By Julie Creswell
For 32 years, Greg Tutunjian, 73, has picked up his coffee at Starbucks. He’s partial to its dark-roast Red Eye, but starting to question his loyalty to the chain that serves it up.
While waiting for his order, Tutunjian watches impatiently as baristas whip up Iced Brown Sugar Oatmilk Shaken Espressos or other foamy, iced, caramel-topped drinks for drive-thru or mobile-app orders. Minutes tick by before he is finally handed his coffee (dark-roast coffee with a shot of espresso).
Even more annoying for Tutunjian is when Starbucks’s mobile app tells him that a bag of his favorite coffee beans — Komodo Dragon — is in stock when it isn’t.
“I will go to four or five Starbucks in my local area and have the same experience. I check the app right before I go inside and it says it’s there, but when I arrive, the people working there say, ‘Oh, we don’t use or look at the app,’” said Tutunjian, a software consultant from Newton, Massachusetts. “I walk out empty-handed.”
Tutunjian’s frustrations are now Brian Niccol’s problems.
Niccol took over as the Starbucks CEO on Sept. 9 and quickly laid out what’s wrong at the company. During his first week on the job, he panned the Starbucks store experience in a letter posted on the company’s website: “It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic.”
The numbers bear him out. Last month, the coffee giant issued a preliminary report that showed a 7% drop in global same-store sales for the fourth quarter amid “a pronounced traffic decline” in North America — 10% lower than it was a year earlier. The company, in a sign that it will take time for Niccol to fix Starbucks’ issues, suspended its financial guidance for the 2025 fiscal year.
Investors tuned in last Wednesday to hear Niccol’s early efforts to remedy the maladies he has diagnosed. The company officially reported its fourth-quarter earnings, and there were high expectations for Niccol, who was wooed from a successful run at Chipotle with a compensation package worth more than $100 million.
“Our problems are fixable — most of what we need to do is within our control,” Niccol told investors on the call late Wednesday. While work is already underway on some issues, he did note that “some things will take some time.”
Some customers, already squeezed by inflation, are simply balking at $8 lattes, while others are boycotting the chain for a variety of reasons. Still others have switched to coffee shop competitors that are popping up across the country.
Starbucks is also a victim of its own success. It pioneered the customized coffee drink, allowing customers to add an extra espresso shot, two pumps of sugar-free vanilla syrup and matcha cream cold foam to top it off. A simple cup of coffee became an expression of individualism or caloric abandon. But those eight-ingredient drinks can take a couple of minutes to make. And with more than a third of transactions in recent quarters coming from mobile app orders, that can lead to long waits for customers who order in person.
“The traditional Starbucks experience is being greeted by name, having a friendly conversation with the barista and given a drink that tastes good,” said Ari Bray, a barista at a store near the University of Washington in Seattle, one of about 500 stores in the country that are unionized. “When there is a 15-minute wait and nobody can talk to you because they’re so slammed, that’s not a good experience for anyone.”
On Wednesday, Niccol mentioned a few steps designed to win back customers. Starting with the introduction of the holiday menu in early November, Starbucks will no longer charge customers extra for nondairy milk, one of the most popular customizations. The company said it would also not increase prices for the 2025 fiscal year.
The company is also setting a goal of getting customers their orders in four minutes or less, Niccol said. Brewed coffee will now be delivered to customers at the register, and customers can customize their coffee themselves — adding milk and sweeteners — at the condiment stations that the company will be reinstalling. That should also alleviate some of the workload for baristas, Niccol said.
Some customers pine for the 1990s, when Starbucks cafes encouraged customers to curl up on a cozy chair or chat with friends while sipping lattes. Like most other restaurant chains in the postpandemic world, Starbucks has focused a lot of attention on drive-thru and pickup orders. Seating has been reduced or even removed in some of its stores.
“My first date was at a Starbucks. One of my favorite things to do was get a coffee and read a book at Starbucks,” said Nicole Simone, a 39-year-old musician in Los Angeles. “Now it feels like a fast-food restaurant. It has the sterility of a Taco Bell or McDonald’s.”
Niccol said the company was reviewing and revising its store design with a goal of bringing back the cafe experience and more comfortable seating.
Analysts expect Niccol to first tackle the problems facing stores in North America, which make up about 43% of the company’s nearly 40,000 stores around the world and provide about three-quarters of its revenue.
But China, where Starbucks has more than 7,300 stores and a rapid expansion plan, is a sore spot for the company. Same-store sales there fell 14% in the fourth quarter, according to preliminary earnings. China’s lackluster economy, combined with heightened competition from other coffee and tea shops in the country, has led some analysts to wonder if Starbucks might slow its expansion plans or even spin the China business off entirely.
But in a video posted last week, Niccol said the company needed to “address staffing in our stores, remove bottlenecks and simplify things for our baristas.” He also called for improving the mobile system for ordering and paying so that mobile orders do not overwhelm the cafes.
And Niccol is moving quickly to simplify the menu, even removing the olive oil drinks promoted by the company’s longtime leader, Howard Schultz, according to Bloomberg News.
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