Starbucks explored a takeover of Chipotle Mexican Grill, the Financial Times reported Thursday, in a move that would reunite Chief Executive Brian Niccol with the burrito chain he led before joining the coffee giant two year ago.
The coffee chain has worked with advisers in recent months on a takeover proposal for Chipotle, the FT reported, citing people familiar with the matter.
Starbucks and Chipotle did not immediately respond to Reuters requests for comment.
Shares of Chipotle, which has a market capitalization of nearly $39 billion, were up about 6% on Thursday, while those of Starbucks were down about 3%. Starbucks is worth about $107 billion, according to LSEG data.
The burrito chain has been contending with softer traffic as consumers pull back on discretionary spending, while higher food and labor costs have pressured margins across the industry. Its shares are down about 17% so far this year.
A potential deal could also accelerate Chipotle’s international expansion, analysts said.
“What I like about this potential is the opportunity CEO Brian Niccol would have to leverage Starbucks’ licensed partnerships in Europe to expand Chipotle more aggressively,” Jim Sanderson, analyst at Northcoast Research said.
As of the end of last year, Chipotle had nearly 4,000 restaurants in the US and about 100 international Chipotle restaurants. Meanwhile Starbucks has roughly 40,000 stores globally with roughly 18,000 in North America.
Niccol joined Starbucks in 2024 after spending six years at Chipotle, where he was credited with overseeing a turnaround after the company’s food-safety crises and expanding its digital business, helping drive years of strong sales growth.
He was brought in to Starbucks to turn around the business and in the last two years has aimed to improve customer experience through a simplified menu and shortened wait times, fueling four straight quarters of comparable sales growth.
“We have more work to do,” Niccol said in July after the company raised its annual sales and profit forecasts.
“The timing of this would be a little weird, given that Starbucks is in the middle of their transformation and hasn’t yet shown the margin improvement investors are probably hoping for. Instead of jump-starting the transformation, at first blush, this seems more like jumping the shark instead,” said Brian Jacobsen, Chief Economic Strategist, Annex Wealth Management.