With Brian Niccol assuming role as CEO of Starbucks on Sept 9, his work is cut out. Strike balance between the digital and in-person experiences, while keeping Howard Schultz at bay.
Sep 10·edited Sep 10Liked by Amrita Roy, Uttam Dey
Starbucks just made their investors look like StarSchmucks.
I think the are a number of things to consider when it comes to the Starbucks sales slump, and you did a fine job of considering them.
Marketing is definitely *not* an issue -- but those in the advertising world will always tell you it is. 😉 👉
I would only like to add that I think the lingering effects of the COVID-19 scare are effecting all places like Starbucks.
For nearly a year, longer in some places, people were not allowed to have their "Third Place" hangout. As a result, they learned to live without it.
Similarly, as costs (for everything save durable goods) skyrocket, novelty sugary coffee drinks will become rather low priority.
Americans for more than half a century have enjoyed some of the lowest food prices in the world. That is, when considering the cost of food, as a percentage of income. That's changing very quickly. People tend to prioritize "roof over head, food in my stomach."
Also consider, Starbucks being overpriced was actually a part of the brand. After all, you can't sell coffee at Dunkin' Dounuts prices, and claim to be upscale. It just doesn't pan out. Starbucks is what it is -- because it is above a price point.
Now it seems that price point is too high for its base customer.
CEOs can promise the world, but they can't put money in their customers pockets and remain profitable.
My prediction is that places like Starbucks will continue to do poorly, until the economy rebounds, which is likely not to happen for a *very* long time.
I guess that seems to be the general consensus everywhere about how the Green Aprons are treated. What would change your mind though if you had to buy Starbucks coffee again?
No, not unless the employees were provided with excellent health insurance, good wages, two weeks of paid sick leave, 2 - 3 weeks of paid vacation, and generous maternity benefits. They have the money to do it, but they want to keep every penny for themselves.
Exactly, its old vibe has been completely wiped out after 2020. Pretty tough challenge down the road to turn it around now to strike a balance between growing its digital sales and building in-store experience to keep charging premium price and bringing customers back.
If I want decaf I have to pay twice as much for an americano
Challenges are cheap with the stars. When they first started the average challenge had decent ROI at 100-150 stars - now it’s avg 40-80 which doesn’t even get a cookie. And using stars doubled at the same time.
One of my favorite things about reading your articles Amrita is i easily become absorbed in the topic, and how you capture my attention. I’ve noticed the last two years the Human Bean and Dutch brothers have moved into town in several locations. One of the Dutch brothers located next to a Starbucks. Both of them have drive-thrus and inside seating. Dutch Brothers always out does Starbucks from my observations. I wasn’t aware of Starbucks turmoil.
Thanks Charlotte for your kind words. I have never been to Human Bean or to Dutch Bros, but from what I am hearing, don't think they are in Vancouver. Until Starbucks can fix its "vibes" with re-kindling its store experience, while doing actual food innovation that involves coffee and not some fancy cold beverage that just looks good on Instagram, it will continue to lose market share to these players and to independent local coffeeshops.
I went to Starbucks last week in Dubai and frankly, wasn't impressed by their coffee. But that's my personal take we shouldn't generalize. What do you guys think of the new CEO traveling to work by plane three times a week from another state? Too arrogant or too bright?
Hey Denis, as someone who would go to Starbucks at least a couple times a week before 2020, it's been more than a year that I have stopped going. I think they have sacrificed their core coffee innovation over colder, sugary beverages which are not my thing. As for the CEO, I actually didn't know he was travelling three times a week to HQ. I think investors in general are a little too optimistic about Brian Niccol, sure he has done a phenomenal job at Chipotle and Taco Bell. But replicating that success in a place that is way larger and more internationally spread out than those chains may require a slightly different playbook. Let's see how the progress stacks up in the coming quarters.
When I lived in Shanghai I was regular at Starbucks. It was my tie to the States. When Starbucks came to my city it was like 2013, and wow, we’re on the map now that we have a Starbucks in our city. Now in my second go around I’m China, I get coffee from Chinese local brands like Luckin. Not the best but I don’t need to pay 2.5 times the price other. When I want something a bit more refined there are heaps of local cafes even in a tier 3 Chinese city. Starbucks is still around but they’re concentrated in high traffic malls which is a good for maybe their image and positioning but I never want to go in on a weekend because it’s usually packed. And then during the weekday there are so many more options closer to my office. So the end result is the Starbucks has become almost irrelevant. If they left, it would be a collective shrug which is crazy.
Thanks for sharing your story Kinsen. I had a similar connection to Starbucks when I was working in Istanbul in the early 2010's and even after I came back to the US, I used to go at least a couple of times a week, until I stopped completely after Covid. In North America and international markets, I feel like independent and local chains are catching up quickly and Starbucks is having a real hard time to keep its premium positioning given the degradation in its service with the whole mess of digital orders vs. in-store experience, along with poor menu innovation outside of core coffee. Like you said, it is hard to justify the price when you can get similar versions for cheaper. It will be interesting to see the route that it takes next.
