Starbucks Is Returning to Its Roots in Premium Coffee Under Turnaround CEO
The days of saving a few pennies on your daily coffee runs are over. Starbucks, the world’s largest coffee chain, is pivoting away from promotional discounts under the leadership of Brian Niccol, the company’s new CEO tasked with returning Starbucks back to its premium roots. Despite having turned to a bevy of discounts through its mobile app in recent months to draw in customers, Starbucks is backing away from its short-lived promotional strategy and will instead refocus on high-quality coffee and improving the in-cafe experience. The strategy was first reported by The Wall Street Journal and confirmed by Starbucks in a statement to Observer.
The approach is markedly different to the company’s actions earlier this year, which saw Starbucks promote a range of discounts including “buy one, get one free” and half-off deals. In the summer, the coffee chain even began offering meal deals for drinks and breakfast food that started at $5. Laxman Narasimhan, the former CEO of Starbucks who was replaced by Niccol last month, told investors in June that such offers were partially responsible for bringing back “lapsed” Starbucks customers.
But they haven’t had a concrete impact on Starbuck’s financial results. The coffee chain has recently struggled with activist investors and lagging sales in the U.S. and China. During its most recent fiscal quarter, it saw its net income fall 7.6 percent year-over-year to $1.05 billion.
In an effort to restore Starbucks’ reputation and sales, the company tapped Niccol—a former Chipotle CEO with a history of helming company comebacks—to enact a turnaround strategy. The executive has already made his mark at Starbucks, overseeing several leadership changes including the departure of the company’s global chief merchant and product officer, according to the Wall Street Journal, which reported Niccol describing his strategy as “making a couple powerful choices, and then we’ve got to execute like crazy” during an internal company forum last month.
Many of these changes will center around bringing Starbucks back to its original vision as a cafe established with a love of “high-quality coffee,” said Niccol in a September letter where he stated that Starbucks has “drifted from our core.” The company must double down on supporting baristas by providing them the tools and time to craft premium drinks, he said. Niccol also noted that Starbucks also is focused on “elevating the in-store experience” and making its locations “inviting places to linger” through comfortable seating, thoughtful design and a distinction between “to go” and “for here” service.
For decades, Starbucks avoided entering the realm of discounts and promotions. Howard Schultz, the coffee chain’s founder who most recently served as its CEO between 2008 and 2017, told analysts in 2016 that he didn’t want to rely on promotions and subsequently “discount or dilute the integrity of the brand.”
Schultz has been critical of Starbuck’s trajectory in recent years, especially regarding its reliance on its mobile app. During a June podcast, he described the tool as the company’s “biggest Achilles heel” despite the convenience it provides for customers. “We’re not a beverage company serving coffee, we are a coffee company serving people,” he said. “We need to be much more coffee forward—we cannot allow the mobile app to be a runaway train that is going to constantly dilute the integrity of the experience for Starbucks.”
Niccol, who has already earned the praise of Schultz, appears to agree with the founder’s sentiments. “We’re refocusing on what has always set Starbucks apart—a welcoming coffeehouse where people gather, and where we serve the finest coffee, handcrafted by our skilled barista,” he said in last month’s letter. “This is our enduring identity.”