Somewhere Amid the Frappuccinos, Fans Say Starbucks Lost Something
“Customers are turning away from the coffee giant, and its new chief executive, Brian Niccol, has to figure out how to get them back.
For 32 years, Greg Tutunjian, 73, has picked up his coffee at Starbucks. He’s partial to its dark-roast Red Eye, but starting to question his loyalty to the chain that serves it up.
While waiting for his order, Mr. Tutunjian watches impatiently as baristas whip up Iced Brown Sugar Oatmilk Shaken Espressos or other foamy, iced, caramel-topped drinks for drive-through or mobile-app orders. Minutes tick by before he is finally handed his coffee (dark-roast coffee with a shot of espresso).
Even more annoying for Mr. Tutunjian is when Starbucks’s mobile app tells him that a bag of his favorite coffee beans — Komodo Dragon — is in stock when it isn’t.
“I will go to four or five Starbucks in my local area and have the same experience. I check the app right before I go inside and it says it’s there, but when I arrive, the people working there say, ‘Oh, we don’t use or look at the app,’” said Mr. Tutunjian, a software consultant from Newton, Mass. “I walk out empty-handed.”
Mr. Tutunjian’s frustrations are now Brian Niccol’s problems.
Mr. Niccol took over as the Starbucks chief executive on Sept. 9 and quickly laid out what’s wrong at the company. During his first week on the job, he panned the Starbucks store experience in a letter posted on the company’s website: “It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic.”
The numbers bear him out. Last week, the coffee giant issued a preliminary report that showed a 7 percent drop in global same-store sales for the fourth quarter amid “a pronounced traffic decline” in North America — 10 percent lower than it was a year earlier. The company, in a sign that it will take time for Mr. Niccol to fix Starbucks’s issues, suspended its financial guidance for the 2025 fiscal year.
Investors tuned in on Wednesday to hear Mr. Niccol’s early efforts to remedy the maladies he has diagnosed. The company officially reported its fourth-quarter earnings, and there were high expectations for Mr. Niccol, who was wooed from a successful run at Chipotle with a compensation package worth more than $100 million.
“Our problems are fixable — most of what we need to do is within our control,” Mr. Niccol told investors on the call late Wednesday. While work is already underway on some issues, he did note that “some things will take some time.”
Some customers, already squeezed by inflation, are simply balking at $8 lattes, while others are boycotting the chain for a variety of reasons. Still others have switched to coffee shop competitors that are popping up across the country.
Starbucks is also a victim of its own success. It pioneered the customized coffee drink, allowing customers to add an extra espresso shot, two pumps of sugar-free vanilla syrup and matcha cream cold foam to top it off. A simple cup of coffee became an expression of individualism or caloric abandon. But those eight-ingredient drinks can take a couple of minutes to make. And with more than a third of transactions in recent quarters coming from mobile app orders, that can lead to long waits for customers who order in person.
“The traditional Starbucks experience is being greeted by name, having a friendly conversation with the barista and given a drink that tastes good,” said Ari Bray, a barista at a store near the University of Washington in Seattle, one of about 500 stores in the country that are unionized. “When there is a 15-minute wait and nobody can talk to you because they’re so slammed, that’s not a good experience for anyone.”
On Wednesday, Mr. Niccol mentioned a few steps designed to win back customers. Starting with the introduction of the holiday menu in early November, Starbucks will no longer charge customers extra for nondairy milk, one of the most popular customizations. The company said it would also not increase prices for the 2025 fiscal year.
The company is also setting a goal of getting customers their orders in four minutes or less, Mr. Niccol said. Brewed coffee will now be delivered to customers at the register, and customers can customize their coffee themselves — adding milk and sweeteners — at the condiment stations that the company will be reinstalling. That should also alleviate some of the workload for baristas, Mr. Niccol said.
Some customers pine for the 1990s, when Starbucks cafes encouraged customers to curl up on a cozy chair or chat with friends while sipping lattes. Like most other restaurant chains in the postpandemic world, Starbucks has focused a lot of attention on drive-through and pickup orders. Seating has been reduced or even removed in some of its stores.
“My first date was at a Starbucks. One of my favorite things to do was get a coffee and read a book at Starbucks,” said Nicole Simone, a 39-year-old musician in Los Angeles. “Now it feels like a fast-food restaurant. It has the sterility of a Taco Bell or McDonald’s.”
Mr. Niccol said the company was reviewing and revising its store design with a goal of bringing back the cafe experience and more comfortable seating.
Analysts expect Mr. Niccol to first tackle the problems facing stores in North America, which make up about 43 percent of the company’s nearly 40,000 stores around the world and provide about three-quarters of its revenue.
But China, where Starbucks has more than 7,300 stores and a rapid expansion plan, is a sore spot for the company. Same-store sales there fell 14 percent in the fourth quarter, according to preliminary earnings. China’s lackluster economy, combined with heightened competition from other coffee and tea shops in the country, has led some analysts to wonder if Starbucks might slow its expansion plans or even spin the China business off entirely.
But in a video posted last week, Mr. Niccol said the company needed to “address staffing in our stores, remove bottlenecks and simplify things for our baristas.” He also called for improving the mobile system for ordering and paying so that mobile orders do not overwhelm the cafes.
And Mr. Niccol is moving quickly to simplify the menu, even removing the olive oil drinks promoted by the company’s longtime leader, Howard Schultz, according to Bloomberg News.
Still, customers hoping to pay less for their pumpkin spice lattes or pink drinks are likely to be out of luck. This summer, the chain offered certain drinks for half-price, resulting in long lines and waits. Analysts expect the company to end those sorts of promotions and discounts.
Instead, they expect Mr. Niccol to try to lift Starbucks above the competition by restoring it to a premium brand and experience. One of the first changes he made to the company’s executive ranks was bringing in a global chief brand officer, Tressie Lieberman, who worked with him as Chipotle’s vice president of digital marketing.
“They are a premium brand, and I think they will lean further into that,” said Peter Saleh, an analyst at the investment banking firm BTIG. Though he would not be surprised, he said, if the company occasionally dropped some free things into customers’ mobile accounts, as Chipotle has done with its rewards program.
As for reducing wait times for drinks and making the lives of frenzied baristas a bit better, Mr. Saleh hopes the company will roll out its so-called Siren System a bit faster. Introduced two years ago, the system is intended to make tasks easier and faster, cutting the time to make, say, a frappuccino by a third, the company claimed.
But in most cases the system requires the closure of the store to redesign the work area layout and train employees. So far, only about 10 percent of Starbucks stores have installed it.
“Brian maybe doesn’t have an opinion yet on whether to speed up the rollout of the Siren, but if it truly does what it was intended to do and it can significantly cut the time it takes to make frappuccinos, that is a lot of labor hours and efficiencies gained right there,” Mr. Saleh said.
On the call, Mr. Niccol said the company was identifying which stores were experiencing severe bottlenecks in getting customers their orders quickly. Those stores, he said, may get the entire Siren System quickly while other stores may need only a part of the system.
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change. More about Julie Creswell“
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