Starbucks' latest strategic pivot involves less automation, more baristas

CBS News

01-05-2025

Starbucks is rethinking the role of "innovation" in running a coffee chain.
After rolling out a new system of technical enhancements to streamline cold food and drink orders, the company made an abrupt U-turn this week and said it would halt use of its automated equipment and restore the human touch by bringing more baristas on board.
The reboot comes at a delicate time for the restaurant giant, which is under pressure to boost sales and revive a brand that has lost its luster with some customers. Although Starbucks remains profitable, its sales slowed last year. In the company's most recent quarter its revenues rose 2% to $8.7 billion, falling just short of Wall Street analysts' forecasts of $8.8 billion.
In a bid to win back customers, starting in May Starbucks will expand its "Green Apron service model" which will involve hiring new baristas at thousands of locations and fine-tuning an algorithm to manage orders, CEO Brian Niccol said on a call with Wall Street analysts earlier this week.
"What we've learned over the last couple of months, specifically behind both the algorithm pilot and the labor pilot, is the combination of staffing, deployment and technology gives us the outcomes of a great customer connection experience as well as the right speed and throughput associated with what we want to achieve, both in-cafe, mobile order and drive-thru," Niccol said.
What is the Siren system?
Named after the twin-tailed mermaid that serves as the face of the company's branding, the Siren system is a series of hot and cold food equipment that Starbucks started rolling out in 2022 to "make crafting beverages and food more straightforward" for workers, according to the coffee chain's website. The Siren System is installed in less than 10% of U.S. company operated stores, according to a Starbucks spokesperson.
Building on that platform, Starbucks unveiled the Siren Craft System in July 2024. The technology is aimed at streamlining beverage and food preparation, shortening wait times, and helping baristas deal with the daily flood of orders, including the speciality concoctions the coffee chain has become known for, according to Starbucks.
Less than a year later, however, Niccol said the company will halt its deployment of the Siren tech and instead invest more in labor. Focusing on expanding its workforce, the company said, has proven more effective than implementing new tech when it comes to driving growth.
"It's not that we're not going to ever use the Siren system," Niccol said in the earnings call. "It's just not something that we need to be rolling out across all 10,000 stores."
Starbucks will bring more baristas on board this year at thousands of locations and allow employees to pick up extra shifts, the Starbucks CEO said. The company's hope is that small personal touches — like handwritten notes from baristas on their cups and ceramic to-stay mugs — will keep customers coming in the door and entice them to stay longer.
"What we're discovering is the equipment doesn't solve the customer experience that we need to provide, but rather staffing the stores and deploying with this technology behind it does," Niccol said.
To be sure, Starbucks isn't turning its back on tech. While Siren is taking a backseat, the CEO also said the company is testing a new sequencing algorithm that has lowered drive-thru and in-store wait times to less than four minutes.
Starbucks employs around 361,000 workers worldwide, according to the Associated Press. In February, the coffee chain announced it would lay off 1,100 corporate employees, about 7% of all its white-collar workforce. This did not include baristas who service the stores.
How much do baristas earn?
Starbucks baristas earn an average of $19 an hour, according to a spokesperson. The company also offers health care, retirement and other benefits, distinguishing it from many retailers.
"When you factor in benefits, our comprehensive compensation package averages $30 per hour," the spokesperson said.
Starbucks' automation push was part of a larger effort to draw more customers to its stores, known as the "Back to Starbucks" strategy. After enjoying years of rapid growth, the company's progress has stalled, with U.S. same-store sales slipping 2% last year.
Looking for a refresh, the company in 2024 brought Niccol — a highly regarded restaurant industry veteran who as CEO of Chipotle had helped the fast-casual chain more than double its business — in as chief executive.
In coming aboard in September, Niccol promised to elevate the in-store experience, reduce wait times and boost sales. "It is clear we need to fundamentally change our strategy to win back customers and return to growth," Niccol said during a call with analysts last year.
contributed to this report.