Executive Briefing
How to save Starbucks
Also: A billion-plus reasons to like Pepsi’s Siete deal. And the truth about David bars.
By Dan Frommer on Tuesday, October 8, 2024 at 2:15 pm
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In Brian Niccol’s first note published as the new CEO of Starbucks, he outlined how he plans to start turning around the coffee chain’s struggling US business.
Niccol, if you’re not familiar, joined Starbucks this summer to fix a worsening situation after a very successful six-year run at Chipotle, where he rebuilt trust and growth after a food safety crisis, and delivered excellent results during and after the pandemic.
At Starbucks, he writes, his first tasks include:
- Making sure baristas have the “tools and time” to make great drinks.
- Improving operations specifically during the morning rush, its most important time of the day.
- “Elevating the in-store experience” with “comfortable seating, thoughtful design, and a clear distinction between ‘to-go’ and ‘for-here’ service” — trying to re-establish Starbucks as a “third place” where you’d actually want to spend time.
The first two seem primed for some thoughtfully applied automation and technology — something that Niccol was starting to roll out at Chipotle — and just good, solid ops work. The third will require him to express some taste, which is something we’re less familiar with.
The mess at Starbucks is different in that there’s no specific disaster to recover from; it’s more a case of slipping toward mediocrity at scale, again. What’s at stake, however, is the future of the business and brand.
In the US, Starbucks’ comparable store transactions declined 6% year-over-year in the June quarter. A year before, they had been growing, though modestly. For context, the National Coffee Association recently reported that US “out-of-home coffee consumption is at the highest level since January 2020.” Americans are still spending more money on specialty coffee — just not as frequently at Starbucks.
I’ve spent the past few weeks on a bit of a Starbucks tour. In addition to the improvements Niccol lists, I’d add:
More health-conscious drinks and food, including taking a very hard look at the high sugar content in many of Starbucks’ beverages.
Depending on the season, cold drinks now represent much or most of Starbucks’ business, including 76% in the June quarter. Earlier this year, longtime exec Brady Brewer called this a “shift in generational taste preferences” among younger consumers toward cold drinks and away from hot drinks. Often featuring sweetened milks blended with syrups and topped with sweet foams, these increasingly resemble decadent dessert treats, rather than the coffee drinks that the Starbucks brand was built on.
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Hi, I’m Dan Frommer and this is The New Consumer, a publication about how and why people spend their time and money.
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