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CBS News
01-05-2025
- Business
- CBS News
Starbucks' latest strategic pivot involves less automation, more baristas
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.
New York Post
30-04-2025
- Business
- New York Post
Starbucks to hire thousands of baristas, scale back automation in bid to win back customers
Starbucks will scale back its automation plans and hire thousands of baristas in a significant shift aimed at winning back customers, CEO Brian Niccol announced Tuesday, as the coffee chain grapples with falling sales and a challenging consumer environment. Niccol, who took the helm of Starbucks in September 2024, acknowledged that previous efforts to cut labor costs by leaning heavily on technology had fallen short. 'Over the last couple of years, we've actually been removing labor from the stores,' he told investors on a call. 3 Starbucks will scale back its automation plans and hire thousands of baristas in a significant shift aimed at winning back customers. AFP via Getty Images 'I think with the hope that equipment could offset the removal of the labor. What we're finding is… that wasn't an accurate assumption with what played out.' The decision to increase staffing follows pilot tests in a limited number of stores shortly after Niccol joined. Now, the company plans to expand that approach to roughly 3,000 locations this year. The move marks a notable reversal in strategy at a time when many in the food and beverage industry are accelerating the use of automation to reduce costs. Starbucks will also pull back on the rollout of its Siren Craft System — a suite of high-tech drink-making tools introduced in 2022 and named after the company's iconic siren logo. The system was designed to streamline operations, but its effectiveness in improving store efficiency has come into question. 3 Starbucks baristas stand on stage during an annual shareholders meeting in Seattle in March 2019. AP While Niccol acknowledged that boosting staffing levels would result in higher costs, he expressed confidence in the long-term benefits. 'I'm banking on some growth to come with the investment,' he said. The hiring spree comes alongside broader efforts to rejuvenate the brand, including store redesigns, menu updates and tweaks to employee dress codes. Earlier this month, Starbucks unveiled a new uniform guideline requiring baristas to wear dark, solid-colored shirts to better highlight the company's trademark green apron and enhance brand familiarity. In January, Starbucks reversed a six-year-old policy that allowed non-paying customers to use its cafes and facilities in North America. The original rule, which had been widely seen as a step toward inclusivity, has now been rolled back as part of the company's strategy to focus more on its core paying clientele. 3 Starbucks hopes the change will win back customers. Starbucks Despite the sweeping changes, early results from Niccol's turnaround plan have been underwhelming. The company reported a 1% drop in global sales for the quarter ending March 31, marking its fifth consecutive quarterly decline. US performance remained weak, though sales in China and Canada showed modest gains. Following the earnings announcement, Starbucks shares tumbled more than 6.5% in after-hours trading as investors responded to the disappointing results and uncertain path forward. Niccol, who was previously CEO of Taco Bell and Chipotle, was brought in to reinvigorate Starbucks amid mounting economic pressures and shifting consumer habits.
Yahoo
30-04-2025
- Business
- Yahoo
Starbucks to hire more baristas in bid to win back customers
Starbucks will hire more baristas and scale back plans to roll out automation, the coffee shop giant's chief executive Brian Niccol says. The move, which is part of his strategy to win back customers, comes as other food and drink chains increasingly adopt technology to cut costs. Also on Tuesday, the firm announced worse-than-expected financial results as its sales continue to fall. Mr Niccol was brought into Starbucks last year tasked with turning the business around as it struggles with rising prices and consumers cut back spending. "Over the last couple of years, we've actually been removing labour from the stores. I think with the hope that equipment could offset the removal of the labour," Mr Niccol said during a call with investors. "What we're finding is... that wasn't an accurate assumption with what played out." Increasing staff numbers was tested in a handful of stores around the time Mr Niccol joined the firm in September 2024. He has been expanding the approach to include around 3,000 stores this year. At the same time the firm said it will pull back from deploying its Siren Craft System. Named after the iconic Starbucks logo, it is a suite of technology and equipment that was introduced in 2022 to streamline drink-making. Mr Niccol highlighted that taking on more staff would mean higher costs but said he was "banking on some growth to come with the investment". Alongside recruiting more baristas, Starbucks is also revamping its coffee shops, menus and the company's dress code. Starbucks said in April that its baristas would wear dark, single coloured shirts to "allow our iconic green apron to shine and create a sense of familiarity for our customers". In January, it reversed rules for its cafes in North America that allowed people to use their facilities even if they had not bought anything. The changes were a U-turn from a policy introduced six years ago that allowed people to linger in Starbucks outlets and use their toilets without making a purchase. So far Mr Niccol's turnaround efforts have seen limited results. The company's latest financial figures showed that global sales fell by 1% in the three months to the end of March, the fifth quarterly decline in a row. But while trading continued to show weakness in the US, which is its biggest market, sales rose in China and Canada. Starbucks shares fell by more than 6.5% in extended trading after the earnings were announced. Sign in to access your portfolio
Business Insider
29-04-2025
- Business
- Business Insider
Starbucks is staffing up its stores with baristas and ditching machines in the latest stage of its turnaround
Starbucks is betting that people, not machines, might be the key to its turnaround. The coffee chain is planning to hire more baristas and invest in hours for them to work at its stores, CEO Brian Niccol said after Starbucks reported its second-quarter earnings Tuesday. Starbucks is also using a new algorithm to determine the order in which store employees make drinks, avoiding long wait times. Starbucks is planning to roll out the new approach, called the Green Apron Service model, starting next month. The goal is to have it in about a third of its US locations by the end of its 2025 fiscal year. "We're finding that investments in labor rather than equipment are more effective" at getting customers their orders and growing sales, Niccol said. Starbucks' shares were trading nearly 7% lower after hours on Tuesday after the company outlined its plans to invest in employee hours. The company reported second-quarter earnings that were slightly below analysts' estimates. The investment in employee hours is a departure from Starbucks' approach to staffing stores over the last few years. Before Niccol joined the company as CEO and chairman in September, the chain had cut hours, leading to understaffing at many Starbucks stores. Instead, Starbucks added new equipment, such as faster blenders and dispensers that gave baristas just the right amount of an ingredient, such as ice or milk, instead of having them measure it out. It also implemented the Siren Craft System, which was meant to allocate employees to the most important tasks at busy times. "Over the last couple of years, we've been removing labor from the stores, I think with the hope that equipment could offset the removal of the labor," Niccol said on Tuesday. "That wasn't an accurate assumption with what played out," he added. Last quarter, Starbucks ran a pilot at 700 of its stores that involved adding more labor hours at those locations. At one store in downtown Chicago, for instance, the additional hours allowed store employees to tackle mobile orders and lots of walk-in customers at that location, Niccol said. At a suburban store, meanwhile, more hours went to staffing the drive-thru. Starbucks is also betting that a new order sequencing algorithm will leave store employees more time to interact with customers. Niccol has said that he wants Starbucks to be a comfortable place for customers to hang out. The algorithm, which Starbucks is using in 400 stores, has cut down on customer wait times by improving the order in which baristas prepare drinks. "It's a lot calmer," Niccol said of stores that use the algorithm. "There's the opportunity to provide great connection" between customers and baristas. The changes are the latest Starbucks has made under Niccol. Others include asking patrons to make a purchase to hang out in-store and directing baristas to leave hand-written messages and doodles on to-go cups.
