Starbucks Plans Revival Strategy as Customer Visits Decline
Facing declining customer visits, Starbucks is set to embark on a restorative journey to reclaim its identity and enhance the overall experience.
During the company’s fourth-quarter and full-year earnings call Wednesday (Oct. 30), CEO Brian Niccol outlined a plan to refocus the company on its core identity. Dubbed “Back to Starbucks,” the initiative seeks to elevate the customer experience by prioritizing coffee quality and ensuring baristas have the support they need to deliver exceptional service.
Niccol stressed the importance of reestablishing Starbucks as a community gathering place and simplifying the menu to attract more customers. As the company seeks to revitalize its U.S. operations, Niccol expressed confidence in the brand’s enduring strength and its ability to return to growth.
“I believe that our problems are very fixable and that we have significant strengths to build on,” Niccol said. “I’ve spent my career understanding, stewarding and building brands, and it’s clear the Starbucks brand is strong and enduring.
“When we stay true to our core identity and focus on delivering a great partner and customer experience, our customers come — and importantly, they come back.”
By the Numbers
Niccol’s optimistic remarks, however, contrast sharply to the company’s fourth-quarter performance, where global comparable store sales fell 7% and consolidated net revenue decreased 3%, to $9.1 billion.
Starbucks’ struggles were particularly evident in North America, with U.S. comparable store sales declining 6%, driven by a steep 10% drop in transactions. Despite a 4% increase in the average ticket, it wasn’t enough to offset the downturn in customer visits.
Despite efforts to expand product offerings and increase in-app promotions, these initiatives failed to drive the desired changes in customer behavior across both Starbucks Rewards members and non-members. This stagnation was mirrored in China, where comparable store sales dropped 14%, impacted by intense competition and a challenging economic environment that dampened consumer spending.
For the full fiscal year, comparable store sales declined 2%, while consolidated net revenue increased slightly to $36.2 billion. Due to the ongoing CEO transition and the current business climate, Starbucks suspended its guidance for fiscal year 2025.
“Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top line and bottom line,” Chief Financial Officer Rachel Ruggeri stated.
“While our efficiency efforts continued to produce according to plan, they were not enough to outpace the impact of the decline in traffic. We are developing a plan to turn around our business, but it will take time. We want to amplify our confidence in the business and provide some certainty as we drive our turnaround.”
Niccol added: “Our fourth-quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth, and that’s exactly what we are doing with our ‘Back to Starbucks’ plan.”
Changes in Consumer Spending
As economic pressures mount alongside Starbucks’ decline in consumer traffic, the PYMNTS Intelligence series, “New Reality Check: The Paycheck-to-Paycheck Report,” the “How Consumer Perception of Inflation Forces Many to Trade Down” edition reveals 98% of individuals living paycheck to paycheck and struggling to pay their bills are cutting back on dining out. In contrast, 95% of those living paycheck to paycheck but managing their bills reported making similar reductions.
To address these challenges and improve customer engagement, Niccol emphasized the need for staffing improvements, streamlined processes, and a commitment to high-quality service, particularly during peak hours.
Back to Its Roots
Additionally, he plans to reposition Starbucks as a community coffeehouse, revisiting store amenities to create a welcoming environment. Marketing efforts will transition from focusing solely on Starbucks Rewards customers to a broader audience, simplifying the menu and enhancing perceived value.
“No one matches our expertise,” Niccol said. “Our deep engagement with coffee farmers, our skilled roasters, the premium equipment we use in our coffeehouses, and the skill of our baristas are all unmatched.
“We need to reestablish ourselves as the community coffeehouse. Starbucks has always been a place where people come together. If you stay true to your core identity, take care of customers and your team, simplify the business, deliver consistently high-quality products and experiences, and tell your story effectively, you will be successful.”
To spark growth, Niccol told analysts he has an overarching immediate mission: To complete all in-store orders in less than four minutes.
“Fifty percent of our transactions are already happening in less than four minutes,” he explained. “We know it’s very doable, we just need to do it in all our stores for every transaction. We have work to do to achieve this consistently. Getting the core café experience right will drive everything we do and everything we make.”
Other key initiatives, Niccol said, include reducing upcharges for non-dairy milks and streamlining the supply chain for efficiency. Staffing will be optimized to ensure each transaction is a positive experience.
“We’ll take a hard look at the staffing to ensure we’re setting the teams up for success all day long,” Niccol explained. “I want to make sure the teams are staffed to win every transaction so people can walk away saying they had a great experience. We’re going to test and learn our way through this.”
Looking ahead, Niccol is focusing on the U.S. market while exploring growth opportunities internationally, particularly in China. He believes that by returning to the core values of quality and community, Starbucks can rekindle customer loyalty and drive growth.
“We have to reintroduce Starbucks to the world,” he added. “We’re fundamentally changing our marketing. We’ve been focusing on Starbucks Rewards customers rather than talking to all our customers. We’re prioritizing our brand, highlighting the handcrafted products customers expect, and showcasing the coffee innovation that sets Starbucks apart.”
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