To Howard Schultz, the chaos he observed at a Starbucks in Chicago one recent morning summed up the troubles of the company he long led as chairman and CEO.
Commuters tumbled off trains and into a Starbucks store to pick up the orders they had placed on their cellphones. Drinks weren’t ready when the mobile app said they would be, and customers couldn’t tell which beverage was theirs.
“Everyone shows up, and all of a sudden, we’ve got a mosh pit,” Schultz said during a June episode of the podcast “Acquired.” “That’s not Starbucks.”
Fifty-three years after its founding, the Seattle coffee giant is unhappy with what it’s become — and trying to figure out how to meet customers’ changing needs without losing its coffeehouse roots. To recapture what once made it special — and turn around sagging sales — Starbucks is turning to Brian Niccol, an experienced marketer who previously led Taco Bell and Chipotle.
Niccol took over as Starbucks’ chairman and chief executive on Monday.
With nearly 40,000 stores worldwide, Starbucks feels like it’s on nearly every corner, but analysts say its premium prices turn off many customers who just want a quick jolt of caffeine. At a Manhattan Starbucks, a medium Pumpkin Spice Latte is now almost $8.
Even convenience stores like Wawa now offer great coffee, noted Chris Kayes, a professor of management at George Washington University. Meanwhile, consumers who want a higher-end coffee experience seek out independent cafes or upscale chains like Blue Bottle.
“From a marketing perspective, Starbucks has lost its way,” Kayes said.
Starbucks said that since he was named its incoming CEO on Aug. 13, Niccol has been visiting U.S. stores, listening to baristas and observing the brand’s challenges.
The company said, “We look forward to the fresh ideas that Brian will bring to our business. “
Phil Kafarakis, president and CEO of the International Foodservice Manufacturers Association trade group, said streamlining Starbucks’ menu is key to eliminating the kind of disarray Schultz reported seeing in Chicago. Niccol needs to figure out who Starbucks’ core customers are and what they like to drink, Kafarakis said, and then start trimming the excess.
Because patrons can customize their drinks in many ways, Starbucks baristas are tasked with consistently making around 100,000 different variations, Schultz said in the June podcast. Drinks can be iced, blended, foamed, shaken or flavored. Starbucks lists 11 different kinds of creamers and milk on its U.S. website.
“They have created innovation. They have been very progressive. But the problem is, it’s gotten complicated,” Kafarakis said. “Some poor human being has to make all those.”
New drinks can also muddy Starbucks’ messaging. The company announced an environmental milestone six years ago: it would eliminate single-use plastic straws globally by 2020. But this summer, single-use plastic straws were back, tucked into Starbucks’ new cold boba drinks.
Starbucks said the new straws are made of compostable plastic. However, the Ocean Conservancy, which once praised Starbucks as a “shining example” for eliminating single-use straws, said many composting systems aren’t equipped to manage compostable plastics. The conservancy said companies should move away from disposables altogether.
Even as the beverages have gotten more complex — down to the number of flavor pumps each customer prefers or the amount of caramel drizzle they want on their Frappuccino — baristas have come under pressure to make them more quickly. Almost 75% of Starbucks’ orders now come through the company’s mobile app, drive-thru windows or delivery partners like DoorDash. Fewer customers linger in stores.
As a result, Starbucks needs to catch up with some rivals regarding service delivery times. In a recent U.S. survey, the restaurant consulting firm Technomic found that 77% of customers at Caribou Coffee reported getting their order in five minutes or less, compared to 62% at Starbucks.
At Chipotle, Niccol streamlined store operations to shorten wait times, beefed up marketing and lured customers back with limited-time menu items. Remaking Starbucks could be much more difficult. It has many more stores and varying challenges worldwide, including low-cost competitors in China and ongoing boycotts in the Middle East.
But Starbucks’ board thinks Niccol has the expertise to chart a new course. Under his generous contract, Niccol could make well more than $100 million in his first year at Starbucks. He will continue living in California and commuting to Starbucks’ Seattle headquarters using a corporate jet. “He’s the Ryan Reynolds of CEOs,” Kayes said. “They’re paying a lot upfront but expecting a return at the box office.”
