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Starbucks’ new chief executive has pledged to restore its status as a “community coffee house”, signalling shifts from his predecessor’s strategy as he gave the first details of his plans for reviving the café chain’s faltering sales.
In an open letter on his second day in the job, Brian Niccol set out the priorities for his first 100 days — and diagnosed some of the problems that led to his predecessor Laxman Narasimhan being abruptly ousted last month.
Some stores, especially in the US, lack the “magic” that draws customers into Starbucks, the former Chipotle Mexican Grill CEO said in a letter addressed to employees, customers and stakeholders.
“It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic,” he wrote, adding: “There’s a shared sense that we have drifted from our core.”
Starbucks shares have risen by about a fifth since Niccol’s appointment on hopes he will be able to repeat what was a wildly successful turnaround at the US burrito chain he led from 2018.
Niccol said one of his four initial areas of focus in the US would be “re-establishing Starbucks as the community coffee house”, with stores that are “inviting places to linger, with comfortable seating, thoughtful design and a clear distinction between ‘to-go’ and ‘for-here’ service”, he wrote.
Starbucks has become increasingly reliant on takeaway orders placed on mobile apps and picked up at counters or drive-through windows. The morning rush has led to long queues and complaints that the company’s appeal as a “third place” — the cosy hang-out separate from home and work championed by longtime chief Howard Schultz — had faded.
Narasimhan’s strategy included changes to stores to make them more efficient and new outlets designed solely for drive-through or delivery-only service. The company has been renovating hundreds of stores this year and Narasimhan had already said it was expanding seating options to help “enhance the café experience”.
Starbucks has reported global same-store sales declines for the past two quarters. Before Niccol’s appointment its shares had lagged the broader US stock market for several years.
Niccol said he would spend most of his time initially on the US, which is by far the company’s biggest market. His other three areas of focus would be service in the high-volume morning period, the experience of baristas and “telling our story”, he said, adding: “We won’t let others define who we are.”
Outside the US, sales have been sliding in China, a critical engine of growth for the company, while Starbucks has suffered from boycotts in the Middle East and elsewhere over the war in Gaza.
“In China, we need to understand the potential path to capture growth and capitalise on our strengths in this dynamic market. Internationally, we see enormous potential for growth, especially in regions like the Middle East, where we’ll work to dispel misconceptions about our brand, and in Asia Pacific, Europe and Latin America, where the love for Starbucks is strong,” Niccol wrote.
Shares of Starbucks rose 1.2 per cent to close at $93.34 on Tuesday.
