{"id":13191,"date":"2024-11-02T14:05:47","date_gmt":"2024-11-02T14:05:47","guid":{"rendered":"https:\/\/topat10.com\/?p=13191"},"modified":"2024-11-02T14:05:47","modified_gmt":"2024-11-02T14:05:47","slug":"the-burrito-king-in-coffee-land-starbucks-ceo-brian-niccols-most-important-job-is-fixing-the-bad-vibes","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=13191","title":{"rendered":"The burrito king in coffee land: Starbucks CEO Brian Niccol\u2019s most important job is fixing the bad vibes"},"content":{"rendered":"\n
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Baristas are overworked<\/a> as they try to churn out a constant stream of complicated customized drinks<\/a>. Mobile orders and staffing problems have only made the problem worse, and added to longer wait times<\/a>. There\u2019s often nowhere to sit. In short, it\u2019s the last place anyone would want to linger over a $3.45 cup of coffee, let alone a $6.65 pumpkin spice latte.\u00a0<\/p>\n

Customers have noticed. The company released a painful earnings report<\/a> this week, revealing that fourth-quarter revenues tumbled 3% to $9.1 billion, and the magic retail metric\u2014quarterly global comparable store sales\u2014were down 7%. Ultimately, business challenges prompted the $110 billion coffee chain to suspend guidance<\/a> last week for the full fiscal year of 2025 \u201cto allow ample opportunity to complete an assessment of the business and solidify key strategies.\u201d\u00a0<\/p>\n

Seattle-based Starbucks is betting new rockstar CEO Brian Niccol can turn things around with a strategic plan called \u201cBack to Starbucks.\u201d Niccol, who was offered a $113 million payday<\/a> to take the barista-in-chief job, is an outsider to the company, which has had four different CEOs since 2022. Starbucks\u2019 board members are banking on the former Chipotle<\/a> wunderkind, who took over in September, to fix a slew of operational and labor issues<\/a>. And analysts and experts say he has one overarching mandate: Make the in-store experience the kind of pleasant yet affordable luxury it once was.\u00a0<\/p>\n

\u201cStarbucks used to have an energy around it,\u201d Sharon Zackfia, an analyst at William Blair & Co., an investment bank and financial services company, tells Fortune<\/em>. \u201cStarbucks just needs to figure out how to kind of recapture that love and affinity.\u201d<\/p>\n

Niccol addressed the issue head-on during the company\u2019s earnings call this week, and discussed getting back to the brand\u2019s \u201ccore identity.\u201d\u00a0<\/p>\n

\u201cWe have to get back to what has always set Starbucks apart: a welcoming coffee house where people gather.\u201d\u00a0<\/p>\n

The burrito king in coffee land<\/strong><\/h2>\n

When it comes to cultivating an ephemeral atmosphere of luxury, the devil\u2019s in the details. Niccol must figure out a way to maintain the revenue of mobile and drive-thru orders while still making the in-store experience something to be desired.\u00a0<\/p>\n

It\u2019s hard to imagine a CEO better suited for the moment, or with as much goodwill behind him. Niccol brings extensive experience in the food and beverage space, with stints at Chipotle and Taco Bell. Wall Street has high hopes for the 50-year-old executive: Starbucks stock popped 25% in September on the news that he would be taking over the company. But his operational chops, and how they could solve Starbucks\u2019 atmosphere problems, will be tested.\u00a0<\/p>\n

Chipotle focuses \u201crelentlessly on fitting cogs into their burrito machine,\u201d Sean Dunlop, an analyst at Morningstar, a financial services company, tells Fortune<\/em>. On average, the fast-casual Mexican chain can make around 25 entrees in 15 minutes<\/a>, he says, and some locations can do much more than that. Dunlop also says people are looking at Chipotle\u2019s assembly line and thinking that if Niccol could just do the same thing at Starbucks, \u201cwe can solve all the speed of service issues. We can solve the employee dissatisfaction issues.\u201d\u00a0<\/p>\n

Niccol said this week that Starbucks will be slimming down its complex menu<\/a>, and working on getting every order into the hands of a customer within four minutes. He also envisioned separating the in-store experience from the mobile order pickup experience, taming the mobile app with some \u201ccommon-sense guardrails,\u201d and reining in<\/a> highly customized drink orders.<\/p>\n

\u201cWe kind of incentivize people to customize drinks that probably aren\u2019t the best way to execute the drink,\u201d said Niccol, adding that \u201cwe have some clean up to do.\u201d\u00a0<\/p>\n

