Ahead of Starbucks’ first-quarter earnings call on Tuesday (Jan. 28), company officials are taking steps to address declining sales and traffic with a series of policy changes.
Starting Monday (Jan. 27), Starbucks reinstated condiment bars and return to barista-written names on cups, aiming to recapture the classic coffeehouse experience and improve service efficiency. Additionally, the company is expanding free refills on select orders to all paying customers and enforcing a new code of conduct that limits non-purchasing customers’ access to restrooms and seating.
These initiatives are part of CEO Brian Niccol’s strategy to increase customer visits and reverse the company’s recent sales slump, which has led to three consecutive quarters of declining transactions.
With the decision to update the branding to “Starbucks Coffee Company” and focus on personal touches, Niccol is signaling a return to the company’s roots, prioritizing customer experience and operational efficiency. These changes come as Starbucks faces pressure to spark growth amid challenging market conditions and ever-changing customer expectations.
Scott Stuart, CEO of the Turnaround Management Association (TMA), said in an interview with PYMNTS that while Starbucks’ efforts to revitalize its brand are commendable, the bigger challenge remains in balancing its marketing strategy.
“At this point there is still the greater question of how to position the brand with continued tension around pull back on promos versus an aggressive marketing effort to pump some excitement into the brand,” Stuart explained.
“This is still a brand in transition and, while more analysts than not still seem bullish on the stock, and earnings while lower may still beat street expectations, the path ahead remains murky.”
How does this reflect the company’s ongoing strategy to reconnect with its roots and customer base?
“Herein lies the crux of the continued struggle,” Stuart added. “The brand is strong and, of course, customer appeal is key, but the devil will be in the details in how the name change and the feel of a more intimate ‘coffee shop’ experience for the customer will play out. It’s not easy to simply roll back to what was. It has to make sense in a vastly different landscape and a much more complex competitive environment.”
Since Niccol became CEO last year, his focus has been on turning things around at Starbucks. Reflecting on the company’s current challenges, Stuart suggested Starbucks, once the undisputed leader in the coffee space, has faced struggles as the market evolved and competition intensified.
“Starbucks rode high on the wave as the brand leader in coffee until it didn’t,” Stuart explained. “It is still a defining and leading brand and its diversification, cost, and moving away from its roots plays a role in its decline, but diversification of a business model as it grows is not wrong. It led and dominated for a time, but as times changed, the market adapted, generational tastes changed, and a competitive landscape developed, and it affected Starbucks more than it may have anticipated.”
What does the future hold for Starbucks?
“Starbucks has runway … with analysts still seeing strength and opportunity in the brand,” Stuart added. “While it’s too early to say on timing of its turnaround, the challenges it faces are certainly concerning, but not yet alarming to a point of urgency.”
During the company’s fourth-quarter and full-year earnings call, Niccol discussed his plan to refocus Starbucks on its core identity through an initiative called Back to Starbucks. The strategy aims to elevate the customer experience by prioritizing coffee quality and supporting baristas, along with simplifying the menu and positioning Starbucks as a community gathering space.