Starbucks CEO Brian Niccols was interviewed by CNBC on October 31, 2024.
CNBC
Starbucks Chief Executive Brian Niccol shared more details about the company’s turnaround strategy during the company’s quarterly conference call Wednesday.
Starbucks sales have fallen for three consecutive quarters. But the coffee chain hopes a few simple tweaks to its U.S. operations will pay off and help reverse that trend as it works toward a more ambitious and comprehensive game plan.
Many of the upcoming changes are designed to help Starbucks achieve a smaller goal: serving customers customized drinks in four minutes. About half of all deals currently fall within that threshold, Nicol said.
Starbucks Chief Financial Officer Rachel Ruggeri told investors on a conference call that the company also plans to reduce new stores and renovations in fiscal 2025 to free up capital as the company focuses on turning a profit.
Starbucks shares were flat in after-hours trading Thursday after the company reported its third consecutive quarter of revenue declines.
Here’s how Nico’s plans to help Starbucks sales rebound:
Termination action ordering and payment disorder
Starbucks customers are used to walking into a coffee shop and seeing the counter crowded with mobile orders. Nicole wants to change that.
“If it works well, that’s great, but sometimes it’s a challenge for customers and partners,” he told investors on a company conference call.
Mobile orders account for more than 30% of Starbucks’ U.S. transaction volume.
Mobile ordering and Uber Eats and Doordash delivery pickup areas at Starbucks coffee shops in Queens, New York.
Lindsay Nicholson | Underground CG | Universal Image Group | Getty Images
Nicole said Starbucks is working to improve the accuracy of the app’s timing to let customers know when their drink is ready. In addition, he hopes to better separate mobile ordering from in-restaurant ordering and reduce the number of customized drinks customers have to order.
“Right now, I think there are some customizations in mobile order app execution that are very broad and unnecessary,” Nicol told CNBC. “So I think we need to put better guardrails in place so that we can provide you with Customization to suit the drink you order, while also allowing our baristas to perform their operations more consistently.”
Cut back on “overly complex” menus
Spain, Barcelona, Plaza Francisco Massia, Starbucks, cafe customers ordering food.
Jeff Greenberg | Universal Image Group | Getty Images
Starbucks’ menu is getting a makeover.
Nicol said coffee chains need to focus on “fewer, better” products. A streamlined menu will make it easier for baristas to create every drink consistently. It should also increase speed of service since they will have fewer drink recipes to remember.
“There’s always a long tail on the menu and, frankly, we don’t execute that well on those items,” Nicol said, adding that baristas often take longer to make unfamiliar drinks.
Nicol said Starbucks will also consider which items would not be on the menu if the four-minute standard were in place.
While the changes may disappoint some customers, Nicol said he thinks they’ll appreciate faster, more consistent service in the long run.
Make your coffee shop more personal
As part of Nicol’s plan to “return to Starbucks,” he wants the company’s locations to feel like a “third place” for customers to work and socialize outside of their homes and offices.
The coffee chain’s “third place” positioning helped it grow into a global giant, but along the way it lost that reputation. Nicol said he hopes to reintroduce more personal touches, such as serving coffee in ceramic cups to customers who choose to linger at the cafe. Markers are also making a triumphant return after being replaced by printed labels.
Starbucks is also reviewing its store designs with a focus on restoring more comfortable seating and amenities.
On July 19, 2024, customers sat inside a Starbucks in Manhattan Beach, California.
Etienne Laurent | AFP | Getty Images
“The reality is that most of the cafes that we have, I think don’t have the right seating, maybe don’t have the right textures, don’t have the right layers, don’t have the right warmth. We need to bring that back,” Nicole said.
In recent years, the company has launched more Pickup only locations with few seats available, especially in urban areas. Nico said even these cafes could be more welcoming to customers.
“I think there are design elements that can still come up with the idea of a community cafe, even if some of the designs we do don’t lend themselves to providing a full traditional cafe experience,” he told CNBC.
Bring back the condiments
Starbucks brown sugar bags are seen in a Starbucks cafe in Krakow, Poland, on November 4, 2022.
Beata Sales | Noor Photos | Getty Images
Early in the coronavirus pandemic, Starbucks moved its condiment bar off the counter. From that point on, when customers wanted milk or sugar in their drink—even a simple drip coffee—they had to ask the barista directly.
But that could soon change. Nicol said the condiment bar will return, freeing up more time for baristas and easing some customer frustrations.
The cafe is well staffed
Starbucks coffee shop, Zona Paseo Montejo Centro, Merida, Mexico, barista and cashier working and smiling.
Jeff Greenberg | Universal Image Group | Getty Images
Starbucks has increased the average hours its baristas work. More shifts and a more consistent schedule reduce a company’s turnover and help overall retention.
But Nicol also wants to ensure the cafe is properly staffed from the busy morning rush to the “off-peak” peak times.
A new way of marketing
Since his first week on the job in early September, Nicol has said he wants to improve the way the company markets itself. On a conference call Wednesday, he said he hopes the marketing will target a broader audience than just Starbucks Rewards members and showcase the quality of Starbucks coffee.
Customers may also see a reduction in the number of transactions as part of the marketing shift. Nicol said the discount-driven offers were “ineffective” and could overburden baristas.
Nicole has a marketing background and started his career in Procter & Gamble. Then he moved to Yum Brands He held various marketing positions before rising to leadership at Taco Bell. Marketing expertise came in handy when he joined Chipotle And likely valuable at Starbucks, too. He has hired a former Chipotle alumnus, Tracy LiebermanServes as Starbucks’ new chief global brand officer.
Dairy alternatives finally don’t cost extra
After years of pleading from customers, Starbucks finally Effective November 7th, the additional fee for milk replacer will be eliminated.
Almond milk will be available in select Starbucks stores in the United States by the end of September.
Source: Starbucks
More broadly, Starbucks does not plan to change prices in North America during its next fiscal year, which ends in early October, in an effort to improve consumer perceptions of its pricing.
Executives pointed to resistance from rising prices as one of the reasons why occasional customers stopped visiting its stores.
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