Starbucks CEO Brian Niccol is wasting no time in his first few months at the helm, as he makes sweeping changes to bring the Seattle-based coffee chain back to its glory days. In his first earnings call as chief executive, Niccol briefly touched upon the company’s disappointing fourth quarter, but mostly spent time laying out a “Back to Starbucks” plan full of many small and major changes.
As previously reported, Starbucks reported a 7% global same-store sales decline in the fourth quarter ended Sept. 29 driven by an 8% decline in traffic. U.S. performance was particularly thorny for Starbucks, as the company reported a 10% decrease in North America traffic that was only partially offset by menu price increases.
Despite the continued challenges for Starbucks, Niccol’s focus during the Oct. 30 Q4 earnings call was on the long road ahead. The two basic tenets of his Back to Starbucks plan are to uncomplicate the company’s operations and to refocus the company on customer service and the third place that it used to be known for.
“Regardless of whether you walk in to just pick up your coffee and go, I want you to feel like you've walked into a special place,” Niccol said Wednesday. “I know we've got it right when people are questioning whether or not they want to order mobile, because maybe if they have a few minutes, they’d rather stay and get that cafe experience. I have a strong belief that we can make the cafe experience something special, welcoming, and warm.”
Here are 10 changes coming to Starbucks soon, as outlined in the company’s Q4 earnings call:
Ditching the non-dairy milk upcharge
While you can read more about this change here, the bottom line is that Starbucks is removing the extra 90 cents (on average) that the company traditionally charged for drinks made with almond milk, soy milk, coconut milk, and oat milk this November in order to embrace everyday value. Vegan activist groups and non-dairy drinkers have also been calling for Starbucks to get rid of this upcharge for years.
This is one way Starbucks is rethinking the customization process. In the call Wednesday, Niccol said the company will begin putting some “guard rails” on customization so that complicated drinks (ones that might be trending on TikTok, for example) might cost more than they used to, while customizations like substituting for oat milk will not:
“I think when we simplify that aspect of it and then charge for the things that we should be charging for and maybe not charging for the things that don't really need to be charged for, everybody's going to walk away feeling a lot better about their personal beverage that they've created,” Niccol said.
Getting back to the third place
Starbucks used to be known for embracing its position as a third place: where people met for first dates, job interviews, and study sessions. But over the past several years as the focus has gotten to be more on mobile order pickups, seating has disappeared from many cafes, and few customers linger.
This is something Niccol and his team want to change, starting with encouraging customers to take a breath and enjoy their coffee in-house.
“We're reclaiming the third place so our cafes feel like the welcoming coffee house our customers remember,” Niccol said. “In the coming months, we intend to reintroduce more personal touches to elevate the cafe experience. For instance, we'll begin to prioritize serving coffee and ceramic mugs for customers who choose to enjoy their coffee in our cafes. We're also beginning to review and revise our cafe designs to bring back more comfortable seating and amenities and to ensure our stores are a place where customers want to sit, work and meet.”
Bringing back handwritten names
One of the more personal touches Starbucks wants to bring back is the handwritten names on Starbucks cups (where baristas were infamously known to misspell names). Over the past several years, this process has slowly been replaced with just printing guests’ names on stickers to place on cups.
“One of the other things we're going to do is we’re going to be bringing the Sharpies back to our baristas,” Niccol said. “It’s going to give them the opportunity to put that additional human touch on every coffee experience as well.”
Getting wait times down to four minutes
Niccol kept emphasizing the two starkly different ideal Starbucks experiences: one where a customer leisurely sits with friends enjoying coffee from a ceramic mug, and the other where a customer in a hurry can pick up their mobile order quickly and without friction. With efficiency in mind, Starbucks wants to get the wait time for café customers down to four minutes or less:
“Today more than 30% of transactions are driven by mobile orders -- At peak it can drive an influx of orders that can be difficult to sequence and quickly deliver to our customers,” Niccol said. “When it works well, it's great, but sometimes it can be a challenge for both customers and partners. So, we're working to improve sequencing with a new algorithm that enables on time mobile order handoffs and supports our four-minute throughput with quality being our goal for cafe customers.”
Bringing back the condiment bar
Self-serve condiment bars went the way of the handwritten names on cups during the pandemic, and now Starbucks wants to bring them back with both efficiency and customer service in mind:
“We're going to bring back the coffee condiment bar, because both our customers are asking for it, and our baristas are saying it would help them deliver the speed of service that they want to provide,” Niccol said.
Simplifying the menu
As previously stated, Niccol wants to pare down the Starbucks menu to focus on a core, coffee-centric menu, and alluded to the downsides of a revolving door of new menu items.
“To improve throughput quality and consistency, we will cut down our overly complex menu to align with our core identity as a coffee company,” Niccol said. “We will still offer customers great choice but will be focused on fewer, better offerings consistently crafted.”
Slowing down LTO calendar
As part of this, Starbucks won’t be coming out with a new lineup of LTOs every month, which will help in-store efficiency as well we to help cut costs for the company overall.
“We are definitely not going to be moving at the speed you probably saw over the last two years,” Niccol said. “Part of that is we're just going to take a much more disciplined approach using the stage gate process so that what we roll out, we have a better understanding of how it's going to perform. The supply chain can support it, the baristas can execute it and, we'll make sure we're smart about how we then market it, so people are aware of it.”
Focusing on Starbucks marketing for all
Speaking of marketing, Starbucks will begin to change its marketing strategy to be inclusive of all potential customers—not just loyalty program guests.
“Our marketing needs to tell our coffee story and showcase our premium coffee beverages,” Niccol said. “Our newly launched campaign focuses on talking to all customers and elevates the Starbucks brand in a much more visible way through broad reach media like Linear TV. It reminds customers across age groups that Starbucks serves the best coffee.”
Choosing to not increase prices
One of the other marketing strategies Starbucks will make is to remind customers of the company’s everyday value. Starbucks now knows that discounting does not work, so making customers realize the value in what they get in every cup (plus an efficient, fairly priced, low-stress experience) will be the next best strategy.
Niccol said that as part of his pricing architecture plan, Starbucks won’t raise prices at company-owned stores through fiscal year 2025.
Scaling back store growth and renovations
In order to invest fully in the scope and scale of this wide-reaching plan, Starbucks plans to slow down its investment in both new store growth and renovations.
“We plan to reduce the number of our new stores and renovations in fiscal year 2025 to accommodate a redesign, while also unlocking capital to support our broader turnaround,” CFO of Starbucks said Wednesday. “We expect this shift coupled with efficiencies will help us balance our investments accordingly.”
The overall goal is not to put a stop to growth but to temporarily pause it so that the company can figure out how to reduce the costs of its renovation program while tweaking it to accommodate the separate needs of Starbucks guests: those who are in a hurry, and those who want to sit, sip and savor.
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