Fast Five Shorts | Starbucks Unveils Its Turnaround Plan
In the latest edition of Omni Talk’s Retail Fast Five, sponsored by the A&M Consumer and Retail Group, Avalara, Mirakl, Ownit AI, and Ocampo Capital Chris Walton and Anne Mezzenga discuss: Starbucks Unveiling Its Turnaround Plan
For the full episode head here: https://www.youtube.com/watch?v=uDYRYCTUsOk&t=0s
This podcast uses the following third-party services for analysis:
Podcorn - https://podcorn.com/privacy
Transcript
So Starbucks new CEO Brian Nickel wants to make Starbucks a coffee shop again, but also a faster one, according to Restaurant Business Online.
Speaker A:Nickel, in his first earnings call at the helm of the Seattle based chain last Wednesday, described a strategy that effectively makes the company a coffee shop again, with comfortable seating and ceramic mugs for those who want to spend some time inside, much like they had for most of the chain's history.
Speaker A:But the company will also be quicker for those customers who have no intent on sitting anywhere but their office chair or their automobile.
Speaker A:Nikol wants every customer to get their drink within four minutes of ordering, a goal the company currently meets only half the time.
Speaker A:It's wild he's intent on achieving that goal.
Speaker A:Nicole mentioned four minutes 13 times on the earnings call, even going so far as saying, quote, I'm putting a full court press on solving four minutes, end quote.
Speaker A:Starbucks also announced on the earnings call that it plans to stop charging customers who order non dairy beverage modifiers for their drinks, such as oat milk or almond milk, and that it plans to bring back the condiment bars were that were a casualty of the pandemic, which will help speed service because baristas will be able to simply hand customers their coffees right at the point of sale.
Speaker A:While removing those charges for the non dairy milk will cost the company some revenue.
Speaker A:Nickel believes that allowing customers to add their own almond milk will improve through throughput and help traffic in the long run.
Speaker A:And customers will probably like what amounts to be a 10% discount on their drink now.
Speaker A:Chris.
Speaker B:Wow.
Speaker A:Where do we start?
Speaker B:AD oh my God.
Speaker A:This is also the A and M put you on the spot question.
Speaker A:Oh, geez, I forgot about that.
Speaker B:We don't have that yet.
Speaker B:Oh, God.
Speaker A:Okay, okay.
Speaker B:Lot of rose.
Speaker A:Lots of questions here.
Speaker A:Yes.
Speaker B:Oh my God.
Speaker A:All right, all right.
Speaker A:So A and M wants to know.
Speaker A:This is their question for you.
Speaker A:We discussed the CEO transition and what Starbucks should do next with you guys on the Fast five.
Speaker A:When it was announced and we hosted a few months ago on that podcast, we said that Starbucks needed to get back to improving the poor speed of service and long waits, reset the right price value on products, and focus on fundamental Starbucks experience for those who sit in stores.
Speaker A:So the question A and M has is, was Brian listening to all of us all along and did he steal our suggested playbook?
Speaker A:Chris, the floor is yours.
Speaker B:Oh, my God.
Speaker B:What do we like to think so af.
Speaker B:What do we like to think so.
Speaker B:Yes.
Speaker B:I mean, chances are no.
Speaker B:But maybe, you know, maybe.
Speaker B:Maybe somebody was inspired inside his organization to help him put this plan together.
Speaker B:But I mean, Anne, I don't know about you, I don't know if you're buying this or not, because I'm curious because you, you kind of, I think in that same discussion went the complete different direction.
Speaker B:So I'm curious to see what you think.
Speaker B:But, but I'm not buying a first class ticket on this new turnaround train plan.
Speaker B:But I'm definitely, I'm definitely happy to sit and coach along this journey right now.
Speaker B:I'm definitely happy.
Speaker B:I mean, I love the creamers in the condiment bar move.
Speaker B:That is a win win for me, both for the customers and for staff operations.
Speaker B:I think it does everything they say it's going to do.
Speaker B:I love the focus on four minutes because that is personally my biggest, biggest gripe, particularly when I go into the store to order and it has taken me sometimes 20 minutes to get my drink and that is just too freaking long.
Speaker B:Now how you do that algorithmically is a big question.
Speaker B:I don't even know if it's possible given how many mobile orders you got going through the system.
Speaker B:The part that I'm most like kind of leery about though, is the ceramic mug thing because that actually requires a pretty sizable operational change.
Speaker B:You have to collect them, you have to get them washed, you have to keep them in stock.
Speaker A:But you can do that now at Starbucks if you want.
Speaker A:You can get a ceramic mug from Starbucks?
Speaker A:Yeah.
Speaker A:And how many people really were like.
Speaker B:Oh, I didn't know you can do that.
Speaker A:Oh, I think that's just like a.
Speaker A:I think that's like a PR sizzle thing.
Speaker A:I don't think.
Speaker B:Yes, 100%.
Speaker B:And that's why I was going to say I'm leery of it.
Speaker B:But when I think about it, it's a marketing investment that could potentially be offset by reducing the marketing budget in other places.
Speaker B:So by that I mean instead of advertising Starbucks as the third place, just make it the third place and the story sells itself.
