As inflation continues to simmer and economic uncertainty rattles consumers, Starbucks CEO Brian Niccol says he has the solution to ensuring the coffee chain doesn’t suffer from customers pulling back on their $6 or $7 lattes.
Niccol said during the Fast Company Innovation Festival on Tuesday he does not believe a rocky economic landscape will offset Starbucks’ gains because of his company’s “commitment to craft and quality” and “great customer experience.”
The Starbucks CEO recently passed the one-year mark of his tenure helming the coffee giant and the anniversary of his “Back to Starbucks” plan meant to return the company to its roots as a cozy “third space” where customers can leisurely sip their beverages.
At the core of Niccol’s vision is not just rebuilding a desire among customers to linger in stores longer, but to build connections with baristas through a series of personal touches like hand-written notes scribbled on coffee cups. His vision also includes leaning on automation behind the counter and a pared-down menu to give baristas more face time with patrons.
“When I ask people, name me a great customer service company, I usually get a blank stare,” Niccol said. “That tells me, right off the bat, there’s a huge opportunity to be the defining customer-service company.”
“There is tremendous value in being a world-class, customer-service company combined with great craft, great quality food,” he added. “When you look at putting those two things together for the price that we will have to charge for it, I think it will turn out to be invaluable.”
Returning to a ‘third space’
One year into the “Back to Starbucks” experiment, the company has seen mixed success. The company reported in July its sixth straight quarter of declining same-store sales in the U.S., including 2% in its third quarter. Starbucks reported it also saw a 4% decrease in comparable transactions. The company’s stock has fallen about 9% year-to-date.
But Niccol also said in July the turnaround plan was “ahead of schedule.” He cited internal data indicating customers were taking note of improved speed, hospitality, and order accuracy.
Those improvements also extended to how consumers viewed Starbucks’ pricing, with customer value perceptions also reaching a two-year high, Niccol said, driven by Gen Z and millennial customers making up more than half of Starbuck’s consumer base. Transactions among non-rewards customers also grew year-over-year.
“Customer connection scores are up and customer complaints are down, both quarter-over-quarter and year-over-year,” Niccol said in the earnings presentation.
Niccol noted he’s based many of Starbucks’ changes on observations he’s made visiting locations.
“I walked into a store. Outlets were covered or outlets weren’t working, there weren’t enough seats,” Niccol said on Tuesday.
He said he also noticed some stores had prioritized waiting areas for mobile ordering, pushing the company to reconsider how to sync timing of online orders and pick-up times to ensure customers don’t pile up in waiting areas, cutting into floor space where customers could otherwise sit. The company will likely add hundreds of thousands of chairs and seating back into locations, according to the CEO.
“Our customers are giving us positive feedback,” Niccol said. “And I think we’re on our way to being that world-class, customer service, customer experience company.”