Starbucks' turnaround includes shorter wait times, simpler menu: NPR

Starbucks has hired a new CEO to help offset declining sales.

Matt Rourke/AP

Hide caption

Toggle label

Matt Rourke/AP

You know things are tough at Starbucks when the company preemptively reveals bad news, which it did last week to stay ahead of its earnings deadline on Wednesday.

Sales in the U.S. have been declining for months, falling 6% in the most recent quarter from a year earlier, making it the worst quarter since pandemic shutdowns. The number of purchases fell by 10%.

The chain's new CEO ordered big changes Wednesday: drinks ready in four minutes or less, no upcharges for non-dairy milk, a simpler menu, a store redesign and the return of the condiment bar where people used to pour their own milk and sweeteners before the pandemic.

“It's clear that we need to fundamentally change our strategy to win back customers,” CEO Brian Niccol told investors in his first address about two months after taking office. “We’re taking back third place to make our cafes feel like the welcoming coffeehouse our customers remember.”

Much of Niccol's focus appears to be on separating mobile ordering, which offers less customization, from the in-store experience, where he wants to add more comfortable furniture and ceramic mugs to encourage people to stay.

Too fancy to be simple, too simple to be fancy

Two women with paper cups chatted at a table near an airy new Starbucks in the upscale Washington suburb of Bethesda, Maryland. Upon closer inspection, it turned out that the cups came from another coffee shop a block away.

“We’re just here for the sun,” said one of the women, Tamar King. “This is a park.”

In fact, this Starbucks is rife with competitors: This busy downtown stretch has 11 coffee spots within a two-block radius. These include the usual suspects Dunkin' and Panera, trendy options Tatte Bakery and Ceremony Coffee Roasters, and even another Starbucks. This kind of competition didn't previously pose a threat to the coffee giant, but it has grown significantly.

In a video address, Starbucks' new CEO Brian Niccol says the chain's strategy needs a “fundamental change.”

NPR screenshot/video address from Starbucks CEO

Hide caption

Toggle label

NPR screenshot/video address from Starbucks CEO

There is also another battlefront. The company that got America excited about coffee is now competing not only with other coffee shops, but also with all the fancy coffee machines people have at home or at work.

This leaves Starbucks stuck in the middle: too fancy to be simple, too simple to be fancy.

“I went (to Starbucks) every day for years,” King said. What has changed? “The office I work in has a fantastic coffee machine. Fantastic.”

On Wednesday, Starbucks announced that it is losing not only casual customers but also once-loyal visitors.

“We loved it so much for years,” said Lisa Janofsky, who stopped by the Bethesda Starbucks with her husband, Jerry, to redeem his rewards card: a free Venti Skim Latte as a gift for his birthday.

They went to Starbucks regularly. But now they are gravitating towards gourmet coffee shops if they want the “community feel” and great coffee taste. They estimate that daily lattes are made at home for about $1 per cup.

“We have a nice machine at home that we use,” Jerry Janofsky said. “And my wife is a great barista, she creates designs for me.”

On the wish list: better beans and latte art

Lisa Janofsky says she would visit more often if Starbucks beans tasted less burnt, size options included a short latte with just a shot of espresso and if baristas made latte art.

Niccol said latte art — designs on the milk foam — is something baristas told him they love. But at Starbucks' pace, that's hard to imagine, especially during the morning rush: Mobile orders are piling up, stores are crowded, workers are overwhelmed.

Now Niccol is reassessing staffing levels during peak hours. He hopes to give baristas more time to focus on espresso drinks. One option is a simpler menu and “guardrails” for customization.

“I think sometimes we get confused because we offer so many different customizations — and then the complexity of the customizations that people offer us,” Niccol said. “And I think a lot of it is unnecessary.”

The CEO did not provide details about the food and beverage options offered. However, an internal memo obtained by Bloomberg states that Starbucks will initially eliminate olive oil coffee and toffee nut syrup.

The coffee giant is betting heavily on Niccol in the truest sense of the word. The coffee company lured him from Chipotle, where he is credited with getting a fresh start after a series of foodborne illness outbreaks. At the coffee giant, he could earn one of the biggest paychecks in the industry – more than $100 million – if he manages to turn things around.

Niccol’s challenges are many.

Several shoppers in Bethesda expressed disappointment that Starbucks is still fighting its unionized stores. The chain has lost its footing in China. The company is facing boycotts in the Middle East and Asia for allegedly supporting Israel in its conflict with Gaza. A woman in Maryland says that's why two dozen people she knows in the U.S. have also stopped going to Starbucks.

And by far the biggest complaint?

“It's way too expensive,” said Anjeli Smith, a regular Starbucks coffee worker who was meeting a friend that day for a cold brew with pumpkin cream. “I usually only use my gift cards for birthdays and graduations.”

When approached Wednesday, Niccol said the chain had just begun reviewing its menu and prices. The end of additional fees for non-dairy products will be implemented at Starbucks stores in North America on November 7th.

The new CEO calls his turnaround plan “Back to Starbucks,” harkening back to a time when Starbucks was simpler, cheaper, cozier, cooler — and thriving.