1 of 3
Starbucks CEO Brian Niccol, in a video addressed to staff worldwide, said, “I believe our problems are fixable and that we have significant strengths to build on.” He urged staff to “stay true to our core identity.”
2 of 3
Red Cup Day sales set a record at Starbucks locations in the US. Traffic at the company’s 9,645 US stores increased by 42.4% on Nov. 14. Source: Starbucks
3 of 3
Starbucks Barista Photo credit: Starbucks
Starbucks CEO Brian Niccol told the Wall Street Journal that the recently concluded Red Cup Day was “a fantastic day for coffee and a great step in our journey.”
This success may be early evidence of a reversal in year-over-year sales declines of 6% in same-store sales growth in the US, which was attributed to a 10% decline in foot traffic at the world’s largest coffee chain.
At the time Niccol was named CEO in Quarter Three of 2024, a number of metrics showed how embattled Starbucks was. The employee count was down 5% from the previous year. The company’s stock price was trading well below the $103 per share 52-week high, and foot traffic was down in many of its 38,000 locations in 87 countries.
Niccol Takes Quick Action, Sales Record Result
He showed quick action, including suspending the company’s annual forecast following a disappointing quarterly earnings report in October, notifying investors that the turnaround would take time. Niccol, the former “turnaround CEO” of Chipotle, addressed the company’s many employees by video on October 3rd. “I’ve heard from some customers that we have drifted from our core, that we’ve made it harder to be a customer than it should be, and we’ve stopped communicating with them as a result, some are visiting us less often,” he said in the video.
He had announced his “Back to Starbucks” campaign in a September 20 open letter to all Starbucks stakeholders, explaining that (particularly in the United States) the “magical experience” has been diluted and become transactional and frustrating.
He has since reintroduced the practice of baristas writing customer names on the cups, also enabling the staff to place cups directly into customer hands instead of leaving them on the counter. He announced that self-serve cold brew stations will be installed and said the rollout of the Clover Vertica Brewers at all US locations will be completed by the end of 2025. Condiment stands removed during the pandemic were re-installed, encouraging customers to perfect their favorite drinks. And in a move which sparked excited buzz on social media, the charge for non-dairy options was removed, a decision that will reduce drink costs by 10% on non-dairy options for nearly half of the customers who choose it.
These little things quickly added up. Red Cup Day on Nov. 14 resulted in the highest one-day sales in the company's history. The chain saw a 42.4% increase in visits as customers lined up to get this year’s reusable cup, made with 95% recycled materials. Using the cup on return visits earns a 10-cent discount and 25 Starbucks Reward stars.
More critically, it demonstrated that Niccol has the backing of workers who walked off the job in large numbers last year on Red Cup Day—the largest work stoppage in the company’s history.
The turnaround is getting barista support because Niccol has promised to put guardrails on customization while encouraging the friendly connection with customers that became the touchstone of the company’s growth. "Most of what we need to do is in our control," said Niccol, citing menu, operations, and brand identity.
Major Changes Underway for Starbucks
Niccol has announced a comprehensive overhaul of company focus which will introduce a wide range of changes, both in-store and for mobile ordering.
- Expansion. Niccol has slowed expansion, with fewer planned renovations and new locations in 2025 to free up capital.
- Service: Drinks will now be prepared within four minutes or less. Customers once again have the option of sipping from ceramic cups.
- Menu: Prices increased by 4% in 2024 but will remain stable through the 2025 fiscal year. Starbucks is paring down and discontinuing offerings, including olive oil-infused Oleato.
- Mobile: Order pickups will be separated from the traditional coffee experience of interacting with baristas, streamlining store customer flow. Niccol said the algorithm for mobile ordering will be improved. Mobile orders currently account for 30% of sales.
- Schedule: Changes include optimizing the number of staff in-store during peak hours. Niccol set a goal of 90% of promotions from within stores for retail leadership roles. Corporate workers must work from the office at least three days a week.
- Unionization: In 2025, a conference of managers of union and non-union stores will discuss employee-led efforts to unionize company locations, primarily within the US.
- Marketing: Advertising will undergo fundamental changes, including a return to television spots to engage a more extensive customer base. The ads will feature roasters, baristas, supply chain aspects, and agronomists at origin.
The Outlook in 2025
Starbucks stock prices have risen 26% since Niccol was hired. In November, the price per share was $102.46, nearing the 52-week high.
What will happen in China remains a wild card, with Luckin locations now outnumbering Starbucks locations. Luckin has a superior delivery system and operates stores with much lower overhead than Starbucks, but lacks the “Made in USA” brand reputation. In China, comparable same-store sales at Starbucks locations declined by 14% in the latest quarter, with an 8% decline in ticket size as austerity dominates consumer spending. Competitor Mixue is pricing coffee as low as RMB 6 per cup (82 cents), and Cotti Coffee offers comparable lattes at RMB 9.9 ($1.36) per cup.
Niccol, who started the job in September, has demonstrated his awareness of fundamental challenges and is acting quickly, but demand is slack as inflation-wary consumers resist higher prices. All coffee retailers face extraordinarily high green coffee prices that will raise costs in the new year, and employee turmoil at the store level remains an issue.
It is too soon to tell whether his “Back to Starbucks” initiatives will succeed. Turnarounds take time, and Niccol has just started, but he is clocking a brisk pace for 60 days on the job.