In recent months, Starbucks has grappled with operational and financial challenges, compounding its struggle to maintain market dominance.
The company’s difficulties, from a mobile outage to shifting consumer spending habits, underscore the complexities facing the iconic coffee chain as it manages changing market dynamics.
Starbucks’ operational woes came into sharp focus with a mobile ordering outage in the third quarter of 2024. The disruption not only led to widespread customer frustration but also contributed to a decline in sales. The outage impacted in-store and digital transactions, disrupting the chain’s key revenue streams during a critical sales period as consumers continued to draw back from nonessential purchases.
PYMNTS Intelligence’s “How Consumer Perception of Inflation Forces Many to Trade Down” edition of the “New Reality Check: The Paycheck-to-Paycheck Report” revealed that 98% of those who live paycheck to paycheck and have issues paying bills are scaling back their dining out expenses. Meanwhile, 95% of those who live paycheck to paycheck without issues paying bills said the same.
Consumers are burdened by rising beverage prices. According to the report, beverage prices have surged by an estimated 16% to 29%.
Against this backdrop, Starbucks hired a new CEO, Brian Niccol, who assumed his post Sept. 9 and carries a track record of innovation and transformation to his new role. Celebrated for his transformative leadership at Chipotle, where he rejuvenated the brand with digital upgrades and operational refinements, Niccol now steps into a pivotal role at Starbucks. While the stakes are high, Starbucks hired Niccol because of his performance history.
When Starbucks announced Niccol as its new CEO Aug. 13, Greg Zakowicz, senior eCommerce expert at Omnisend, told PYMNTS that Niccol “may just be the perfect fit for the organization. He has an impressive background, especially in the food industry where products are nonessential items and has successfully led companies like this during challenging economic times. With a continual increase of consumers trading down on items like groceries, I don’t think this should be understated. He knows how to appeal to consumers at times when their wallets are tight. That is one thing Starbucks desperately needs.”
In a Tuesday (Sept. 10) letter to partners, customers and stakeholders, Niccol offered a personal commitment to revitalizing the coffee giant’s storied legacy.
Titled “Back to Starbucks,” the letter, which blends introspection and ambition, was a declaration of Niccol’s intent to guide Starbucks back to its roots while navigating the future.
“As I step into my first week as CEO, I do so not only as a leader but as a long-time customer,” Niccol wrote, noting he spent time in several Starbucks stores in the past few weeks, talking to customers, partners and teams across operations, store design, marketing and product development.
“In each conversation, two truths emerged: First, Starbucks is a beloved brand with wonderful people,” he wrote. “We are woven into the fabric of people’s lives and the communities we serve. Second, there’s a shared sense that we have drifted from our core. We have an opportunity to make the store experience better for our partners and, in turn, for our customers.”
Niccol’s plan comprises several strategic areas. First, he said he wants to empower baristas by providing them with the tools and time necessary to craft exceptional drinks, ensuring a personalized and consistent customer experience.
“It’s time for us to tell our story again,” he wrote, adding the aim is to reconnect with customers by showcasing Starbucks’ coffee expertise and contributions to the community.
“Our stores have always been more than a place to get a drink,” he wrote. “They’ve been a gathering space, a community center where conversations are sparked, friendships form, and everyone is greeted by a welcoming barista. A visit to Starbucks is about connection and joy, and of course great coffee. Many of our customers still experience this magic every day, but in some places — especially in the U.S. — we aren’t always delivering. It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic. These moments are opportunities for us to do better.”
To support these goals, Niccol outlined a plan for technological investments that will enhance both partner and customer experiences. This includes improvements to supply chain logistics and advancements in the mobile ordering platform, underscoring a commitment to operational excellence and innovation.
“My focus for the first 100 days is clear,” he wrote. “I’ll spend time in our stores and at our support centers, meeting with key partners and suppliers, and working with our team to drive these critical first steps.”
As Starbucks faces these challenges, the path forward requires a balanced approach to operational improvements and strategic innovations. The company’s ability to adapt its digital infrastructure, address consumer financial pressures and use effective marketing strategies will be critical to stabilization and growth.
With new leadership steering the charge, Starbucks is at a crossroads where decisive action and strategic innovation will determine its success in a competitive and dynamic market environment.
Intel’s new CEO, Lip-Bu Tan, is clear-eyed about the chipmaker’s many problems and the tough road ahead as he engineers a turnaround to revive this legendary Silicon Valley company.
