4 Ways New CEO Brian Niccol is Going to Change Starbucks
Starbucks, the international coffee chain, has suffered its worst decline in in-store sales since the global Covid-19 pandemic shutdown.
The company said comparable sales fell 7% for its fourth July to September quarter, including a 6% slump at its US stores, Starbucks’ biggest market.
Sales in China declined 14% in the same period as the coffee store faced intensified competition and a weak economy that impacted consumer spending.
Global sales on the same basis dropped 2% for its fiscal full year, according to preliminary results unexpectedly published on Tuesday.
The decline in comparable same-store sales represents the sharpest fall since the fourth quarter of 2020, when pandemic lockdowns sent same-store sales down 9%.
Global customers have turned their backs on Starbucks’ pricey drinks as they rein in their spending.
In Switzerland, a tall latte alone can cost over US$7, while in the UK a caramel frappuccino costs over US$6.
Overall revenues in the fourth quarter declined 3 per cent to $9.1 billion.
Rachel Ruggeri, Starbucks chief financial officer, said: “Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top line and bottom line.”
The coffee shop chain has pledged to improve its customer experience under Brian Niccol, 50, who was poached from Chipotle Mexican Grill, the restaurant chain, to take over as chief executive in September.
Starbucks' new CEO said the latest results made it “clear that we need to fundamentally change our strategy so we can get back to growth”.
Niccol replaced Laxman Narasimhan, 57, who stepped down after just over a year in the role amid declining sales.
The former Chipotle Mexican Grill CEO was offered one of the biggest executive deals in corporate history to switch jobs, worth up to $113m, and four times larger than that of his predecessor.
Niccol has already faced criticism after it was revealed that Starbucks had told him he could commute by private jet from his home in Newport Beach, California, to its headquarters in Seattle, instead of relocating.
Starbucks also said that “given the company's CEO transition coupled with the current state of the business,” it was suspending its guidance for the 2025 fiscal year.
"This will allow ample opportunity to complete an assessment of the business and solidify key strategies, while stabilising and positioning the business for long-term growth," a press release read.
The coffee shop chain has pledged to “fundamentally change” its strategy after such a disappointing set of preliminary results.
X ways new Starbucks CEO Brian Niccol is going to change things
#1 - Improve customer experience
Niccol says he wants to simplify Starbucks’ overly complex menu, fix its pricing architecture and ensure “every customer feels Starbucks is worth it every single time they visit” - especially during the morning peak.
#2 - Offer career growth
Rather than being seen as a menial job that people do while waiting for something else, Niccol says that baristas need to be given “meaningful career growth and industry-leading benefits” to make Starbucks the best job in retail.
#3 - Improve mobile technology
The company is planning to change its mobile order and pay system so that “it doesn’t overwhelm the café experience”, Niccol says.
#4 - Cut back on promo deals
Under Niccol, Starbucks is reportedly reversing its push to offer lots of promos on beverages and snacks to members of its rewards program through its smartphone app. Those promos have led to backups at Starbucks locations and long wait times for customers.
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