In conjunction with the release of Starbucks’ disappointing Q4 preliminary results, new CEO Brian Niccol — who joined the company at the tail end of the quarter — released a video about the path forward for the Seattle coffee chain.
In the video, Niccol emphasized five key areas of concentration for Starbucks, which will report a 7% global same-store sales decline during its next earnings call on Oct. 30: coffee product development, barista needs, experience improvement during peak hours, emphasis on community, and brand architecture overhaul.
“People love Starbucks, but I’ve heard from some customers that we've drifted from our core, that we’ve made it harder to be a customer than it should be, and that we’ve stopped communicating with them,” Niccol said in the message to employees and investors. “As a result, some are visiting less often, and I think today’s results tell that same story. To welcome all our customers back and return to growth, we need to fundamentally change our recent strategy.”
In its preliminary results, Starbucks reported a 3% decline in net revenue, primarily driven by challenges in the North American market, which saw a 6% decline in same-store sales and a 10% decline in traffic. According to the results, the temporary measures of new products and in-app promotions “did not improve customer behaviors, specifically traffic across both Starbucks Rewards and non-SR customer segments, resulting in lower-than-expected performance.”
According to Niccol, Starbucks’ problems are “very fixable,” and he intends to focus on the aforementioned five key areas to drive traffic and growth for the brand again:
- Coffee comes first: In recent quarters, Starbucks has rolled out many new product offerings, LTOs, and even new categories. Niccol wants to instead work on simplifying the menu and focus on the quality of Starbucks’ coffee and the skill of the baristas who make it
- Green apron partners: As union tensions continue to recede, Starbucks will continue to focus on the experience and needs of its employees. “We must ensure our baristas have the time and tools they need to provide exceptional customer service, and that they are supported by strong leaders and managers across every store,” Niccol said.
- Great in-store experience at all hours: Niccol admitted that Starbucks’ customer experience can be lacking and frustrating during peak hours, so he said that “we need to address staffing in our stores, remove bottle necks, and simplify things for our baristas,” as well as improve mobile order and pay.
- Re-establish Starbucks as a community coffeehouse Once upon a time, Starbucks was known for its emphasis on third-place culture and Niccol wants to get back to that: “even if customers don’t want to stay in the café each time they visit, we know they expect our stores to look and feel like the community coffeehouse they remember.”
- Fundamentally changing Starbucks marketing Niccol wants to de-emphasize Starbucks Rewards as the primary digital marketing arm, and instead “prioritizing the brand,” which includes an overhaul of menu, pricing, and everyday value.
As a result of both this time of transition and the current challenged business state, Starbucks has suspended guidance for the entire fiscal year of 2025.
Contact Joanna at [email protected]
