Starbucks is actively seeking to re-engage its customer base and reassure investors through a new turnaround initiative, which also includes promises to its store managers for enhanced seating arrangements and a commitment to internal promotions.
With CEO Brian Niccol at the helm since his appointment, the company has been working diligently to revive its sales momentum. This intent was evident during the company’s Leadership Experience event, which hosted over 14,000 store leaders in Las Vegas this week.
At the event, Starbucks introduced its new coffee blend, the 1971 Roast, as a nod to the year when its first store opened in Pike Place, Seattle. The participants at the inaugural Global Barista Championships echoed the company’s theme of returning to its roots, aptly using “back to Starbucks” as their battle cry. The wifi password for the event humorously reflected the same theme.
Nicol presented a comprehensive strategy to investors that aims to recalibrate the company’s marketing approach, enhance staffing levels in stores, address issues with the mobile app, and create a more inviting atmosphere within its locations. Earlier this year, Starbucks laid off approximately 1,100 corporate employees in an effort to streamline operations and reduce redundancy.
Since April, Starbucks shares have appreciated nearly 20%, nearing levels seen following a surge of almost 25% at the time of Niccol’s appointment.
While re-establishing customer connections and appeasing investors, Starbucks is also focused on rebuilding trust with its employees, who have voiced concerns about work hours and workloads—a situation that has contributed to a growing union movement across the nation.
To ignite enthusiasm among store managers, executives emphasized a new approach giving managers increased influence over operations. Before launching new items, such as a protein-rich cold foam, Starbucks will pilot these products in five stores to solicit barista feedback.
The chain plans to bolster staffing levels this summer, allowing managers to determine the number of baristas necessary for efficient operations. Furthermore, the majority of North American stores will introduce an assistant manager position next year.
“You are the leaders of Starbucks. Your focus on the customer is critical. Your leadership is critical. And as you return to your coffeehouses, please remember: coffee, community, opportunity, all the good that follows,” Niccol stated during the event.
A culture shift
Niccol’s vision of a “back to Starbucks” approach underscores a belief that the company’s core values have deteriorated. The Leadership Experience marked the first gathering of this magnitude since 2019, a period that has seen three different CEOs at the helm.
“We are a business of connection and humanity,” Niccol remarked as he addressed the large crowd. “Great people make great things happen.”
As increasing numbers of customers opt to order through the Starbucks app, the company’s cafes are losing their essence as communal spaces where patrons enjoy their drinks.
Starbucks is therefore reversing past decisions, such as the removal of seating from cafes. Over the last few years, 30,000 seats have been eliminated, a move that has frustrated both patrons and staff alike. One manager reportedly requested that her store be exempt from renovations to retain its seating, a sentiment echoed by Niccol’s own experiences.
“We’re going to put those seats back in,” he proclaimed, prompting enthusiastic applause from the audience.
The response was similarly positive when he outlined plans to prioritize internal promotions as the company prepares to open 10,000 additional locations in the U.S.
Historically, about 60% of Starbucks store managers have been promoted from within; the goal now is to raise that figure to 90% for retail leadership positions. The anticipated growth will necessitate the hiring of 1,000 new district managers, 100 regional directors, and 14 regional vice presidents, ultimately enhancing career advancement opportunities for store leaders.
Concerns about staffing levels have been a focal point for Starbucks employees, contributing to the recent wave of union elections at many stores. Previous management practices often compromised on labor allocations, prioritizing profit margins over employee well-being, leading to staff burnout and diminished service quality.
Under Niccol’s leadership, the company is shifting this paradigm. Plans to implement the new Green Apron labor model—the rollout of which is anticipated by the end of summer—have been accelerated due to positive trial results indicating better service times and increased customer traffic. Managers will now have a greater role in determining staffing levels in their stores.
Additionally, Chief Partner Officer Sara Kelly received a warm reception from attendees after announcing that most North American locations will welcome a dedicated full-time assistant store manager next year.
“For much of the time, your store is operating without you there, and you share that even when you’re not in the store, you’re not able to fully disconnect, and it can feel like the weight of everything is on your shoulders … It affects everything, the partner experience, the customer experience, the performance of your store,” Kelly shared with the gathering.
Schultz’s stamp of approval
Amidst the challenges facing Niccol in revitalizing the company’s identity, the audience’s most enthusiastic responses were reserved for speakers no longer tied to the company.
Former chairwoman Mellody Hobson received standing ovations both entering and leaving the stage. With tears in her eyes, she expressed gratitude to Starbucks employees for their consistent warmth and hospitality throughout her tenure.
Hobson stepped down earlier this year, marking the end of her nearly 20-year journey with Starbucks, which included her historic role as the first African American woman to chair a Fortune 500 company. She also holds the position of co-CEO at Ariel Investments.
When Hobson transitioned her board chair responsibilities to Niccol in September, she was instrumental in persuading him to join Starbucks from Chipotle, highlighting the importance of her leadership during this transitional phase.
“A quick conversation [with Hobson] turned into something really special for me,” Niccol reflected.
Another familiar figure, former three-time CEO Howard Schultz, also garnered significant applause during the event. Schultz, who was pivotal in expanding Starbucks into a leading coffee brand, made a surprise appearance at the Leadership Experience—his first public engagement with Niccol since the board’s decision to choose Niccol over Schultz’s preferred successor, Laxman Narasimhan.
Starbucks has historically grappled with succession concerns, given Schultz’s past inclinations to return to the CEO position. Since Niccol took over, analysts have speculated that he is the first CEO capable of shifting away from Schultz’s longstanding influence over the company.
Niccol recounted a moment of inspiration he felt listening to Schultz speak at Yum Brands, his previous employer, back in 2008. Schultz, now 71, also appeared via video during the event to acknowledge Hobson’s contributions to Starbucks.
While speaking with Niccol, Schultz endorsed the latter’s strategy to return to core values, expressing excitement at the prospect. He encouraged managers to channel that energy back into their respective Starbucks locations.
“Be true to the coffee, be true to your partners,” Schultz urged attendees. “And I know we’re going to come out of here … like a tidal wave and surprise and delight the world and prove all those cynics wrong again, just as we did in 1987.”