Speaker B:So that's why I think it's kind of genius, especially if you can.
Speaker B:I didn't even know you could already do that.
Speaker B:So then the operational dynamics probably are a lot less than I was expecting.
Speaker B:Although I imagine there is some increased cost or operational effect to this.
Speaker A:But yeah, if people do it, I mean, that's the thing too.
Speaker A:Like, I think this is so overblown of like.
Speaker B:Well, you can, you could, you could force the question though, at the cashier.
Speaker B:Would you like that in a ceramic cup or would you like that in a takeaway?
Speaker B:Cup.
Speaker B:And, and you know what?
Speaker B:If I'm sitting there, I'm getting a ceramic cup.
Speaker B:Yeah, for sure.
Speaker B:I think I am.
Speaker A:You should, you should do that now.
Speaker B:A hundred percent.
Speaker B:A hundred.
Speaker B:Because my coffee tastes better in ceramics and everyone knows that.
Speaker B:Come on.
Speaker B:All right, but what do you think?
Speaker B:What do you think?
Speaker B:Are you going to throw shade on Mr.
Speaker B:Nichol or are you going to jump on board this gravy train?
Speaker B:What do you think?
Speaker A:Listen, Brian Nichols for president, like that really has somehow found out.
Speaker A:Well, I mean, look at what he's done.
Speaker A:He's taken, you and I, we are on opposing sides of this argument and he's giving everybody a little bit of what they want, from the baristas to the customers.
Speaker A:Like somehow you get your coffee house experience when you want it.
Speaker A:Like everybody's going to be, everybody's lives are going to be better because those, the Starbucks are going to be hopefully nicer.
Speaker A:And if they're really investing in this like coffee house experience, I get my drink made in less than four minutes, which is all that I want.
Speaker A:I want faster operations.
Speaker A:I want to get that drink as quickly as possible with as few hands touching it as possible.
Speaker A:I just want the same consistent coffee all the time.
Speaker A:And now dairy free customers get the 10% price reduction in their coffee.
Speaker A:Like, this is amazing.
Speaker A:He's doing everything for everyone.
Speaker A:And I do think, like you were talking about earlier, like, does he have the chops or is it possible to really start to get that, get to that under four minute process?
Speaker A:And the guys from Chipotle, like, he knows how to automate things and cut out things that are not working or that are holding up the system.
Speaker A:So I, I think that we'll, we'll see a lot of great things come if, if they can be successful in, in really giving every single person what they want in this situation.
Speaker A:I don't care if you want, you can hang out at the Starbucks all you want.
Speaker A:I just want my coffee fast.
Speaker B:Yeah.
Speaker B:And he, yeah, and he's already doing the four minute thing because making the customers pour in their own, you know, you know, dairy or dairy substitutes at the condiment bar, that definitely is going to speed up the process too as well.
Speaker B:Also there's a couple other points that I love.
Speaker B:The four minutes thing, just as a leadership thing, it's easy to rally around.
Speaker B:It's, it's an easy metric to get everyone behind and it makes sense.
Speaker B:So that from a leadership standpoint is really cool.
Speaker B:And the other point too, he's also, we, we didn't talk about this in the headline, but he, he's, he simplified the product line.
Speaker B:He got rid of the rumored to be dysentery driving oleato line.
Speaker B:Right?
Speaker B:So, like, yeah, that, that's now gone.
Speaker B:And, and I don't miss that.
Speaker B:I don't know about you, but I don't miss it.
Speaker B:And so, especially given those rumors.
Speaker B:So, like, you know, I think that makes sense.
Speaker B:And then I wonder what further, you know, menu reductions are going to come out of this too, down the, down the road.
Speaker B:So, so you're in, you're, you're liking this?
Speaker A:Yeah, no, I think he did it.
Speaker A:I think he's doing a great job.
Speaker A:I think, I think he's coming in and doing exactly what he should be doing and what they brought him into to do.
Speaker A:Really.
Speaker A:Like, they, they, there's a reason they took him.
Speaker A:And they're taking more people from Chipotle too, to kind of take the turnaround that that team was able to do for Chipotle and start doing it for Starbucks because they need it.
Speaker A:Especially when you start talking about markets outside the U.S.
Speaker A:like China, where they're just getting killed by Luckin Coffee and some of these other players that are coming in now to the US too.
Speaker A:So they gotta get, they gotta get their, their poop in a group, you.
Speaker B:Know, and, and the Olly Auto thing is a signal too, from a leadership standpoint, because that was Howard Schultz's baby.
Speaker B:And he's basically like, nope, we're done.
Speaker B:We're not doing that anymore.
Speaker B:I don't care.
Speaker B:And so that's, that's cool.
Speaker B:I like it.
Speaker B:I like it.
Speaker B:All right, we'll see how it goes.
Speaker B:Could be a big fanboy coming up here, Anne.
Speaker A:He could be CEO of the year.
Speaker A:Doug McMillan.
Speaker A:You may.
Speaker B:No, never, Never, never, never.
Speaker B:That's never happening.
Speaker B:And that's never going to happen.
Speaker B:Never going to happen in my book, Anne.
Speaker A:Okay, all right.
