$Starbucks(SBUX)$ “I will have a pumpkin spice latter, double pump of sugar, no foam please”
“Sir, this is a Wendy’s. Starbucks is next door”
Starbucks could be back. This week, I am looking at why the company had 5 consecutive quarters of declining profits, and how it’s trying to get back to the old Starbucks of before.
It’s no secret that Starbucks has been struggling. I still remember I used to chill at a Starbucks to talk with friends and colleagues, sipping on hot latte.
But that’s not the Starbucks that you know now.
In recent years, Starbucks shifted to having less seats and made things minimalistic. They don’t want you to sit down and enjoy because space and rent are expensive.
Instead, they want you to buy a coffee to go and leave.
It doesn’t help that it also rolled out an online ordering platform, where customers could just order and have it delivered and collected now.
There was no more warmth in customer interaction - just cold hard button-pressing and arriving to collect it.
That didn’t go well with its customers.
From the 1Q 2024 to 4Q 2024,
Revenue declined at an average rate of 1.5%
Profits declined even further by an average of close to 20%.
In August 2024, Starbucks appointed a new CEO, Brian Niccol. He’s famous for leading the turnaround in Chipotle.
Since then, he has pivoted Starbucks back to its old ways.
Reinvested in renovation and decoration that is ‘warm’ and ‘inviting’
Rent out more seats for people to sit, chat and enjoy a nice day
Laid off 1,100 redundant jobs to cut costs
Brian Niccol recently met with 14,000 store managers to talk about Starbucks future.
And that has received positive responses to them
Key to this was to allow store managers to tell leadership how many workers they will need.
Furthermore, he has also created a new assistant manager position to help the store managers manage better.
Because of overwork, Starbucks employees have unionised and Niccol definitely wants to keep relations with them friendly.
Most importantly, it is clear what Starbucks wants. To re-create the old Starbucks culture and environment, where customers come and have a good chat with the baristas, sip on some coffee, and chat with their family and friends.
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