Starbucks Corp’s new chief executive officer Brian Niccol. — Bloomberg
New York: Starbucks Corp’s new chief executive officer Brian Niccol, addressing investors for the first time since taking the company’s helm, laid out his vision of strategic changes to reboot the struggling coffee chain – from reining in drink customisation to revising the staffing model.
Niccol said Starbucks needs to focus on coffee, first and foremost, while improving service times.
He set a goal of getting drinks to in-store customers in four minutes or less and ensuring online orders are filled on time. Starbucks will also trim its food and beverage menu, and Niccol vowed a more disciplined approach to product development, saying the company had strayed from its own process in recent years.
Speaking on an earnings call on Wednesday, he promised to bring back some touches that will make the Starbucks experience feel less like fast food: ceramic mugs, sharpies that baristas can use to personalise cups, and a condiment bar that will allow customers to once again pour their own milk and sugar.
“It’s a lot of stuff, but I like that he’s super aggressive and he’s trying to tackle that all,” said Michael Halen, a restaurant analyst at Bloomberg Intelligence.
Starbucks’ fiscal fourth-quarter results illustrate the depth of the problems Niccol has to fix.
Same-store sales contracted 7%, the third consecutive decline, with negative numbers in all regions.
Profitability, as measured by operating margin, contracted from a year earlier. Most of the numbers were released last week.
The declines have been fuelled, in part, by customers pulling back due to higher prices and increasingly long wait times as baristas juggle in-store, drive-thru and digital orders with endless customisation options.
“Our financial results were very disappointing and it is clear we need to fundamentally change our strategy to win back customers and return to growth,” Niccol said during the company’s call with investors. He said the company wouldn’t raise its prices during its current fiscal year, which started at the end of September.
Starbucks shares have risen 1.4% this year through Wednesday’s close, compared to a 22% rise for the S&P 500 Index.
Niccol, who engineered turnarounds at Taco Bell and Chipotle Mexican Grill Inc, has acted quickly since taking the helm on Sept 9, starting with remaking the company’s top ranks.
He hired a new global chief brand officer to “reintroduce” the brand to customers.
The chief executive said Starbucks can recapture growth by getting in-store coffee orders to customers quickly, refocusing on all guests instead on just rewards members, and getting the company’s prices right.
On Wednesday, Starbucks announced it would drop the extra charge for non-dairy milk, effectively cutting prices for many customers.The company also needs to create “that community house experience where people want to be in Starbucks, spend time in Starbucks”, Niccol said.
“All those things will add up, I believe, to growth,” he added.
Additionally, Starbucks is reducing store openings and renovations as it figures out a new design.
The chief executive had previously said he wants to create cosier stores that invite people to linger.
On the topic of labour, he said Starbucks is piloting a new approach to staffing.
An internal company survey found that only a third of workers think staffing levels are adequate.
“We’re going to test and learn our way through this,” Niccol told investors. “We may find it’s going to require some additional hours,” he added. — Bloomberg
