Will Starbucks New CEO Sustain Investors' Smile?
Over the six years that Mr. Niccol was its CEO, Chipotle's revenue doubled! So, with much fanfare, he begins his new journey as the CEO of Starbucks. Quickly forgotten was the former short-lived CEO of Starbucks. In an earlier article, I predicted his failure. After announcing Niccol as its new head, Starbucks shares popped 21% in one day! However, beware that "past performance doesn't indicate future results." So, will Niccol maintain investors' smiles or flop like its last CEO?
On September 10th, Niccol penned an open letter to partners, customers, and stakeholders. The letter reveals that he doesn't have a new vision for Starbucks. Instead, he wants to revive Howards Schulz's vision, where customers pay a premium for hand-crafted coffee while enjoying the Starbucks Experience while improving order fulfillment time and reliability. But these are contradictory goals.
Niccol wants to reestablish Schulz's vision of connecting baristas and their clients. For example, he wants the Barista to hand each order to each client rather than placing it on the counter. This will take time away from order preparation and might result in more errors and slower fulfillment, contradicting his second goal of reliably fulfilling orders. Baristas must be efficient, so they compromise on "connection" rather than make people wait an inordinate amount of time.
Reverting to Howard Schultz's vision of Starbucks as a Third Place, Niccol wants to reestablish Starbucks as the community coffeehouse "committed to elevating the in-store experience—ensuring our spaces reflect the sights, smells, and sounds that define Starbucks. Our stores will be inviting places to linger, with comfortable seating, thoughtful design, and a clear distinction between “to-go” and “for-here” service, whatever that means. Will Baristas be further burdened with the requirement to do things differently depending on where the beverage is consumed?
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In the letter, Niccol reveals his fourth goal: "It’s time for us to tell our story again, reminding people of our unmatched coffee expertise, our role in communities, and the special experience only Starbucks can provide. We won’t let others define who we are." I'm not sure this statement is accurate. Its fulfillment issues overshadow the "experience." Their expertise doesn't translate into a good-tasting cup of coffee for many people. Many independent coffee houses were launched after Starbucks's initial success, providing a much better experience and better-tasting coffee.
Nicoll must find a new vision for Starbucks while honoring the old one. Revising Schulz's unsustainable vision of perfectly handcrafted beverages delivered personally by a Barista who knows your name is counterproductive to accurate and timely fulfillment. Investors will only retain their smiles if he transform Starbucks with a vision that improves fulfillment.
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4 个月This article reminds me of a question I think of often when it comes to Starbucks. What was it about the Starbucks brand that allowed it to do something no other coffee brand has ever done: go global? This core question speaks to the magic of what worked, but also what is lost currently. When you lose your keys, the best advice is to go look in the last place you had them. But I am not sure if Starbucks remembers the last time they had their keys or not.
Strategic Advisor
4 个月Starbucks sales declined in this quarter, and the stock price slid as a result. They will not offer guidance for 2025.