My personal opinion: they have sacrificed the quality of their basic drip coffee over colder, sugary beverages that have alienated their customer base. As someone who would go to Starbucks at least a couple/few times a week, I think it's been over a year since I have since visited.
My kid worked at Dutch bros. He found it very cultish. Starbucks was once very cultish. Our ceos are all idiots. They can't see that AI will not longer value the cognitive. The easiest people to win over with emotions are the somatic whose star is rising. But since no one knows what that even is or how those people move through the world it will target the people it always has and they are the ones who will be losing their jobs. I have no t been to a Starbucks in 2 years. Maybe 4. They suck. They have always sucked their coffee is over roasted. But I used to go in for a warm or cool place when travelling to sit and relax. Now it is the opposite of relaxing. It is sterile and their food is always stale, unappetizing and unsatiating. They are going under. Sell your stock.
I havent been to Starbucks for a while as well. But I did go and write this post while sitting in a Starbucks - found a table pretty close to the serving station. They messed up a few people's orders from the point of view that they were slow to deliver, especially when these customers had ordered ahead on the app.
I agree that that novelty feeling of the Starbucks experience is no more. Its a lot more commoditized. I havent been to BROS store yet. If you dont mind, im just curious - what aspects of BROS experience did your kid find as cultish - in a good way or a bad way?
Any establishment that makes their employees act more enthusiastic than the typical college show choir, is a cult by my standards. Sugary sweet employee enthusiasm that you are there to buy a coffee is like a trip to bizzarro world.
Some people love this. They think over the top fake is better than actual connection. It's the call sign for all those who emotionally regulates on their own children and are so stripped of body wisdom they have lost what it means to have genuine human interaction.
Speaking for me personally the problem with Starbucks is they sell mediocre coffee at a premium price. I’m a bit of a coffee snob in the sense I’ll roast my own beans in a drum roaster so I may not be typical, but in the land of coffee chains Starbucks is both expensive, and inferior.
Starbucks just made their investors look like StarSchmucks.
I think the are a number of things to consider when it comes to the Starbucks sales slump, and you did a fine job of considering them.
Marketing is definitely *not* an issue -- but those in the advertising world will always tell you it is. 😉 👉
I would only like to add that I think the lingering effects of the COVID-19 scare are effecting all places like Starbucks.
For nearly a year, longer in some places, people were not allowed to have their "Third Place" hangout. As a result, they learned to live without it.
Similarly, as costs (for everything save durable goods) skyrocket, novelty sugary coffee drinks will become rather low priority.
Americans for more than half a century have enjoyed some of the lowest food prices in the world. That is, when considering the cost of food, as a percentage of income. That's changing very quickly. People tend to prioritize "roof over head, food in my stomach."
Also consider, Starbucks being overpriced was actually a part of the brand. After all, you can't sell coffee at Dunkin' Dounuts prices, and claim to be upscale. It just doesn't pan out. Starbucks is what it is -- because it is above a price point.
Now it seems that price point is too high for its base customer.
CEOs can promise the world, but they can't put money in their customers pockets and remain profitable.
My prediction is that places like Starbucks will continue to do poorly, until the economy rebounds, which is likely not to happen for a *very* long time.
Thanks for sharing your thoughts, really interesting point on how Covid may have permanently changed peoples' preferences for a "third place"hangout.
Interesting observations - thanks for sharing.
Yes, a price points to avoid currently.
This is an extraordinarily comprehensive analysis. And very interesting. The work you do always exceeds expectations. Thank you so much.
Thank you Diana!
Starbucks treats their employees terribly, while they rake in billions. I do not buy their products and I never will.
I guess that seems to be the general consensus everywhere about how the Green Aprons are treated. What would change your mind though if you had to buy Starbucks coffee again?
No, not unless the employees were provided with excellent health insurance, good wages, two weeks of paid sick leave, 2 - 3 weeks of paid vacation, and generous maternity benefits. They have the money to do it, but they want to keep every penny for themselves.
Starbucks going under and the location being bought by local people with souls.
Good issue.
I agree.
I hadn’t been to a Starbucks for a while, and dropped by one in Vancouver during a recent business trip.
I couldn’t recognize it anymore.
The experience was different (and not necessarily better), it had lost its way in my opinion. I wasn’t sure what it stood for anymore.
Exactly, its old vibe has been completely wiped out after 2020. Pretty tough challenge down the road to turn it around now to strike a balance between growing its digital sales and building in-store experience to keep charging premium price and bringing customers back.
Ousted the seating
Jacked prices
Coffee is cold half the time
No decaf ready, must be pourover which goes cold
If I want decaf I have to pay twice as much for an americano
Challenges are cheap with the stars. When they first started the average challenge had decent ROI at 100-150 stars - now it’s avg 40-80 which doesn’t even get a cookie. And using stars doubled at the same time.
