Starbucks’ freshly-brewed CEO Brian Niccol has the “venti” task of getting the coffee shop giant back on track. The tall order starts with more people fulfilling orders across Starbucks’ many channels.
The company released preliminary fourth-quarter earnings, which shows how deep the Starbucks slump is. For the third straight quarter, overall same-store sales fell, this time by 7%. That’s the biggest drop since the COVID-19 pandemic. Same-store sales in China fell by 14%, but it’s the 6% decline in North America that’s most troubling for the chain.
“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. As a result, some are visiting less often,” Niccol acknowledged.
Niccol took over as head barista in September after serving six years as Chipotle’s CEO. He is credited with turning the fast-casual restaurant around after years of bad outcomes, mostly due to E. coli outbreaks. In his new role, Niccol has said his commitment is to get “back to Starbucks.”
“At Starbucks, coffee comes first,” Niccol said. “Through product development, marketing, and in-store experience, we need to remind everyone that we are, and always have been, Starbucks Coffee Company.”
The biggest consumer-facing challenge at Starbucks is managing the operation of multiple order channels, said Robert Byrne, senior director of consumer research at the foodservice industry consulting firm Technomic. Between in-store, online and drive-thru, Starbucks has struggled with synchronization.
“Part of the reason that [Niccol] is the person that they hand-picked as the next person to lead the brand is because he was very successful in creating two separate make lines in Chipotle stores, essentially one that satisfies one order flow and one that satisfies that in-store order flow, which makes for speed on both counts,” Byrne said.
Solving Starbucks’ order flow woes will bulk up labor costs, Byrne admits. But he says increasing staff is where the coffee chain can achieve that “back to Starbucks” mentality.
“Starbucks has had a very contentious relationship with all of their team members over the past couple of years. There’s no mystery there,” Byrne said. “It can be a grind for those baristas and for those working the register and working the counters.”
Starbucks needs “more bodies and more hands” to properly maintain the multiple order flows, he said. That could also help foster a personal touch.
“This idea of that drink being hand-delivered to each guest, that’s the piece that’s missing here,” Byrne said. “That’s the part where the experience becomes commoditized and you could be getting your coffee from anywhere. But if somebody [in a] green apron is handing it to you with a smile, with, ‘Have a great day’ … That goes so far in that individual’s day. It builds the loyalty that you expect.”
Starbucks’ challenges are numerous. For Byrne’s “big idea” on how Starbucks could transform its business, watch the full interview in the video above.