As Starbucks continues to pursue new opportunities to expand digital customer relationships, the quick-service coffee chain reported growth in the ranks of its rewards program membership. The company saw active Starbucks Rewards membership in the U.S. grow to 17.6 million active members at the end of Q4, which marked a year-over-year increase of 15 percent.
Starbucks President and CEO Kevin Johnson said in a call with analysts on Wednesday (Oct. 30) that the rewards program is an “important growth driver.” The company knows from experience that when customers join Starbucks Rewards, their spend level with Starbucks meaningfully increases. He added that another element of the company’s digital strategy is artificial intelligence (AI). Over the past year, Johnson said, the company has been “dialing up our in-house capabilities and investments in AI” with an initiative that it calls Deep Brew.
Deep Brew, he noted, will increasingly power the company’s personalization engine, optimize store labor allocations and drive inventory management in its stores. The company also plans to harness Deep Brew in ways that free up its partners so they can spend more time connecting with customers. The plan is an important differentiator for the future, as Starbucks continues to build out its AI capabilities to better support partners.
Johnson also noted that the firm continues to see a strong correlation between Starbucks partner engagement and customer connection, which leads to higher customer frequency. That relationship reinforces the firm’s belief that the experience delivered by its partners is an important competitive advantage, as it elevates the customer experience and drives growth. In fiscal year 2019 in the U.S., Starbucks invested in partners by allocating additional store labor, increasing store-level training and simplifying in-store tasks, often with new technology.
Starbucks introduced a new staffing and scheduling system to optimize labor allocations, based on partner preferences and predictive analytics. The company also continued to invest in beverage innovation, and Johnson noted that beverages contributed five points of its U.S. comp sales growth in Q4, led by the strength of its cold beverage platform. It also completed its rollout of nitro cold brew across company operated stores in the U.S. during the summer.
For Q4, Johnson said the company, again, “delivered strong operating results,” which topped off a transformative year for the company, as it continued to execute its growth at-scale agenda with discipline and focus. Starbucks reported revenue of $6.75 billion and non-GAAP earnings per share of $0.70, compared to analysts’ estimates of $6.68 billion and $0.70.