Starbucks outlines customer experience revamp after ‘disappointing’ fourth quarter

Starbucks’ full-year sales fell 0.6% to $36.1bn | Photo credit: Dominik Pearce

Starbucks CEO Brian Niccol has outlined his strategy to streamline store processes, reduce wait times and improve value-for-money in the US after the coffee chain posted “disappointing” full-year and fourth quarter consolidated results. 
 

Confirming sales data from its preliminary earnings release, Starbucks reported a 0.6% year-on-year sales decline in the 12 months ended 29 September 2024 to $36.1bn, alongside an 8% decline in operating income to $5.4bn. US like-for-like sales fell 2% during the year and 6% in the fourth quarter. 

“Our financial results were very disappointing. My experience tells me that when we get back to our core identity and consistently deliver a great experience, our customers will come back. We have a clear plan and are moving quickly to return Starbucks to growth,” Niccol said. 

Starbucks currently operates 16,941 stores in the US, nearly 10,000 of which are company operated. 

On an earnings call, the former Chipotle CEO reinforced the need to overhaul Starbucks’ US operations and improve the customer experience following three consecutive quarters of falling sales. 
 

Among the planned changes, Starbucks will scrap its $0.80 non-dairy surcharge, which could reduce the price of certain beverages by 10%, and freeze beverage prices at company-owned stores across the US and Canada for at least 12 months. 

Niccol has also set a goal to serve in-store customers ‘in four minutes or less’ by reducing menu customisation complexity and reintroducing self-service milk, sugar and condiment bars at its US stores in the first quarter of 2025 to reduce burdens on baristas. 

The coffee chain is also seeking to streamline in-store processes for digital orders which currently represent more than 30% of Starbucks transactions. Niccol said staff can find digital orders ‘difficult to sequence’ during peak morning hours. 
 

Since becoming Starbucks CEO in September 2024, Niccol has focused on addressing the chain’s sluggish performance in the US. However, he has also emphasised the need for improvements in China, its second largest market, where the Seattle-based business faces increased value-focused competition, particularly from fast-growing rivals Luckin Coffee and Cotti Coffee.  

“Before discussing China in detail, I need to spend time there to better understand our operations and the market. All indications show me the competitive environment is extreme, the macro environment is tough, and we need to figure out how we grow in the market now and into the future,” Niccol said on the earnings call. 

Starbucks will also continue to explore ‘strategic partnerships’ in the world’s largest branded coffee shop market to support long-term growth. The business has previously signed retail partnership deals with e-commerce giant Alibaba, delivery firm Meituan, hotel chain Hilton and investment group Sequoia Capital China. 

The US coffee giant currently operates 7,596 stores in China – significantly tracking behind the ambitious 9,000 stores by 2025 goal set by Niccol’s predecessors Howard Schultz and Laxman Narasimhan.