“This is an iconic and essential company that is important for the industry and also to the United States,” Tan said in a keynote address at Intel’s conference in Las Vegas this week.
The nuclear physicist, who dropped out of the Ph.D. program at MIT, is best known for transforming Cadence Design Systems into a robust chip design and software company. He was also a board member at Intel.
“We fell behind on innovation. We have been too slow to adapt to meet your needs. You deserve better, and we need to improve, and we will,” Tan told his audience of customers and vendors. “Please be brutally honest with us.”
Tan called this juncture a “defining moment” for the legendary chipmaker.
Intel was once the world’s most valuable chipmaker — a crown that would go to Nvidia. With its “Intel Inside” branding, it was the first chipmaker to become a household name. In the 1990s, Intel and Windows became so dominant in PCs that the pair were called “Wintel.” Intel founder Gordon Moore’s “Moore’s Law” still stands 60 years after it was created.
Intel’s troubles began in the mid-2010s, when it started missing key product deadlines and struggled to advance to 10nm manufacturing, allowing rivals like TSMC and AMD to overtake it in performance and efficiency. Once the industry leader, Intel became hampered by internal bureaucracy, a rigid culture, and a hardware-first mindset that lagged behind a software- and artificial intelligence (AI)-driven future, while competitors like ARM and Nvidia thrived.
Intel also famously turned down Apple’s request to make chips for the iPhone, paving the way for Qualcomm. In the third quarter of 2024, Intel posted its largest quarterly loss of $16.6 billion, including a $15.9 billion charge to reflect lower valuations and costs to lay off 15,000 employees.
Now there are even reports of Intel as a takeover target — humiliating for a tech icon. “Intel Corp.’s fall from market dominance to takeover target is a tale marked by missed opportunities and rising expenses,” wrote Iuri Struta, senior research associate at S&P Global Market Intelligence, in a blog post. In 2020, Intel was the second most valuable chipmaker. As of last September, it had fallen to 14th place, he said.
Tan understands the enormity of his task to turn around Intel. “We have a lot of hard work ahead. We have fallen short of your expectations. I will pull together strong teams to correct the past mistakes and start to earn your trust,” he said. “I will not be satisfied until we delight all of you.”
Read more: Intel Faces Potential Breakup as Broadcom and TSMC Explore Deals
Tan faces a big challenge in reviving a company with decades of inertia to lead in a market that now moves at hyperspeed. His four areas of focus are: changing the culture, strengthening the core business, incubating and growing new business, and building customer trust.
Tan said he will bring Intel back to its roots: an engineering-focused company. He promised to meet with engineers even six to seven levels down from the C-suite to hear their ideas and unleash their creativity. Tan also promised to retain and attract key talent, which had been leaving Intel.
Tan said Intel needs to adopt a startup culture to innovate, where every day is Day One. His weekends are filled with meetings with engineers and software architects who have “brilliant” ideas and who “want to change the world. That’s when I get excited to work closely with them,” Tan said.
Tan also plans to simplify the way Intel works because “bureaucracy kills innovation.” The startup mindset will enable them to act with speed.
“We are operating in a very dynamic, fast-moving industry. Technology adoptions and disruption are accelerating faster than ever. This is being driven by the one transformational force called AI,” Tan said.
Intel will target three AI areas: cloud AI, generative and agentic AI, and physical AI such as robotics. To that end, Tan said Intel will spin off non-core business divisions but did not name which ones.
To right its operations, Tan said Intel must change the way it makes products. The company used to start by making hardware — chips — and then developing the software to make it work. “The world has changed. You have to flip that around,” Tan said. “You start with the problem, what you’re trying to solve. … Then we work backwards from there.”
Tan also addressed Intel’s product and foundry priorities. In client computing, he reaffirmed a commitment to innovation, noting the competitive landscape has shifted and Intel must not “stand still.” Pushing forward with AI-enhanced PCs, the company aims to ship its next-generation Panther Lake processors on its 18A process node later this year.
Perhaps most critically, Tan confirmed Intel’s ambitions to manufacture chips for customers around the world. “Foundry is a service business that is built on the foundational principle of trust,” he said.
At this stage in his career, Tan said he has been asked why he would take on one of the most difficult jobs in tech.
“The answer is very simple. I love this company,” Tan said, with tears in his eyes. “It was very hard for me to watch it struggle. I simply cannot stay on the sidelines knowing that I could help turn things around.”
Photo: Intel CEO Lip-Bu Tan. Credit: Intel livestream
