It’s a tale of two Starbucks companies: While the Seattle coffee chain delivered record revenues during the third quarter of 2022, Starbucks is also in the middle of a corporate reinvention plan amid increasing employee tensions. Interim CEO Howard Schultz is introducing a number of changes to address company dissatisfaction before the transfer of power to an unnamed incoming CEO in 2023.
During the earnings call for the third quarter ended July 3, Schultz admitted that many of the “issues and challenges” facing the company are “self-induced” and he will be introducing a five pillar plan for success moving forward with a “deep sense of urgency” for change. While specific details on the plan will not be available until Starbucks Investor Day this fall, the pillars individually address retail integration, a renewed focus on employees, reimagined store operations, personalized customer interactions, and working on giving everyone a voice.
“We were in a moment where Starbucks leaders needed to put themselves in the shoes of our partners and demonstrate great empathy and compassion toward them,” Schultz said Tuesday. “And we needed to address our partner's concerns with urgency. What began as informal partner meetings soon evolved into focused co-creation sessions, where Starbucks partners and leaders collaborated on how best to reimagine the next Starbucks.”
Some changes already in the works include wage accelerations for all employees, investing more in store training, and a new digital engagement platform for employees. Starbucks is also rolling out a new universal tipping and recognition platform for employees by the end of the fiscal year.
“Our partners shared how hard it had become to keep up with customer demand, and how insufficient training had left new partners unprepared for their roles, challenging partner and customer experiences,” Schultz added. “[…] At times I was overwhelmed by what I heard: the challenges the fears, the desire for emotional and financial security, and a sense of belonging and purpose.”
More information on new employee initiatives will come at the investor meeting in September, along with more information on how Starbucks plans to take part in Web3 and the metaverse. Starbucks has been notably absent from the discussion among many large foodservice chains about Web3 technology, but the coffee chain is making moves soon:
“We have been working on a very exciting new digital initiative that builds on our existing industry-leading digital cloud,” Schultz said. “[…] We believe this new digital Web3-enabled initiative will allow us to build on the current Starbucks Rewards engagement model, while also introducing new methods of emotionally engaging customers, expanding our digital third place community and offering a broader set of rewards.”
In other news this quarter, Starbucks’ growth momentum has been tied to the continued success of its cold drinks, which now comprise roughly 75% of total beverage sales, at all times of the year. The iced shaken espresso category, introduced last year, is the fastest growing category on the Starbucks menu, and is creating a surge in new dayparts, like the midafternoon, especially for Gen Z customers.
For a more in-depth look at Starbucks’ third quarter by the numbers, check out NRN’s analysis here.
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