Starbucks is rolling out a broad plan to drive growth over the next three years – from faster Frappuccinos to more digital rewards.
On Tap: New equipment that makes it easier for baristas to whip up complicated drinks in seconds. Thousands of new American stores. A more reliable mobile app with new rewards. And enough new benefits to perhaps deter employees from unionizing.
The news came during the company’s Investor Day on Tuesday, when Starbucks (SBUX) executives spent hours outlining what the next few years will look like.
“We’re not reinventing what we do,” interim CEO Howard Schultz said Tuesday. “We are simply reinventing the way we do things.” Schultz will remain in his role until new CEO Laxman Narasimhan officially takes the reins in April.
Schultz presented an outline version of the new plan in July via an open letter to employees, stating that “the Starbucks business as it is built today is not configured to fully accommodate changing behaviors, the needs and expectations of our [employees] or customers. It is not designed for the future we aspire to for ourselves and the communities in which we serve.
Starbucks must catch up with its customers to accelerate its growth. Over the years, “the business has changed dramatically,” Schultz said.
Customers are increasingly ordering through the company’s mobile app and drive-thru. They opt for cold drinks, which now make up the majority of drink orders. Sometimes they also order TikTok-inspired concoctions so elaborate they make a tall iced vanilla latte look like a simple black coffee.
These new consumption habits create complexity for employees responsible for preparing time-consuming recipes ordered in person, via an app or at the drive-thru. This means longer waiting times for customers – if they decide to queue.
“One of our challenges today is that we’re not able to keep up with the capacity of the demand coming through our stores,” said Brady Brewer, chief marketing officer at Starbucks.
More efficient kitchens and new technology can help baristas get to work faster, alleviating these bottlenecks.
One of these improvements is called the Siren system, which, among other attributes, is designed to reduce the time it takes to make cold drinks. Faster mixers and new dispensers for ingredients like milk and ice are being installed in-line, so baristas can whip up the drink without bending down to reach milk or whipped cream hidden under the counter.
Baristas spend around 36 seconds making a Frappuccino with Siren, compared to around 87 seconds on average with the traditional system. Siren also uses ovens that can heat food in batches, rather than individually, to get food to customers faster. Some stores are already using the system as part of a test, but Starbucks plans to start rolling it out more widely in 2024.
The company also discussed a new coffee machine on Tuesday, which brews a freshly brewed cup of decaffeinated or regular coffee in about 30 seconds without paper filters. The machines are expected to be in all US locations within the next three years.
In addition to improving its current locations, Starbucks plans to open 2,000 net new stores in the United States by 2025, with the goal of building a broad portfolio that includes drive-thru and delivery-only locations.
Technological improvements won’t stop at the kitchen. They are also coming to the mobile app.
Mobile orders have become an important part of Starbucks business. The company had approximately 27.4 million active members in the quarter ending July, up 13% year-over-year. It’s great – when the app is working.
“As many of you know, our mobile app has had a few brief outages over the past few months,” Starbucks Chief Technology Officer Deb Hall Lefevre said Tuesday.
About a quarter of U.S. sales come through digital channels, Lefevre noted. “Even a few minutes of downtime can mean… confusion in our stores and of course lost business opportunities,” she said. The company’s first priority is to make sure the app works reliably, she said: “Things just have to work.”
Starbucks is also planning other enhancements, such as allowing customers to use mobile ordering and collect rewards points when visiting a licensed Starbucks location. It’s also working to show real-time order updates in the app, as well as a joint rewards program with other businesses like retailers or airlines.
At the drive-thru, Starbucks is working on “a frictionless checkout program that will automatically recognize and authenticate our customers as they drive through,” Lefevre said.
Starbucks also said this week that it will allow rewards members to buy or earn NFTs starting later this year.
These technological upgrades, whether in café kitchens or payment systems, are designed not only to improve customer service, but also to support workers.
For Starbucks, making employees happy is an important part of the plan as it combats the growing unionization effort. On Tuesday, the National Labor Relations Board certified votes for unionization at 224 Starbucks stores and certified that 42 locations voted against unionization.
Starbucks has made it clear that it wants workers to deal directly with the company, rather than going through a third party.
“We have a trust deficit with our partners,” Frank Britt, Starbucks chief strategy and transformation officer, said Tuesday. “We failed to meet the highest level of obligations,” he said. “We plan to do quite a bit.”
To that end, Starbucks said this week it will offer eligible employees support to manage their student loan debt and help them open savings accounts. Britt also said the company is working to provide workers with more flexible scheduling options, with future plans including more generous sick leave and additional mental health support.
Starbucks said it could only guarantee new benefits to non-union employees.
But Starbucks Workers United, which led the campaign, remains indifferent to the company’s plan. The group held a march outside the company’s headquarters on Tuesday to coincide with the investor event.
“Workers are pleased that Starbucks is addressing issues related to our working conditions; we unionized because we would like to have a real voice in this process,” the group said in a statement about the investor meeting. “We look forward to negotiating these terms at the negotiating table.”
Correction: This story has been updated to clarify that Starbucks can only guarantee new benefits to non-union employees.
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