Photo by Gema Saputera on Unsplash
September 20, 2024
Is the New CEO’s Revealed Plan a Win for Starbucks?
After his first week as Starbucks CEO, Brian Niccol finally revealed his plan to help turn around Starbucks’ decline. He emphasized the need to reconnect the brand with its core identity. In a public letter, the new Starbucks CEO reflected on insights gained from conversations with partners and customers, noting that while Starbucks is a beloved brand, there’s a sense it has lost its way.
“Starbucks was founded on a love for high quality coffee — handcrafted by our outstanding green apron partners and enjoyed with intention. Coffee is our heart.”
Brian Niccol, Starbucks CEO, via Starbucks
To revitalize the store experience, Niccol outlined a plan focusing on four main priorities:
- Empowering baristas to take care of customers, giving them the time and tools to do so effectively
- Improving morning service consistency to meet customer expectations
- Enhancing in-store ambiance to restore Starbucks as the “community coffeehouse”
- Reinforcing the brand narrative to remind customers of the special Starbucks experience
Ultimately, he committed to returning to Starbucks’ roots as a welcoming coffeehouse that serves high-quality coffee. Additionally, he stressed the importance of understanding growth opportunities in global markets like China and Asia Pacific, with an initial focus on engaging directly with store teams and suppliers to realign with core values.
According to The Motley Fool, while Niccol’s plan isn’t “particularly groundbreaking,” its simplicity and focus could help Starbucks regain momentum and boost its stock in the long term. The four key initiatives aim to improve both employee and customer experiences. The underlying issue seems to be understaffed stores, per the financial advice company, where overworked baristas are rushing to fulfill orders, leaving little room for personalized customer interactions. This not only impacts customer satisfaction but also leads to unhappy employees, further affecting the overall experience.
CNBC’s Jim Cramer reacted to the original news of Niccol taking over as CEO positively. At the time, he stated, “Brian Niccol is the key to a new Starbucks, one that can reclaim its old mantle as the ‘third place’ — you just need to know that this turnaround can’t happen overnight. But, I’m telling you, it’s going to happen.”
Cramer added that Laxman Narasimhan “wasn’t the right person for the role,” explaining that the company needed someone more familiar with the fast-food industry and its challenges, like Niccol. According to CNBC, Cramer “admired Niccol’s selective strategy at Chipotle when it comes to new items, in contrast to Starbucks which had introduced too many new drinks for baristas to handle efficiently.”
As reported by The Associated Press, analysts have found that the price of Starbucks’ coffee is currently one turnoff that is driving away customers who just want a quick caffeine fix. For example, at one location in Manhattan, a medium Pumpkin Spice Latte now costs nearly $8.
Chris Kayes, a management professor at The George Washington University, pointed out that even convenience stores like Wawa now offer quality coffee. Meanwhile, consumers seeking a more premium experience are turning to upscale chains like Blue Bottle or independent cafes.
“From a marketing perspective, Starbucks has really lost its way,” Kayes told The Associated Press.
At the end of Niccol’s letter, he wrote, “My focus for the first 100 days is clear. I’ll spend time in our stores and at our Support Centers, meeting with key partners and suppliers, and working with our team to drive these critical first steps. Together, we will get back to what makes Starbucks, Starbucks.”
Moreover, Starbucks previously revealed other plans for the chain.
In April, the coffee chain announced plans to improve its coffee shop experience by reducing noise and enhancing accessibility, focusing on creating a quieter environment with acoustic dampening features and adjustable lighting. It explained that new store designs would accommodate customers with various needs, including wheelchair users and those with visual impairments, demonstrating Starbucks’ commitment to inclusivity and customer comfort.
Additionally, Starbucks upgraded its two New York cafes using Amazon’s Just Walk Out technology in July, enhancing the shopping experience for customers who prefer using their smartphones. These cashierless stores, which allow patrons to enter and shop without waiting in line, serve as testing grounds for future innovations, although challenges remain as Amazon shifts some focus to its Dash Cart technology in larger grocery settings.
Discussion Questions
In what ways can Starbucks’ core identity evolve to meet changing consumer preferences while maintaining its foundational values?
How can Starbucks balance innovative technologies with the need for personalized customer experiences, ensuring advancements enhance rather than detract from human interaction?
What strategies should Starbucks adopt to differentiate itself and foster long-term customer loyalty in a saturated market?
Poll
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Dick Seesel
Principal, Retailing In Focus LLC
James Tenser
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Frank Margolis
Executive Director, Growth Marketing & Business Development, Toshiba Global Commerce Solutions
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What I like most about the new CEO is that he has spent his first days going around stores and talking to customers and staff. There is a good back to basics vision here, with an emphasis on returning stores to places to linger and relax. Implementing the changes will, however, take time and considerable effort. And there needs to be a lot of retooling of processes and operations to reduce wait times and reduce complexity.
