To The Moon

August 13 must have been a wild night for $Starbucks(SBUX)$ shareholders, as the 24.5% gain was a first in the company's history and essentially wiped out the year-to-date decline.The rally was triggered by a change in the company's CEO, with the board announcing that Brian Niccol, the former CEO of $Chipotle Mexican Grill(CMG)$ , would be taking over as the new CEO.

But was such a dramatic move in the stock price really caused by him coming in to take over?

I don't think so.Observing the institutional investor changes regarding SBUX over the past few months, the entry of activist investors (Activists) has been the most significant factor in shaping the company's stock price.

What are the fundamentals of Starbucks?

Starbucks has been steadily declining on all fronts in recent quarters, from North America to Europe to Asia-Pacific, without exception.

The main reasons are clear to the company itself:

1. Consumer confidence is down in North America, and the effects of inflation are still being felt, but excess savings are running out, and low and middle-income earners are starting to scrimp and save.

2. China and the Asia-Pacific region have fierce competition from tea stores, Starbucks can't roll on selling coffee, and other beverages are uncompetitive;

3. For taking sides with Israel in the Israeli-Palestinian conflict, leading to a number of consumer boycotts.

Considering that the global consumer food and beverage industry is beginning to enter a downward cycle after a few years of a smooth cycle before and after the epidemic, Starbucks should be no exception as its main business continues to suffer headwinds.

How do you see activist investors entering the market?

The two Activists announced so far are Nelson Peltz of Trian Fund Management, who took a large position in July, and Elliott Investment, which hasn't gone so far as to make an announcement.

Needless to say, Elliott's entry into the $Salesforce.com(CRM)$ eform last year has allowed the company to successfully "reduce costs and increase efficiency" and ride the AI winds to great profitability.He has also been on the boards of $Etsy, Inc.(ETSY)$, $Phillips 66(PSX)$ and $Match(MTCH)$ and others currently moving forward, including $Southwest Airlines(LUV)$ $Texas Instruments(TXN)$ $Johnson Controls(JCI)$

Nelson Peltz, on the other hand, has not released its specific positions, but it is interesting to note that sold out of all of its SBUX positions yesterday after the company announced Brian Niccol's announcement of a new CEO.

• First of all, it certainly made a killing on this ticket;

• Second, he's still not bullish on the SBUX aftermath.

What's more, Nelson Peltz also had a conversation earlier this month with Melody Hobson, the chairman of the Starbucks board of directors, to discuss some key issues.The only ones I can think of are the ones commonly used by Activists:

• Improve operational efficiency (store operations, supply chain management, cost control, etc.)

• Enhancing shareholder value (more aggressive buybacks, but actually quite difficult as cash flow will decline);

• Management changes (possible dissatisfaction with the previous CEO)

• As well, the discussion of the company's broader strategic direction must have involved some geopolitical related discussions as well.

But in any case, polishing all positions just after talking to the chairman of the board is clearly not a good sign.

How will the new CEO change the company?

The new variable is Brian Niccol, previously CEO at Inked Grill, and judging by CMG's stock price alone, you can tell this dude is no slouch.

1. Has real skills in operations;

2. The ability to get along with investors.

His key innovative moves that have at least allowed CMG to expand its advantage in the restaurant industry's tailwind cycle include

1. Digital transformation, including digital ordering and takeout (which has accounted for more than 37% of revenue), Chipotlane-driven pickup windows, to improve ordering efficiency, and also successfully capturing the dividends of the epidemic, all of which have increased customer goodwill;

2. Customer loyalty programs, also known as membership systems, have increased repeat business.

3. Culinary innovation and quality.The ability to introduce innovative dishes in a chain of restaurants is also a good way to make headway in a "sloppy" food market like North America.

Although these changes are commonplace in the domestic restaurant industry, and even can not be called what "innovation", but he did use this set of advantages to grasp the U.S. market.

The question is, how to help Starbucks next global brand "break the game"?After all, Starbucks already has his methodology.

Anyway, what I can think of is that in the future, Starbucks may keep trying new "dishes", which may actually be "dishes", and make more innovations in the product category to improve the taste.Don't be surprised if Starbucks sells fried chicken in the future.

Overall, there are two benefits to changing CEOs, at least right now

• One is to send a message about the company's changing strategy through an executive change.

• The other is to recover from the poor consumer word-of-mouth resulting from the "Israeli-Palestinian conflict".Short-term investor feedback also illustrates this point.

Looking at the current macro situation, it's probably not quite "bottoming out" yet, and it would be nice to see McDonald's "proactively joining in on promotional in-rolls" to stabilize sales over the next few quarters.Of course, if Brian Niccol has another "brilliant idea" to help the company establish itself as an industry leader, then investors will be more than happy to return the favor.

But with Activists and Brian Niccol's investor relations skills, SBUX's stock price may have bottomed out, or at least it's unlikely to continue to plummet.