The love is gone<\/strong><\/h2>\n

Starbucks isn\u2019t the same as it used to be, and neither are its customers.\u00a0\u00a0<\/p>\n

\u201cThe Starbucks experience has fundamentally changed over the last five or 10 years,\u201d notes Dunlop.<\/p>\n

Mobile purchases now make up more than 30% of all orders, according to the company. Combined with drive-thru orders, they reportedly make up around 70%<\/strong><\/a> of sales at American stores run by the company. Roughly 76% of beverages sold are now cold drinks, but the back-of-counter layout is not always equipped for that reality. And the drinks that customers order have also become much more complicated, and sometimes fueled by social-media hijinx<\/a>.\u00a0<\/p>\n

All of those factors have combined to create longer wait times<\/a>, and heavier workloads for baristas. Slammed with an incessant stream of drink requests, they don\u2019t have as much bandwidth to spend much quality time or chat with walk-in customers.\u00a0<\/p>\n

A staffing-first approach<\/strong><\/h2>\n

Michelle Eisen, 41, has been working at Starbucks for 14 years, and currently works at a location in Buffalo, NY. She\u2019s also a member of the Starbucks Workers United union, serves as a bargaining delegate, and is from the first store to win their union. She says the workload has shifted \u201cmonumentally\u201d over the past five years in terms of the \u201cpressure that\u2019s put on the hourly workers, baristas and shift supervisors, who are on the floors of these stores every single day.\u201d<\/p>\n

Investing in food quality, making sure there are seating options for walk-in customers, and choosing the right music for the right time of day all play a part in making the stores comfortable\u2014somewhere you actually want to spend time. But those time-stretched baristas are a bigger hindrance to the kind of atmosphere that Starbucks is trying to create than tables and chairs ever could be, says Stephan Meier, an economist and professor at the Columbia Business School. It\u2019s not the art or the furniture that creates a cozy \u201cthird space,\u201d he adds\u2014it\u2019s the workers who make the customers feel special.<\/p>\n

\u201cThe experience of the customer, in my view, has to come through the experience of the employees,\u201d says Meier. \u201cI think they have to figure out how to operationally free up capacity for the baristas to really focus on the human aspect.\u201d\u00a0<\/p>\n

For Starbucks to fix its atmosphere and operations problems, it may have to hire more workers. \u201cI think you could argue that maybe labor productivity is too high and they need to add more labor in order to bring back some of the experiential differentiation that made Starbucks what it is today,\u201d says Zackfia.\u00a0<\/p>\n

Eisen agrees that better scheduling and more workers is key, so that three baristas aren\u2019t bearing the load more appropriate for six people. \u201cIt\u2019s additional wages, it\u2019s additional labor costs, but it pays out in the end,\u201d she says. \u201cIt creates a positive experience for the barista, and hopefully helps with employee retention. And it creates a much more positive experience for the customer, because they can see that their orders are being taken seriously.\u201d<\/p>\n

Over the past few years, 500 Starbucks stores<\/a> have voted to unionize, representing more than 11,000 baristas. The response from previous CEO Howard Schultz was not always enthusiastic<\/a>. Niccol has taken a more conciliatory tone with the union. In response to an open letter<\/a> from the union, Niccol wrote in September that he was \u201ccommitted to continue to bargain in good faith.\u201d\u00a0<\/p>\n

Starbucks CFO Rachel Ruggeri said in the earnings call this week that the company had increased hours per partner, which was helping with turnover, but that it had more work to do to help with staffing issues. Niccol addressed also the barista experience, and mentioned staffing first in a list of changes the company is making.\u00a0<\/p>\n

\u201cOur efforts to get partners the hours and schedules they want are working,\u201d he said. \u201cNow we need to make sure we have the right number of partners on the floor, particularly during our morning peak and shoulder hours.\u201d He added the company was cultivating leaders from within its own ranks, and planning a conference for store managers in 2025.\u00a0<\/p>\n

Zarian Pouncy, 30, has been a Starbucks employee for 11 years. He is also a union member and a bargaining delegate for Starbucks Workers United. He\u2019d like to see a level of comfort come back to the stores themselves. The location where he works in Las Vegas got rid of its chairs a few years ago, and now has wooden stools instead. It has also removed electrical outlets. But he\u2019s optimistic about the future.\u00a0<\/p>\n

\u201cI am hopeful,\u201d he says. \u201cOnce we can kind of slow down, simplify things, go back to what coffee shop culture was, we can get back to a place that baristas might be happy.\u201d<\/p>\n<\/div>\n