This statement puzzles me: typically we’re used to seeing this “empowerment” bromide when we’re talking about streamlining procedures – accepting returns, approving a credit override, etc.. I would think baristas are empowered to pour a cup of coffee already (I mean what are they doing…it’s not like a Purchase Order is required at the counter; if this is coded talk for increasing headcount, OK, but that opens up its own issue…cost.) And I don’t see much mention of what the RW Commentariat usually cites as SB’s major problems: too high prices and too many locations.
Starbucks’ original positioning as a gathering place helped justify its premium pricing. It’s become more of a commodity given its overwhelming dependence on mobile demand.
Niccol has the right priorities, but translating them into operating improvements is the real challenge ahead of him. The stresses on the customer (and barista) experience are not easy to fix.
The iconic and omnipresent Starbucks brand that Howard Schultz and his team built has lost its luster and brand equity over the past ten years. With economies of scale comes efficiencies and reach. Yet the brand has strayed from its successful strategy of offering customers transporting European café experiences and, in the process, has essentially commoditized itself.
The work begins for Brian Niccol and Starbucks to transform and elevate the customer experience while driving profitable growth.
While this is not an easy task, CEO Brian Niccol pledged to restore Starbucks to its former glory when the ubiquitous coffee haunt served as a famous “3rd place” between work/school and home. It will be fascinating to see how this plays out, especially for consumers nostalgic for the Starbucks experience from a pre-digital and mass cafe expansion era. Consider the following
As I shared in an OFFBounds podcast with Paula Macaggi, Brian Niccol has a unique opportunity to restore the brand and enhance the customer experience while driving profitable growth. These are the areas of opportunity the company should consider to get out of the commoditization patterns
1. Separate the customer journeys and enhance the in café experience
2. Prioritize the Café space transformation
3. Quality quality quality
4. Elevate the loyalty program
I’m all for restoring Starbuck’s “third place” role in its local communities, but I’m certain Mr. Niccol knows that lingering customers don’t generate much profit per square foot.
The company has evolved into an app-enabled drive-thru in the suburbs. Meanwhile, in town, and in transit hubs, customers queue up for their liquid candy then bolt for their offices or their flights.
It will always be tough for Starbucks to strike a balance between the peak AM rush (where all the money is made) and the quiet hours where customers use the wi-fi between classes or sales meetings.
I think the new CEO at Starbucks is spot on with the move to go back to their roots. Starbucks originally stood out because of its welcoming atmosphere—people didn’t just stop by for coffee, they stayed to work, chat, or relax. Getting back to that “third place” concept is smart, especially if they continue to focus on employee satisfaction. Happy employees lead to happy customers, and that energy is contagious.
Plus, Starbucks’ premium pricing only works if the experience matches the cost. By making their stores more inviting and enhancing loyalty programs, they can keep customers feeling like they’re getting real value beyond the coffee. And let’s not forget sustainability and fair trade—customers care more about these than ever, and Starbucks can really set itself apart by doubling down on those initiatives.
As long as they balance that personal experience with the convenience of mobile ordering and drive-thrus, I think they’re in a great position to strengthen customer loyalty and thrive in a competitive market.
The issue is that Starbucks is not a third place. It’s not a coffeehouse. It’s not a gathering spot. It’s a drink production operation with high prices. The recent chainwide renovations share two traits: a large pickup area for mobile orders and significantly reduced seating. The message is clear: pick up then get out. (Unless you happen to part of the solo laptop brigade who are monopolizing the scarce seating real estate by making the local Starbucks your workspace, taking up valuable real estate for hours with your $4 refillable drip coffee. But I digress…)
I left Starbucks long ago. It used to be a coffee house and a gathering place. Customer service was something that I looked forward when I used to come in there. Your point is true. The seating areas are getting smaller and smaller. It has become a place that makes expensive, so-so widgets. You pick up your widget and you leave. I seriously hope they focus on the things that originally brought them to the dance. There are so many (and much better, more affordable options out there. They are in for an uphill battle to get back to front of the line.
It’s time for Starbucks to exercise discipline to bring back its roots with less, not more. Over the past few years, Starbucks has tried to be everything to everyone and has lost most of its focus on the elements that brought exceptional appeal and success during the Howard Schultz eras.
A cozy atmosphere, high-quality coffee, and exceptional customer service were among these elements. Starbucks succeeded in creating a loyal customer base by adhering to these core principles. Regaining the company’s original charm and customer loyalty could be achieved by returning to these fundamentals.
Throughout the past ten years, Starbucks, on the other hand, has abandoned its core coffee house image in favor of an endless menu of sugary cold drinks, mediocre food items, irrelevant merchandise, and an often malfunctioning app.
The shift has diluted the brand’s identity and alienated many longtime customers. Lattes, espressos, cappuccino’s, great service, passion, comfort, aroma, light background music, and fresh delicious pastries should be what that Starbucks focuses on, in addition to perfecting its app, with fast, friendly, service, whether in the store, or drive through.