And the rainbows!!! They’re so woke now.
One of my favorite things about reading your articles Amrita is i easily become absorbed in the topic, and how you capture my attention. I’ve noticed the last two years the Human Bean and Dutch brothers have moved into town in several locations. One of the Dutch brothers located next to a Starbucks. Both of them have drive-thrus and inside seating. Dutch Brothers always out does Starbucks from my observations. I wasn’t aware of Starbucks turmoil.
Thanks Charlotte for your kind words. I have never been to Human Bean or to Dutch Bros, but from what I am hearing, don't think they are in Vancouver. Until Starbucks can fix its "vibes" with re-kindling its store experience, while doing actual food innovation that involves coffee and not some fancy cold beverage that just looks good on Instagram, it will continue to lose market share to these players and to independent local coffeeshops.
I went to Starbucks last week in Dubai and frankly, wasn't impressed by their coffee. But that's my personal take we shouldn't generalize. What do you guys think of the new CEO traveling to work by plane three times a week from another state? Too arrogant or too bright?
Hey Denis, as someone who would go to Starbucks at least a couple times a week before 2020, it's been more than a year that I have stopped going. I think they have sacrificed their core coffee innovation over colder, sugary beverages which are not my thing. As for the CEO, I actually didn't know he was travelling three times a week to HQ. I think investors in general are a little too optimistic about Brian Niccol, sure he has done a phenomenal job at Chipotle and Taco Bell. But replicating that success in a place that is way larger and more internationally spread out than those chains may require a slightly different playbook. Let's see how the progress stacks up in the coming quarters.
Thanks, Amrita. Let's wait and see.
When I lived in Shanghai I was regular at Starbucks. It was my tie to the States. When Starbucks came to my city it was like 2013, and wow, we’re on the map now that we have a Starbucks in our city. Now in my second go around I’m China, I get coffee from Chinese local brands like Luckin. Not the best but I don’t need to pay 2.5 times the price other. When I want something a bit more refined there are heaps of local cafes even in a tier 3 Chinese city. Starbucks is still around but they’re concentrated in high traffic malls which is a good for maybe their image and positioning but I never want to go in on a weekend because it’s usually packed. And then during the weekday there are so many more options closer to my office. So the end result is the Starbucks has become almost irrelevant. If they left, it would be a collective shrug which is crazy.
Thanks for sharing your story Kinsen. I had a similar connection to Starbucks when I was working in Istanbul in the early 2010's and even after I came back to the US, I used to go at least a couple of times a week, until I stopped completely after Covid. In North America and international markets, I feel like independent and local chains are catching up quickly and Starbucks is having a real hard time to keep its premium positioning given the degradation in its service with the whole mess of digital orders vs. in-store experience, along with poor menu innovation outside of core coffee. Like you said, it is hard to justify the price when you can get similar versions for cheaper. It will be interesting to see the route that it takes next.
Very good insight. What about the quality of its basic coffee?
My personal opinion: they have sacrificed the quality of their basic drip coffee over colder, sugary beverages that have alienated their customer base. As someone who would go to Starbucks at least a couple/few times a week, I think it's been over a year since I have since visited.
My kid worked at Dutch bros. He found it very cultish. Starbucks was once very cultish. Our ceos are all idiots. They can't see that AI will not longer value the cognitive. The easiest people to win over with emotions are the somatic whose star is rising. But since no one knows what that even is or how those people move through the world it will target the people it always has and they are the ones who will be losing their jobs. I have no t been to a Starbucks in 2 years. Maybe 4. They suck. They have always sucked their coffee is over roasted. But I used to go in for a warm or cool place when travelling to sit and relax. Now it is the opposite of relaxing. It is sterile and their food is always stale, unappetizing and unsatiating. They are going under. Sell your stock.
I havent been to Starbucks for a while as well. But I did go and write this post while sitting in a Starbucks - found a table pretty close to the serving station. They messed up a few people's orders from the point of view that they were slow to deliver, especially when these customers had ordered ahead on the app.
I agree that that novelty feeling of the Starbucks experience is no more. Its a lot more commoditized. I havent been to BROS store yet. If you dont mind, im just curious - what aspects of BROS experience did your kid find as cultish - in a good way or a bad way?
Any establishment that makes their employees act more enthusiastic than the typical college show choir, is a cult by my standards. Sugary sweet employee enthusiasm that you are there to buy a coffee is like a trip to bizzarro world.
Some people love this. They think over the top fake is better than actual connection. It's the call sign for all those who emotionally regulates on their own children and are so stripped of body wisdom they have lost what it means to have genuine human interaction.
Me, 5 years 😔.
Speaking for me personally the problem with Starbucks is they sell mediocre coffee at a premium price. I’m a bit of a coffee snob in the sense I’ll roast my own beans in a drum roaster so I may not be typical, but in the land of coffee chains Starbucks is both expensive, and inferior.
And Bill Gates Beyond Meat on the menu is a huge fu@king turn off….