Starbucks’ new game plan: Will it work?
‘Barron’s Roundtable’ panelists offer their economic outlook and analyze Starbucks and Chipotle stock.
Starbucks’ new chief executive announced a series of changes this week aimed at drawing back customers as the company navigates unionization pressures, declining foot traffic, and frequent leadership changes.
Brian Niccol, who took over as CEO in September, told analysts on an earnings call this week that the company’s financial results “were very disappointing” as sales at U.S. stores opened for at least a year declined 6%, which was driven by a 10% decline in transactions.
Niccol emphasized the need for the company to get back to its roots as a coffee house.
“It is clear we need to fundamentally change our strategy to win back customers and return to growth. Back to Starbucks is that fundamental change,” Niccol said. “We have to get back to what has always set Starbucks apart, a welcoming coffee house where people gather and where we serve the finest coffee, handcrafted by our skilled baristas.”
STARBUCKS CEO SAYS COMPANY WILL FIX ‘OVERLY COMPLEX MENU’ TO REVERSE SALES SLUMP
Starbucks CEO Brian Niccol emphasized the need for the company to get back to its roots as a coffee house. (Photo by Robin Marchant/Getty Images / Getty Images)
Changes to expect at Starbucks:
Coffee house transformation
Niccol said the company intends to revert the cafes back to their former “coffee house” aesthetic with “personal touches,” including serving coffee in ceramic mugs for customers who dine-in.
The company is also reviewing the cafe design and plans to bring back more comfortable seating and amenities, so customers will be more inclined to sit and work.
Milk substitutes
The company said it will stop charging extra for customizing beverages with non-dairy milk. The company said that customers who swap dairy milk for soy milk, oat milk, or coconut milk at company-operated stores will see a price reduction of more than 10% starting Nov. 7.
Starbucks’ selection of milks (Business Wire/Starbucks)
Condiment bar
The condiment bar is making a comeback next year. Niccol told analysts that baristas requested the feature, saying it would speed up their service.
“If you order a brewed cup of coffee, it’s a really fast experience because we’re going to just hand it to you right at the point of sale, and then you can go to the coffee condiment bar and doctor up your coffee how you see fit,” Niccol told analysts.
Sharpies are back
Niccol said the company is re-introducing Sharpies, another nostalgic nod to its earlier days when baristas would write customers’ names on coffee cups.
“I think there’s a lot of just simple things that go a long way of saying, ‘you know what, this is a community place, this is a special place where people are here to connect,’” Niccol said.
Part of his immediate strategy also includes simplifying the coffee chain’s “overly complex menu” and fixing its pricing architecture.
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