Key Takeaways
The Starbucks comeback campaign has created a sense of calm in coffeehouses, according to CEO Brian Niccol, who is confident the company will soon cash in on the vibe shift. The shares, meanwhile, need to stage a comeback of their own.
Seven months into a turnaround plan, Starbucks ( SBUX ) handed in earnings Tuesday that disappointed investors, Niccol said on a conference call. Still, Niccol said the Back to Starbucks campaign was showing signs of progress—more customers are hanging out in stores and transaction declines are slowing—and guiding the company’s evolution.
Looking ahead, he said, Starbucks will rely more on employees and less on equipment, explore baking items in stores, and consider a new afternoon menu.
Order Sequencing, Shift Trading—and Afternoon Snacks
An algorithm that sequences orders for baristas has been piloted in 400 stores and will be expanded to others, according to Niccol. The tool has helped many stores serve drive-thru and in-store customers in less than four minutes and fulfill mobile orders within 12 minutes, Niccol said. These benchmarks were established to ensure mobile orders don't pile up on the counter, while lines grow and disrupt the store atmosphere, Starbucks has said.
“It’s just a lot calmer,” Niccol said of algorithm-driven workflow shifts, according to a transcript made available by AlphaSense. “Partners are set up for success to connect and do their craft with our customers on every transaction."
The chain has cut turnover by making it easier for employees to pick up and trade shifts, according to Niccol. Starbucks will be relying more on staff, he said, and less on high-tech equipment, such as the Siren drink-making system, which will be used selectively rather than broadly rolled out.
“Over the last couple of years, we've actually been removing labor from the stores, I think, with the hope that equipment could offset the removal,” Niccol said, according to the transcript. “That wasn't an accurate assumption."
Starbucks wants customers to spend time in stores, and is increasing free refills as an incentive. The company is also revamping store designs to include different seating, which will soon debut in New York City and Southern California, Niccol said. (Other recent adjustments to the vibe include changes to the dress code and more handwritten messages on cups.)
Cafe locations in the United Kingdom have baked and assembled food served in the store—a move Starbucks may try in the United States as it works to finesse its food and beverage offerings, Niccol said. Starbucks is also exploring an afternoon menu “that includes sparkling beverages, sippable coffee drinks, and snackable bites,” Niccol said.
While shares of Starbucks jumped after Niccol joined last year from Chipotle, they've more recently fallen—and
are substantially closer
to 52-week lows than highs.
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