Starbucks is rolling out a sweeping plan to spark growth over the next three years — from faster Frappuccinos to more digital rewards.
On tap: New equipment that makes it easier for baristas to prepare complicated drinks in seconds. Thousands of new US stores. A more reliable mobile app with new rewards. And enough new perks and benefits to perhaps dissuade employees from joining a union.
The news came Tuesday during the company’s investor day, when Starbucks (SBUX) leaders spent hours outlining what the next few years will look like.
“We’re not reinventing what we do,” interim CEO Howard Schultz said Tuesday. “We’re just reinventing how we do it.” Schultz will remain in his position until incoming CEO Laxman Narasimhan officially takes the reins in April.
Schultz introduced a broad-strokes version of the new plan in July via an open letter to employees, saying “the Starbucks business as it is built today is not set up to fully satisfy the evolving behaviors, needs and expectations of our [employees] or customers. It is not designed for the future we aspire to for ourselves and the communities in which we serve.”
Faster Frappuccinos
Starbucks has to catch up with its customers to accelerate growth. Over the years, the “business has changed dramatically,” Schultz said.
Customers are increasingly ordering through the company’s mobile app and drive-thrus. They’re opting for cold beverages, which now make up the majority of drink orders. Sometimes they also order TikTok-inspired concoctions so elaborate they make a grande iced vanilla latte seem like a simple black coffee.
These new consumer habits create complexity for employees tasked with preparing time-consuming recipes ordered in person, through an app or at the drive-thru. That means longer wait times for customers — if they decide to wait in line at all.
“One of our challenges today is that we’re not able to meet the capacity of demand that is coming through our stores,” said Brady Brewer, chief marketing officer at Starbucks.
More efficient kitchens and new technology can help baristas work faster, easing those bottlenecks.
One of these improvements is called the Siren System, which among other attributes is designed to cut down the amount of time it takes to make cold drinks. Faster blenders and new dispensers for ingredients like milk and ice are set up in a line, so baristas can prepare the beverage without bending down to reach for milk or whipped cream tucked under the counter.
Baristas spend about 36 seconds making a Frappuccino with Siren, down from about 87 seconds on average with the traditional system. Siren also uses ovens that can heat food in batches, rather than individually, to get food to customers more quickly. Some stores are already using the system as part of a test, but Starbucks plans to start rolling it out more broadly in 2024.
The company also discussed a new coffee machine Tuesday, which makes a freshly ground and brewed cup of decaf or regular coffee in about 30 seconds without paper filters. The machines should be in all US locations within the next three years.
In addition to improving its current locations, Starbucks plans to open 2,000 net new stores in the United States by 2025 — aiming to create a broad portfolio including drive-thru and delivery-only locations.
More rewards and better service
The tech improvements won’t stop in the kitchen. They’re also coming to the mobile app.
Mobile orders have become an important part of Starbucks’ business. The company had about 27.4 million active rewards members in the quarter ending in July, up 13% year-over-year. That’s great — when the app is working.
“As many of you are aware, our mobile app has had a few brief outages over the past few months,” said Starbucks’ Chief Technology Officer Deb Hall Lefevre on Tuesday.
About a quarter of US sales come through digital channels, Lefevre noted. “Even a few minutes of downtime can mean … confusion in our stores and, of course, lost business opportunities,” she said. The company’s first priority is to make the app function reliably, she said: “Things just need to work.”
Starbucks is planning other improvements as well, like allowing customers to use mobile ordering and collect rewards points when visiting a licensed Starbucks location. It’s also working on showing real-time order updates in the app, as well as a joint rewards program with other companies like retailers or airlines.
At the drive-thru, Starbucks is working on “a frictionless payment program that will automatically recognize and authenticate our customers as they pass through,” said Lefevre.
Starbucks also said this week that it would allow rewards members to purchase or earn NFTs starting later this year.
‘A trust deficit’
These tech upgrades, whether in cafe kitchens or payment systems, are designed not only to enhance customer service but to support workers.
For Starbucks, making employees happy is an important part of the plan as it fights the growing unionization effort. As of Tuesday, the National Labor Relations Board has certified votes to unionize at 224 Starbucks stores, and certified that 42 locations have voted against unionization.
Starbucks has made clear it wants workers to deal with the company directly, rather than going through a third party.
“We have a trust deficit with our partners,” said Frank Britt, Starbucks’ chief strategy and transformation officer, on Tuesday. “We have not lived up to the highest level of obligations,” he said. “We plan to do quite a bit about it.”
To that end, Starbucks said this week it will offer eligible employees support managing their student loan debt and help them establish savings accounts. Britt also said the company is working on giving workers more flexible scheduling options, with future plans including more generous sick time and additional mental health support.
Starbucks has said it can only guarantee new benefits for non-union employees.
But Starbucks Workers United, which has been leading the campaign, remains unmoved by the company’s plan. The group organized a march outside of the company’s headquarters Tuesday to coincide with the investor event.
“Workers are glad that Starbucks is taking an interest in issues related to our working conditions; we unionized because we would like to have a real voice in this process,” the group said in a statement about the investor meeting. “We look forward to negotiating over these conditions at the bargaining table.”
Correction: This story has been updated to clarify that Starbucks can only guarantee new benefits for non-union employees.