For the new CEO’s 1st 3 priorities, they all require 1 thing that no one is mentioning…. additional headcount (and expense). It will require more employees and more time to ‘take care of customers’ (aka treat them like people and actually talk to them), ‘improve morning service consistency’ (aka having many associates each doing 1 core function), and ‘enhancing in-store ambiance’ (aka actually cleaning tables, keeping merchandise in-stock, etc). The only question is how long will the company give him to show this is impacting top-line sales, as profitability will immediately be hit.
Very good point. You need to invest in the people to get back their once exceptional customer service. You bring up a very salient point- how long will they give him to correct the wrongs , knowing there has to be a considerable amount of investment, will they lose patience with him because its taking too long and not let him complete his objective of why he was there in the first place?
This guy is doing the right thing by going back to basics, driven by, wait for it- talking to customers. It sounds so obvious, and yet so many CEO’s do not do that at all, relying on subordinates to do the dirty work.
I am a regular Starbucks customer, although my drink of choice is green tea. From that reference point Starting in 2020 the brand was in the news for all the wrong reasons. In no particular order there was the outcry over a store trying to get two non customers out of a store, which (too?) quickly turned into a “Starbucks is racist” outcry. Then you had several upper management signals that Starbucks was as woke as possible. Then you had several Starbucks store windows smashed in the “mostly peaceful” protests. Then you had a vocal shift to “gender free” bathrooms with appropriate signage. Then there were the small signals like stores posting signs stating their purpose was to provide safe spaces for everyone, with no mention of serving a quality product.
With an environment like this to start with, CEO Niccol has a lot to improve on. Starting with the product and the customers is a great start.
I dunno. Vente drip (not even a latte) and a breakfast sandwich is now $10.00 I used to visit daily when it was around $6 for the exact same thing. If you want to focus on higher value customers, then you need to also provide a higher value experience. As others have pointed out, it’s basically a turnstile operation today.
I have noticed many Starbucks have removed customer areas at the front of the stores to build to-go pick up spaces. This doesn’t give a good “first 10 second perception” design-wise, and with less seating customers don’t feel encouraged to sip and stay.
Returning to its community coffee house roots is exactly what Starbucks needs.
I like the simplicity of Mr. Niccol’s focus and his store visit plans, and I do hope he can revive Starbucks original vibe. But he and his leadership team have many headwinds in front of them. I was traveling a few weeks ago and stopped in an airport Starbucks to order a latte. Just as I ordered, I heard one of the baristas shout, “we’re the best Starbucks in the airport.” So I had high hopes that I’d get my drink quickly, find a seat at my gate and relax a few minutes before boarding my flight. Instead, I waited 30 minutes to get my drink and then had to nearly run to catch my flight. If this was the best Starbucks in the airport, I’d hate to visit any of the other locations! Sadly, this isn’t an isolated experience. I’ve waited in my local Starbucks drive thru line way too long, way too many times, paying upwards of $6 and then the mobile pay device starts out the process by asking for a 20% tip. The entire experience needs to be disrupted and in addition to Mr. Niccol’s many store visits, I’d advise him to spend a lot of time at the white board re-imagining the art of the possible.
I’m a Starbucks regular and also a fan, to a point. They’re a long way away from the local neighborhood coffee shop where I want to go hang out for a morning over the paper (aging myself right there). In my mind, a great local coffee shop has a basic lineup of coffee drinks that are made well, a great ambiance, lots of choices for different beans and blends, and fast Wi-Fi. It almost feels like Starbucks needs to take a few steps back, reigning in their assortments and beefing up their in-store experience if they really want to be a “Third Place.”
Going back to their roots means some editing and focusing. Deciding what they are no longer going to do in order to simplify life for the baristas and shorten wait times. Can they regionalize or localize that? I’ve read that there are a couple zillion drink combo’s that can be ordered. And the customers that have been ordering all these super custom drinks are going to be OK with that? Efficiency has to be part of the solution here, so editing and focus have to happen, but the details are executing that will be tricky. I hope Niccol’s immersion in the stores lasts awhile. And I hope the baristas are able to provide some store-based perspective on top of all the data I’m sure they are sitting on.
Starbucks is wise to return to its passion for coffee and connection. Baristas aren’t robots; they’re coffee connoisseurs who build relationships and transform customers into loyal brand ambassadors. The pendulum swung too far toward a mechanistic model and now it’s swinging toward more humanity.
Starbucks have a highly diminished value proposition; the price of a drink now far outweighs the convenience of their locations & the (now) grossly overstated experience. How do you fix the experience without spending investing capital? How do you invest capital when the pricing needs to be wound back?
Other commentary has mentioned the challenge of execution, which inherently comes back to quality communication & a culture of deep purpose that is lived with conviction by everyone. Hard to be compelling when the mandate of a fly in / fly out CEO is getting everyone back to the office full time!