges in recent months. High prices, an overly complex menu with endless customisation options, and chaotic mobile ordering systems have harmed sales in critical markets. In a recent statement, Niccol cited long and “hectic” wait times, “transactional” customer service, and “overwhelming” menus as pressing issues that the chain needs to address to revive its “coffeehouse culture” that it became so well-known for.

The decision to hire Niccol is clear. He is credited with leading Chipotle through one of its most turbulent periods, nearly doubling sales by focusing on mobile ordering and pickup counters. Starbucks’ new growth strategy, however, seems markedly different: an attempt to find a middle ground between third-place and convenience-oriented stores.

Spencer Turer is the Vice President of coffee and tea quality testing consultancy Coffee Enterprises. He has almost four decades of experience in the food and beverage industry, working at companies such as Melitta, Dunkin’, and Mitsui.

“The new Starbucks CEO has both fast food and fast casual experience, so he will be experienced in implementing strong management controls,” he says. “At executive levels in the food business, the priority is strategy and tactics, and not the food being served.

“Coffee is culinary, so we share similarities to other food businesses. As such, hiring a CEO from another food industry makes sense.”

Time will tell if CEO switches work

Given his background, Niccol is likely to shift the chain’s focus towards convenience, optimisation, and efficiency. But whether this pivot will work in the company’s favour remains to be seen.

“When executives leave a company, it can be very disruptive for both the functional operation and continuity of staff – the impact is felt throughout the entire company,” Spencer says. “New executives very often change senior managers in an effort to develop a new strategy or culture.”

Starbucks built its brand by offering premium beverages at premium prices while retaining its third place, community-focused ethos. Many consumers are happy to pay higher prices when they have a warm, relaxing environment to enjoy their coffee. But as the company shifted its focus to mobile ordering and drive-thru-only stores, the disconnect between brand identity and consumer perception has harmed sales. Exactly how Starbucks can balance operational efficiency with a premium café experience is unclear.

“Change for the sake of change or change for lack of patience for slow goal achievement is very disruptive,” Spencer adds. “However, change for the sake of improvement may sacrifice short-term disruptions for long-term success.

“Considering the notable global coffee business leadership changes, we can only guess at the internal conversations about the execution of strategic plans and timelines for revenue growth and profitability.”

Could specialty coffee be heading in the same direction?

As specialty coffee brands face the same challenges as big chains, there have been a few notable executive switch-ups in recent years. Indonesia’s Flash Coffee – which markets itself as “affordable” specialty coffee – recently appointed former Food Panda CEO Jakob Angele as executive chairman as it seeks a return to profitability.

After opening in 2020, Flash Coffee rapidly expanded across Southeast Asia, including Singapore, Thailand, Japan, and South Korea.  In October 2023, the chain closed its 11 stores in Singapore. The following month, its 82-store Thai business was acquired by investment firm Turn Capital.

Since its leadership restructuring, Flash Coffee has announced a renewed focus on sustainable growth in the Indonesian market, marking a return to its roots. The company will also franchise its business in other countries, helping it scale more effectively.

Cometeer is another example. The flash-frozen capsule had initially seen much success, partnering with pioneering specialty roasters and becoming the highest-funded coffee startup ever. In early 2023, however, a string of layoffs highlighted how the premium brand was struggling to expand its consumer base.

By December, Cometeer appointed its chief operating officer, Matthew Mandel, as co-CEO to support founder Matthew Roberts, who had struggled to implement sustainable growth strategies. As of now, it remains unclear how the leadership reshuffle will impact the brand’s future successes.

“Cometeer’s founders were both from outside the coffee and food industries, but they built a company on entrepreneurial spirit and enthusiasm, relying on outside coffee and chemistry expertise,” Spencer says. “In my judgment, a new co-CEO is an example of growth and change to the operational life-cycle that requires new expertise and sophistication.”

For specialty coffee companies looking to scale, new CEOs are a smart move

Other specialty coffee brands have recently hired new CEOs, but these moves follow a markedly different narrative to companies like Flash Coffee and Cometeer.

On 1 September 2024, Coffee Collective announced that Rebecca Vang, former director of strategy and organisation of the Danish newspaper Politiken, had joined the company to oversee a “new period of growth”.

The pioneering Danish B Corp roaster operates nine shops in Copenhagen and Aarhus, a bakery and roastery, wholesale operations in over 40 countries, and e-commerce and subscription services. Owners Casper Engel Rasmussen, Klaus Thomsen, and Peter Dupont (who served as CEO for 16 years) will continue to hold key responsibilities in roasting, coffee purchasing, sustainability, and quality, while Vang will use her background in publishing and communications to oversee company growth.

“It appears Coffee Collective has confidence in its existing coffee sophistication and staff, so it’s a strategic move to bring in outside perspective and expertise, not to change direction, but to support future growth,” Spencer says. “The background of a new CEO is notable but may not be the primary reason for change. It’s also about developing a culture, shared values and vision, and finetuning proposed strategic plans.”

The general consensus is external CEO hires signify that a company is looking to undergo significant transformation, while internal appointments symbolise a less drastic change. As market volatility continues – with coffee prices at near-record highs – we could see more specialty coffee companies rethink their strategies and, in turn, bring in new leadership.

As specialty coffee brands look to scale, hiring new CEOs – especially those with outside experience – brings fresh ideas to the table. And in a time of market volatility, this can be a valuable strategic move.

“History will reveal if executive changes are reactionary and in response to deficiency,” Spencer concludes. “Most often, CEO changes are made to improve company performance.”

Enjoyed this? Then read our article on why beverage customisation is set to become even more popular.

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