In a bid to revitalize its brand and boost sales, Starbucks is undertaking a comprehensive turnaround strategy under the leadership of CEO Brian Niccol. This initiative not only focuses on attracting back customers but also aims to reassure investors and engage store managers. Key to this strategy are promises to enhance the in-store experience by adding more seating and fostering internal promotions, creating a culture of growth and opportunity within the company.
During the recent Leadership Experience event held in Las Vegas, which drew over 14,000 store leaders, Starbucks showcased its commitment to bringing the essence of the brand back. A highlight was the introduction of 1971 Roast, a new coffee that harks back to the year the first Starbucks store opened at Pike Place in Seattle. The event also featured participants from the inaugural Global Barista Championships, who celebrated the brand's heritage by referring to Starbucks while preparing drinks for judges. The wifi password adopted for the event, “backtostarbucks!”, symbolized the company's focus on rekindling its connection with customers.
Niccol has laid out a multi-faceted strategy aimed at rejuvenating Starbucks. This involves a thorough re-evaluation of the company's marketing efforts, enhancing staffing levels in cafes, addressing mobile app issues, and creating a more inviting atmosphere in stores. Earlier this year, the company made the difficult decision to lay off approximately 1,100 corporate employees to streamline operations and eliminate redundancies. Despite these challenges, Starbucks shares have surged nearly 20% since April, nearing pre-layoff levels following a significant spike when Niccol was appointed as CEO.
As Starbucks works to restore faith among its employees, the company recognizes the importance of addressing long-standing concerns about workload and staffing. A surge in unionization efforts across the U.S. has highlighted these issues, prompting Starbucks to shift its approach. At the recent event, executives emphasized the importance of empowering store managers with greater control over staffing decisions. This summer, as the company plans to increase staffing levels, managers will have more input to ensure that their stores are adequately staffed.
Niccol's "back to Starbucks" strategy underscores a realization that the company's culture has diminished over time. The recent Leadership Experience, the first since 2019, aimed to rebuild that sense of community. Niccol addressed the audience of store managers, emphasizing that "great people make great things happen." He acknowledged that as customer orders increasingly shift to mobile apps, the cafes have lost their identity as a communal space where patrons can relax and enjoy their drinks. To reclaim this identity, Starbucks is reversing previous decisions, such as removing seating from cafes. Niccol announced plans to reinstate these seats, eliciting enthusiastic applause from attendees, signifying a commitment to enhancing the in-store experience.
In conjunction with restoring seating, Starbucks is dedicated to promoting from within. Historically, about 60% of store managers were promoted internally, but the company aims to increase that figure to 90% for retail leadership roles as it plans to open an additional 10,000 locations in the U.S. This expansion will create thousands of new positions, including 1,000 district managers, 100 regional directors, and 14 regional vice presidents, thereby enhancing career advancement opportunities for existing employees.
Staffing concerns have been a significant issue for Starbucks, leading to increased union activity across its stores. Past management decisions to reduce labor hours contributed to employee burnout and slower service. Under Niccol's guidance, Starbucks is adopting a new Green Apron labor model by the end of summer, aimed at improving service times and driving traffic. This model allows managers to have a greater say in labor allocation, addressing the foundational staffing issues that have plagued the chain.
Throughout the Leadership Experience, Niccol acknowledged the legacy of former executives, particularly Mellody Hobson and Howard Schultz, who remain influential figures in Starbucks' history. Hobson received heartfelt applause from store managers as she bid farewell, having played a pivotal role in guiding Starbucks for nearly two decades. Schultz, who transformed Starbucks into a global coffee powerhouse, made a surprise appearance, reinforcing the importance of returning to the company’s roots. He encouraged managers to embrace the energy of the brand and to stay true to the coffee and their partners, setting a motivating tone for the future.
As Starbucks embarks on this ambitious journey to reclaim its identity and enhance both customer and employee experiences, the company's commitment to community, opportunity, and quality remains paramount. Through strategic changes and a renewed focus on culture, Starbucks aims to not only recover but thrive in the competitive coffee landscape.
