Starbucks has also followed another food service trend that's frustrated customers across the industry
On Tuesday morning, Starbucks Corp. made an announcement that sent ripples
through cold foam everywhere: After a little more than a year on the job, Chief
Executive Officer Laxman Narasimhan is leaving his perch atop the company. Brian
Niccol, the CEO at Chipotle Mexican Grill Inc. since 2018, will assume the
vacated role next month.
Although the C-suite switcheroo was unexpected, it wasn't exactly shocking that Starbucks would look to change its recent fortunes. For two straight quarters, same-store transactions and revenue have declined, spurring an almost 30% drop in the company's stock price since November and attracting the attention of a pair of activist investors who've amassed significant stakes in the chain. By all accounts, Americans still love coffee. That they've begun to look elsewhere to get it, in spite of Starbucks' omnipresence at the end of 2023, the company had more than 16,000 US stores suggests it might have finally pushed its customers too far.
Grabbing a drink at Starbucks isn't quite what it used to be. The chain was long praised for providing a "third place" where customers could hang out, read a book, chat with a friend or send some emails, but over the years, the company's stores have become steadily less hospitable to lingerers. Starbucks has instead pushed customers to preorder drinks through its loyalty app and then collect them swiftly from a drive-through lane or a counter crowded with grande no-whip double-pump mocha Frappucinos and venti skinny pumpkin spice lattes. For a while, this strategy worked beautifully. Customers, no longer forced to wait in line to articulate their preferences out loud to baristas, increased their purchase sizes, concocted more complex drinks and ordered more frequently.
More drive-throughs, less loungers at Starbucks in recent years. Photographer: David Paul Morris/Bloomberg
But as my Bloomberg News colleague Daniela Sirtori detailed in May, that success, combined with a handful of strategic shifts that Starbucks has implemented over the past few years, has caused significant growing pains. Menus have gotten much longer, crowded with items that are more complicated and time-consuming to assemble. At the same time, employees say that staffing has dwindled, and there are fewer people to work registers and prepare orders. Recently, waits for drinks at busy locations can stretch to half an hour or more something unheard-of for much of the company's history. Starbucks' declining fortunes seem to have exacerbated the issue, according to Sirtori, because drink specials and deals intended to bring customers back to stores have done so in sudden crushes of traffic that employees say they aren't staffed to deal with.
Starbucks has also followed another food service trend that's frustrated customers across the industry: It's raised its menu prices repeatedly since 2021, blaming inflation and the rising costs of coffee beans and labor. In its most recent earnings call, Narasimhan mentioned that the company saw more consumers opting for its brew-at-home beans instead of buying prepared drinks, suggesting that they are indeed feeling squeezed by in-store prices, even if they still like the chain's coffee. The Starbucks board is betting that Niccol, who stewarded Chipotle through the aftermath of a food-poisoning scandal that threatened to bring down the company, can reverse the coffee chain's fortunes before more damage is done. At the very least, he has caffeine and sugar on his side.
Although the C-suite switcheroo was unexpected, it wasn't exactly shocking that Starbucks would look to change its recent fortunes. For two straight quarters, same-store transactions and revenue have declined, spurring an almost 30% drop in the company's stock price since November and attracting the attention of a pair of activist investors who've amassed significant stakes in the chain. By all accounts, Americans still love coffee. That they've begun to look elsewhere to get it, in spite of Starbucks' omnipresence at the end of 2023, the company had more than 16,000 US stores suggests it might have finally pushed its customers too far.
Grabbing a drink at Starbucks isn't quite what it used to be. The chain was long praised for providing a "third place" where customers could hang out, read a book, chat with a friend or send some emails, but over the years, the company's stores have become steadily less hospitable to lingerers. Starbucks has instead pushed customers to preorder drinks through its loyalty app and then collect them swiftly from a drive-through lane or a counter crowded with grande no-whip double-pump mocha Frappucinos and venti skinny pumpkin spice lattes. For a while, this strategy worked beautifully. Customers, no longer forced to wait in line to articulate their preferences out loud to baristas, increased their purchase sizes, concocted more complex drinks and ordered more frequently.
More drive-throughs, less loungers at Starbucks in recent years. Photographer: David Paul Morris/Bloomberg
But as my Bloomberg News colleague Daniela Sirtori detailed in May, that success, combined with a handful of strategic shifts that Starbucks has implemented over the past few years, has caused significant growing pains. Menus have gotten much longer, crowded with items that are more complicated and time-consuming to assemble. At the same time, employees say that staffing has dwindled, and there are fewer people to work registers and prepare orders. Recently, waits for drinks at busy locations can stretch to half an hour or more something unheard-of for much of the company's history. Starbucks' declining fortunes seem to have exacerbated the issue, according to Sirtori, because drink specials and deals intended to bring customers back to stores have done so in sudden crushes of traffic that employees say they aren't staffed to deal with.
Starbucks has also followed another food service trend that's frustrated customers across the industry: It's raised its menu prices repeatedly since 2021, blaming inflation and the rising costs of coffee beans and labor. In its most recent earnings call, Narasimhan mentioned that the company saw more consumers opting for its brew-at-home beans instead of buying prepared drinks, suggesting that they are indeed feeling squeezed by in-store prices, even if they still like the chain's coffee. The Starbucks board is betting that Niccol, who stewarded Chipotle through the aftermath of a food-poisoning scandal that threatened to bring down the company, can reverse the coffee chain's fortunes before more damage is done. At the very least, he has caffeine and sugar on his side.
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