Following a Q4 that its new Chairman and CEO Brian Niccol termed “very disappointing,” Starbucks will make a number of changes designed to improve both the customer and associate experience at its cafés. The retailer is seeking to reclaim its designation as a “third place,” one where customers can linger if they want, by bringing back amenities such as serving coffee in ceramic cups and installing more comfortable seating.
Starbucks also will bring back self-service condiment bars, which were eliminated during the COVID pandemic, and stop charging for non-milk additions to coffee, a move that will save some customers as much as 10% off the cost of their drink. Additionally, the retailer plans to freeze any price increases on its U.S.-owned and operated stores through fiscal 2025, which ends in October 2025. Starbucks also will shift its focus to its existing stores rather than building new ones.
“One of our top priorities includes reestablishing Starbucks as the community coffee house,” said Rachel Ruggeri, EVP and CFO at Starbucks during an Oct. 30 conference call discussing Q4 and the just-ended fiscal year. “To do so, we plan to reduce the number of our new stores and renovations in fiscal year 2025 to accommodate a redesign, while also unlocking capital to support our broader turnaround.”
For FY 2024, which ended Oct. 1, 2024, Starbucks’ global comp store sales declined 2%. For Q4, comp store sales fell 7% compared to the same period the previous year.
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Baristas Like ‘Leading the Coffee House’
To address these challenges, Brian Niccol, Starbucks’ Chairman and CEO, also identified the importance of recreating that coffee house “vibe,” based on conversations he’s had with baristas since starting at the top job in September 2024. “They shared with me [that] they wanted their café dining room back,” he said during the conference call. “They like leading the coffee house. I think there’s a moment of pride, of saying, ‘This is my place.’ They know our customers by name. They have their regulars. They want to have a great seat for them. They want to have a great environment for them to enjoy, whether it’s a moment for themselves or whether it’s sharing a moment with others. And so I couldn’t agree more, frankly, with a lot of their feedback.”
Starbucks already has “made significant progress to improve average hours per partner, and partner turnover is at another low,” Niccol added. “Our efforts to get partners the hours and schedules they want are working. Now we need to make sure we have the right number of partners on the floor, particularly during our morning peak and shoulder hours. We are moving quickly to test and learn.”
Balancing Mobile and In-Person Orders
In addition to cutting down what Niccol termed “our overly complex menu,” he promised that Starbucks would do a better job serving both mobile orders and in-person customers. “Today more than 30% of transactions are driven by mobile orders,” he noted. “At peak it can drive an influx of orders that can be difficult to sequence and quickly deliver to our customers.
“When it works well, it’s great, but sometimes it can be a challenge for both customers and partners,” he added. “So we’re working to improve sequencing with a new algorithm that enables on-time mobile order handoffs and supports our four-minute throughput, with quality being our goal for café customers. We’re also placing common sense guardrails on mobile ordering that we think will improve the experience for all customers.”
The retailer also has embarked on a broad-reach marketing campaign that is “talking to all customers and elevates the Starbucks brand in a much more visible way,” said Niccol. “It reminds customers across age groups that Starbucks serves the best coffee. You’ve likely seen our new approach in practice already and you will see more of it throughout the holidays and into January.”
Again, Niccol emphasized that improving the customer experience is critical: “We have work to do to achieve this consistently, but we’ve learned lessons from our success improving the drive-thru experience and reducing the window times,” he said. “Our throughput with quality aspiration and getting the core café experience right will drive everything we do and every decision we make. The moment our barista hands a cup of coffee directly to the customer is our brand moment of truth.”
