Starbucks Struggles to Recapture Its Coffeehouse Roots Under New Leadership

Strategic Insights -

As Starbucks continues to grapple with sluggish sales and a customer base dissatisfied with its premium prices, the company is turning to Brian Niccol, a seasoned marketer with a track record of revitalizing struggling brands. Previously at the helm of Taco Bell and Chipotle, Niccol is tasked with streamlining Starbucks' menu, identifying its core customer base, and reinvigorating the coffeehouse experience without alienating loyal customers. With nearly 40,000 stores globally, Starbucks feels ubiquitous, but its high-end prices are a turnoff to those seeking a quick caffeine fix. Analysts say that consumers seeking a higher-end coffee experience are opting for independent cafes or upscale chains like Blue Bottle.

Key Takeaways:

  • Starbucks' premium prices are a major turnoff for customers seeking a quick coffee fix, with a medium Pumpkin Spice Latte now costing almost $8 at a Manhattan location.
  • The company's menu has become overly complex, with baristas tasked with making 100,000 different variations of drinks, including iced, blended, foamed, shaken, and flavored options.
  • Starbucks has faced criticism for reintroducing single-use plastic straws in its cold boba drinks, despite its 2014 promise to eliminate single-use plastics globally by 2020.
  • Baristas have come under pressure to prepare drinks more quickly, with almost 75% of orders now coming through the mobile app, drive-thru windows, or delivery partners like DoorDash.
  • Starbucks has fallen behind some rivals in service delivery times, with 62% of customers reporting wait times of five minutes or less, compared to 77% at Caribou Coffee.
  • The company's board is optimistic about Niccol's ability to chart a new course, despite concerns about his approach to unionization and his significant compensation package.
  • Under his generous contract, Niccol could potentially earn over $100 million in his first year as CEO.

Statistics:

  • 40,000: The number of Starbucks stores globally
  • 75%: The percentage of Starbucks orders now coming through the mobile app, drive-thru windows, or delivery partners
  • 62%: The percentage of customers at Starbucks reporting wait times of five minutes or less
  • 77%: The percentage of customers at Caribou Coffee reporting wait times of five minutes or less
  • $8: The approximate cost of a medium Pumpkin Spice Latte at a Manhattan Starbucks
  • $100 million: The potential compensation package for Niccol in his first year as CEO
  • 11: The number of different kinds of creamers and milks listed on Starbucks' U.S. website

Sources:

  • "Acquired" podcast, June episode
  • Chris Kayes, professor of management at The George Washington University
  • Phil Kafarakis, president and CEO of the International Foodservice Manufacturers' Association trade group
  • Michelle Eisen, Starbucks barista and union organizer
  • Starbucks Corporation statement, August 13
  • Ocean Conservancy statement
  • Technomic survey
  • Wawa, convenience store chain
  • Blue Bottle, upscale coffee chain
  • Chipotle, Mexican chain
  • Taco Bell, fast food chain
  • US Labor Department, National Labor Relations Board