Starbucks relays ‘reinvention’ strategy in front of shareholders as pro-union protesters rally outside HQ
In the wake of struggling margins, labor relations, and lagging traffic in a pandemic-riddled economy, Starbucks looks to reinvent itself, according to its biannual investor day meeting, with improvements to automated ordering in stores, new coffee-making equipment, and an expanded loyalty program.
Starbucks plans to invest approximately $450 million to upgrade its cafes with new equipment to speed up service and increase efficiency during customer rushes.
“Our physical stores were built for a different era and we have to modernize to meet this moment,” said outgoing Chief Operating Officer John Culver during the investor day meeting.
With its new cold beverage system, the time to create a Mocha Frappuccino, for example, is cut from 86 seconds to 35 seconds. The system faces a second test, planned for January, after making improvements based on initial feedback.
Cold brew, now a $1.2 billion business in the U.S., will also be addressed as Starbucks wants to make the process less intensive. The current process requires more than 20 hours of brewing in-store, with more than 20 steps, like grinding beans from a heavy bag. The new technology automatically grinds and presses the coffee beans and reduces waste by 15%.
The company also unveiled Starbucks Odyssey, a new program that intends to incorporate NFTs and other Web3 technology to create “immersive coffee experiences” for Starbucks Rewards members. With this interface, Starbucks would be one of the first companies to integrate Web3 technology with an industry-leading loyalty program at scale.
As of Monday, customers and partners can join a waitlist for a chance to be among the first to receive access to the Starbucks Odyssey experience, launching later this year.
The company also plans to add 2,000 new stores in the U.S. by 2025, diversifying its stores across cafes, pick-up stores, drive thru-only, and delivery-only locations to meet Starbucks customers whenever and wherever they want.
“When we think about our existing store portfolio and our investments, they must deliver in a few critical areas,” Culver said. “Reducing the level of complexity and making work easier for our partners, enabling stronger engagement and connection between our partners and the customers they serve, and delivering experiential convenience, in a way only Starbucks can.”
Through Monday, Starbucks’s shares had declined 3% since Howard Schultz took the interim CEO role. Laxman Narasimhan, the former chief commercial officer of PepsiCo, will be the company’s new CEO by April 2023.
Amid Starbucks’ reinvention plan is the company’s new approach to managing labor relations, as it committed a total of $1 billion this year in employee investments, public relations, and consultants, which some officials with Starbucks Workers United (SWU) have said is part of an overall tactic of union busting.
The company boosted wages to $17 an hour in the U.S.
During the investor day meeting, approximately 400 people showed up outside Starbucks headquarters to protest.
“First and foremost, we want the raises and benefits that were rolled out in August. Starbucks has purposefully refused to give these benefits to union-represented stores,” said Billie Adeosun, a spokesperson with SWU.
The protestors want adequate healthcare, safer working conditions, and “basic respect,” according to SWU.
Back in May, the regional director of the National Labor Relations Board (NLRB) issued a complaint accusing Starbucks of 29 unfair labor practice charges that included over 200 violations of the National Labor Relations Act.
The NLRB currently has 326 open unfair labor practice cases related to Starbucks.
Most recently, on August 18, U.S. District Judge Sheryl H. Lipman of the District Court of Western Tennessee issued an injunction requiring Starbucks to rehire seven unlawfully fired workers, post the court’s order, and cease and desist from unlawful activities.