Starbucks’ recently appointed chief executive has unveiled a series of initiatives aimed at revitalizing customer engagement amid challenges such as unionization efforts, decreasing visitor numbers, and frequent changes in leadership. Brian Niccol, who assumed the role of CEO in September, expressed concern over the company’s financial performance, noting a 6% decline in sales at U.S. stores that have been open for at least a year, primarily due to a 10% drop in transactions.
Niccol stressed the importance of returning to the essential attributes of Starbucks as a coffee house. He stated, “It is clear we need to fundamentally change our strategy to win back customers and return to growth. Back to Starbucks is that fundamental change,” and emphasized the need to focus on offering a welcoming environment with high-quality, handcrafted coffee.
The company plans to transform its cafes to reflect a “coffee house” style, incorporating personal touches like ceramic mugs for dine-in customers. Additionally, cafe designs are under review, with plans to reintroduce comfortable seating and amenities to encourage customers to stay and work.
Starbucks also announced that it will remove the extra charges for non-dairy milk options. Customers at company-operated stores who choose alternatives like soy, oat, or coconut milk will benefit from a price reduction of over 10% beginning November 7.
An additional initiative involves reintroducing the condiment bar to streamline service, following feedback from baristas. Customers will receive their brewed coffee more efficiently and can customize it at the condiment bar. The company also plans to bring back the use of Sharpies, evoking nostalgia for the time when baristas wrote customers’ names on cups as a gesture of community.
Part of Niccol’s strategic focus includes simplifying Starbucks’ “overly complex menu” and adjusting its pricing structure. Alex Fasciano, an equity analyst at CFRA Research, indicated that while the simplified menu and updated pricing may improve customer experience, these changes could present short-term pricing challenges. Fasciano highlighted that redesigning in-store features could necessitate considerable investments in the 2025 fiscal year.
While he does not anticipate a significant immediate impact, Fasciano acknowledges the potential for long-term improvements in customer satisfaction, which might eventually affect sales and margins positively. In contrast, Morgan Stanley analyst Brian Harbour expressed optimism about the changes, likening the new vision to the Starbucks of two decades ago. However, he acknowledged the complexity of implementing changes across the extensive store network, suggesting a period of adjustment is anticipated before observing tangible results.