Starbucks is looking to turn around its business by becoming less of a fast-food chain and more of a neighborhood coffee shop.
Brian Niccol, the new CEO of the troubled company, Thursday shared his vision of Starbucks becoming “a welcoming coffee shop where people come together and we serve the best coffee.”
Speaking to analysts for the first time since taking office on September 9, Niccol outlined his plan to reverse a trend illustrated by the company’s fourth-quarter financial results, which saw a decline same-store sales of 7%, the third consecutive decline of this type. For the full year, Starbucks said its revenue rose less than 1 percent, to $36 billion.
The Seattle-based coffee giant released poor financial news last week and said it would suspend its financial guidance for its 2025 fiscal year to give Niccol time to evaluate the company.
“It is clear that we need to fundamentally change our strategy to win back customers and return to growth,” said Niccol, who called the earnings report “very disappointing.”
Seeking to appease customers put off by higher prices and longer wait times, Niccol said Starbucks would not raise prices during its current fiscal year, which began in late September, and was taking steps to deliver orders in less than five minutes.
“We probably already have about 50% of our stores or 50% of our transactions under 4 minutes, so we know it’s definitely doable,” Niccol said. “We just have to do it in all of our stores, in every transaction.”
Starbucks is also solving problems in its workforce as its baristas grapple with in-store, drive-thru and online orders, not to mention incessant customization choices, the CEO said.
The coffee giant plans to scale back its overly complex menu and focus on fewer but tastier offerings, while taking steps to “better separate mobile order pickup from the coffee shop experience,” Niccol said.
Starbucks will stop offering its Oleato olive oil-infused drinks in most locations starting early next month, ending what longtime Starbucks leader Howard Schultz called of transformation” when he introduced it in Italy at the beginning of last year.
Starbucks will stop charging extra for plant-based milk
Starting next Thursday, November 7, Starbucks will stop charging more for non-dairy milks at its company-owned and operated cafes across North America. The ability to choose oat, soy or coconut milk is the company’s most popular customization after an extra shot of espresso, Niccol said. Once in place, nearly half of those who pay for a modifier could see a price reduction of 10% or more when choosing a non-dairy milk, according to the executive.
At a Starbucks in Michigan, for example, it costs 70 cents to switch to almond milk in an average Pumpkin Spice Latte.
The change comes after a trial earlier this year by three California residents who claimed that extra charges for non-dairy substitutes constituted a form of discrimination against people with lactose intolerance or other dietary restrictions.
Starbucks also plans to reinstate self-serve condiment coffee bars in all of its cafes by early 2025. The company had moved its milk, sugar and simple drip coffee behind the bar at the start of the COVID-19 pandemic. 19, but this return should be possible. giving its baristas more time to prepare lattes, macchiatos and other less simple drinks.
Additionally, Starbucks plans to offer ceramic mugs to those who want to drink their hot drinks at Starbucks and provide more comfortable seating to make its locations attractive to people who want to sit, work and socialize. He also plans to bring back Sharpie pens so baristas can write a message on a customer’s order.
“While we are confident in the strategy, we expect the turnaround will take time as Starbucks faces ongoing challenges in key markets, including China, as well as increasing competition, high prices, long waiting times and a lack of staff and turnover,” Arun Sundaram said. , equity analyst at CFRA Research, wrote in a note.
Although early in its turnaround, much of what Niccol has presented seems reasonable, according to Neil Saunders, managing director of retail at GlobalData.
“One of the big problems many customers have at Starbucks is the wait time for drinks and the length of the lines at some stores,” Saunders said. “In general, most people want a quick coffee fix when they’re on the go – which makes speed and efficiency paramount. Starbucks has failed to provide this over the past two years,” according to the ‘analyst. “This is a critical solution if Starbucks is to rebuild its sales.”
At the same time, Starbucks also needs to consider customers who want to linger, as it is “increasingly competing with independent coffee shops that often have a good atmosphere,” Saunders said.
Niccol took up his new role weeks after the caffeine supplier ousted Laxman Narasimhan, whose 18-month tenure at the helm was marked by sluggish sales and amid waning affection for the brand, especially among Americans.
A restaurant executive for 20 years, Niccol is credited with reviving Taco Bell’s image and turning around Chipotle after a series of food safety problems.
There are nearly 40,000 Starbucks stores worldwide and approximately 17,000 locations in the United States.
