SEATTLE — Howard Schultz, former CEO and chairman of Starbucks, recently observed a scene at a Chicago Starbucks that illustrated the company’s current struggles. Commuters were arriving to pick up mobile orders, but their drinks weren’t ready on time. Customers couldn’t identify which drinks were theirs, creating a chaotic scene that Schultz likened to a “mosh pit.”
“This isn’t what Starbucks is supposed to be,” Schultz remarked on the podcast “Acquired.”
Now, 53 years after its founding, Starbucks is grappling with how to adapt to modern consumer behavior — dominated by mobile orders — without losing the core identity of a coffeehouse. To tackle declining sales and recapture the essence of the brand, Starbucks has hired Brian Niccol as its new chairman and CEO. Niccol, a seasoned marketing expert, previously led Taco Bell and Chipotle.
Niccol officially steps into the role on Monday, with the task of steering the global coffee giant, which now operates nearly 40,000 stores worldwide. Despite its ubiquity, Starbucks’ premium prices, with some drinks reaching nearly $8, have become a barrier for many customers seeking quick caffeine fixes. Analysts note that competitors like convenience stores and independent cafés are drawing in coffee lovers, further challenging Starbucks’ appeal.
“Starbucks has lost its way from a marketing standpoint,” said Chris Kayes, a professor of management at The George Washington University.
Kayes called Niccol a “celebrity CEO” known for turning around struggling brands. When Niccol joined Chipotle in 2018, the chain was in turmoil following food safety scandals. Within five years, sales had nearly doubled. Starbucks hopes he can work similar magic.
Since being named as Starbucks’ next leader in August, Niccol has been visiting U.S. stores, meeting baristas, and learning about the challenges the company faces. Starbucks expressed optimism in a statement, saying, “We look forward to the fresh ideas that Brian will bring to our business.”
Simplifying Starbucks’ Operations
Experts believe that streamlining Starbucks’ expansive menu is a critical step in reducing operational issues, like those Schultz witnessed in Chicago. According to Phil Kafarakis, CEO of the International Foodservice Manufacturers’ Association, Niccol must identify Starbucks’ core customers and refine the offerings to match their preferences.
The complexity of Starbucks’ menu, which allows for around 100,000 drink variations, has overwhelmed baristas. From iced to blended and foamed drinks, with a wide range of flavor options and 11 types of milk and creamers, baristas are under constant pressure to deliver on these customizations.
“They’ve created innovation, but it’s become overly complicated,” Kafarakis said. “A person has to prepare all those drinks consistently.”
Adding to the complexity, new beverage offerings can sometimes conflict with Starbucks’ environmental goals. In 2018, Starbucks pledged to eliminate single-use plastic straws by 2020, but recently reintroduced them with new cold boba drinks.
Starbucks said the straws are made of compostable plastic, but environmental groups argue that most composting systems can’t properly process such materials. They encourage companies like Starbucks to focus on reducing disposable products altogether.
Mobile Orders Create New Challenges
Starbucks’ mobile app has driven a significant portion of its sales, with nearly 75% of orders now coming through the app, drive-thru windows, or delivery services like DoorDash. However, fewer customers are staying to enjoy the coffeehouse experience that Starbucks was once known for.
Michelle Eisen, a barista and union organizer in Buffalo, New York, said her store has lost the relaxed atmosphere it had when she started in 2010. While Starbucks has added new brewing machines and workstations, staffing levels have not kept up with the increase in orders, leading to delays.
“They’re adding new channels, but not enough staff to keep up,” Eisen said. “Orders are piling in, and we don’t have the manpower to keep up with them.”
This lack of manpower has resulted in slower service compared to competitors. In a recent survey by the consulting firm Technomic, 77% of Caribou Coffee customers said they received their orders within five minutes, compared to just 62% at Starbucks.
A Tough Road Ahead for Niccol
Niccol’s track record at Chipotle is promising. He streamlined operations, reduced wait times, and attracted customers with limited-time promotions. However, Starbucks presents a bigger challenge, with more stores and different market dynamics worldwide. In China, Starbucks faces low-cost competitors, while in the Middle East, it contends with boycotts.
Despite the hurdles, Starbucks’ board is betting big on Niccol. His contract could earn him over $100 million in his first year, which includes the perk of commuting to Seattle from California via corporate jet — a decision that seems at odds with Starbucks’ goal to reduce carbon emissions by 2030.
“He’s like the Ryan Reynolds of CEOs,” Kayes said. “They’re paying a lot, expecting a big return.”
Eisen expressed surprise at Starbucks’ decision to bring Niccol on board less than two years after former CEO Laxman Narasimhan’s hiring. She hopes that Niccol will prioritize working with the union to address staffing issues.
Nearly 500 U.S. Starbucks stores have unionized since late 2021. Both the company and the union, Workers United, aim to finalize a labor agreement by the end of the year.
However, Niccol’s stance on unionization may be more confrontational. When a Chipotle in Maine attempted to unionize in 2022, the company closed the store. The National Labor Relations Board later ruled that Chipotle had violated federal labor laws and ordered it to compensate the affected employees.
“It seems Starbucks is putting a lot into this new CEO,” Eisen said. “I hope they’re just as willing to invest in us.”