Chapter 1: What is the main topic discussed in this episode?
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I'm here right now with Brian Nickel, fresh off his investor day here in New York City and fresh off an earnings report that actually seemed to please a lot of investors. You're five quarters right now into your tenure as CEO of Starbucks, and you put together a couple of quarters of growth, something that the company hadn't seen in quite some time.
Yeah, it was a great quarter for us. The thing that was really exciting is to see the growth was driven by transactions and also the fact that the initiatives that we put in place around operating, supporting our partners with the Green Apron service model, and then really getting back to great customer service, I think really showed up in the results this last quarter. So we're pretty excited.
So when you say transactions, are you getting more people in the store?
That's exactly right. What was great to see too is the growth in transactions came from existing customers that are in our rewards program as well as customers that are not in our rewards program. Frankly, we had been struggling to reclaim momentum with that group. In this quarter, we had both groups growing in visits and as a result, our market share increased in visitation as well.
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Chapter 2: What insights does Starbucks CEO Brian Niccol share about their recent earnings report?
And then you also get just the soul of Starbucks. So, you know, our in-store business is still over 20 percent. The thing that I always like to remind people, too, is people access Starbucks in all these channels. So they may go via the drive-through or mobile order Monday through Friday. But Saturday, when they've got a little bit more time to dwell, they want to hang out in a great space.
And so just this past month, the data I saw is 60% of our customers made at least one purchase from the counter. And that doesn't include our mobile order pickup people that come into the store to pick up their coffee or their drink or their food. So, you know, Obviously, the entire business works because we have the right access modes, right?
Mobile order pickup, delivery, drive-through, and then obviously the Yink Cafe. But I just believe the cafe experience and this idea of a community location, the third place, it's critical to people and it's critical to what makes Starbucks Starbucks. It's who we are.
And you think that's what customers want, because we've seen some new entrants into the coffee space, both domestically as well as some folks like Luckin coming to the U.S., taking a much different business model, basically grab and go, more or less.
The thing I like to remind everybody is we actually execute those channels, right? So we have a mobile order. pickup business, which is one of the competitors. We have the biggest drive-through business. It's well over a $10 billion business. It actually would be a Fortune 500 company just on its own. So we know how to operate and give great experiences in all access modes.
What we've seen over and over again, though, is when we have all these channels with a great coffee house, we really are unmatched. And so that's our point of difference. And that's not to say we can't be great in these other access modes and compete effectively.
I mean, that sounds great on paper, but that sounds also complex. I mean, how do you maintain the integrity of everything when you're trying to have this experience in store at the same time somebody wants to grab and go or a delivery driver showing up to grab an order as well?
All right. And that is why it's so important that we get this green apron service model dialed in. And really at the foundation was making sure we have the right number of people on the roster, the people are deployed correctly, our partners then know what they're accountable to execute.
And what we've been able to see is between technology and I think simplification of the actual operating model, our partners can do a great job. A cafe experience happens in less than four minutes from order to drink with a personal handoff. Mobile order, we're more on time and accurate than we ever have been. And our drive-through during peaks are below four minutes as well.
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Chapter 3: How is Starbucks driving growth through customer transactions?
That's back as well. Our marketing, our menu innovation, one of the things we set out to do as part of this turnaround is get back into culture, get back to leading culture. And you gotta do that with the right drinks, the right food, and then frankly, the right representation of the brand, showing up in the right places at the right time with the right communication.
And Tressie Lieberman, who leads our marketing efforts, she's done a phenomenal job. We are, in my opinion, Starbucks is back.
Well, speaking of her, your investor day yesterday, she talked a lot about your rewards program. It's relaunching, being reimagined, I believe, in early March. Talk about the need to retain your existing customer base, but how that rewards program helps, if at all, in bringing in new customers, those who aren't exposed to Starbucks on a daily basis.
Yeah, so look, we got a lot of feedback on the rewards program. It's been a great program, but the feedback we got was it's not very personalized. And so really what the team has done is made it more personal. And the feedback we get from people that don't participate is like, look, maybe I don't go to Starbucks with enough frequency to really benefit from the rewards program.
We're changing that because now when you get into the green tier, and there's three tiers now, so you're going to have the reserve tier, the gold tier, and the green tier. And reserve is the top. Reserve would be the top. You'll actually get a black reserve Starbucks card, which will be pretty cool because everything seems to be so virtual anymore.
I think people like every once in a while to get something tangible. But the green tier then allows you to redeem stars and you can get a reward with not that much engagement. And so it just gets people to be more connected to the brand. And then ideally over time, they'll migrate into gold or
you know for some of those folks that migrate into reserve i think they'll find it's a really special experience you've managed to sort of uh get sales back up there are still some analysts that look at some of the growth rate that you have four percent i think was safe in the most recent quarter i think your guidance is what three to five percent a little bit longer term but there are some analysts they're looking back to the heyday from a decade or two ago when starbucks was more uh mid single digits and even up into the teens is that even realistic to get back to those levels
Look, I've looked at this as I've come in, and a company at our scale, we have 40,000 coffee houses around the world, over 400,000 Green Apron partners. I think if we can consistently deliver a comp that is 3% or better, revenue growth that is 5% or better, and then earnings growth that outpaces that, that would be world-class. And
We're a world-class company, and we will deliver, I think, world-class results as we get going on this turnaround. So make no mistake, we are a growth company at scale, which is really exciting, I think.
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Chapter 4: What strategies is Starbucks implementing to enhance the in-store experience?
And right now we're having to come back in, we call it our coffee house uplift program, where we are just basically retouching all of our cafes. So we want to have great seats, great atmosphere, a place that feels warm, a place you want to be. And then obviously we have been and will always be some of the best benefits, best wages you can find as a partner.
And so when you look at it in retail, there's no doubt we have one of the best jobs in retail. And that's the reason we can also see it is we have the lowest turnover in our industry by a lot. Our turnover is below 50% at the hourly level. In this industry, turnover is usually over 125%. So we're definitely doing something right. And the feedback I'm getting from our partners is,
They definitely feel supported, they're engaged, and they love doing the work that they're doing.
I am curious, though, about some of the unionization drives that kind of predated you but are obviously still there as well. Have you spoken with those unions in any sort of meaningful way recently? Are they still demanding more than what you've already offered?
You know, look, I think we've talked about this. I'd love to be able to find a deal so that we could get a contract and move on. But it's going to have to be reasonable and it's going to have to reflect the fact that we are the leader in benefits, wages for people that work 20 hours or more in our company.
Because it has to be sustainable so that all 400,000 partners and all 250,000 partners in the United States can continue to have a great experience, a great career, and frankly get great development and growth personally and professionally.
So we're always gonna continue to have the conversation and I'm a believer in that you can find a solution, but it's gonna have to be reasonable so that everybody can be successful long-term.
The US is obviously your primary market, but Starbucks for quite some time and made a real big push into China. At one point you were the largest coffee chain in China. You've retrenched from that just a little bit, and you've recently entered into a partnership to effectively sell off the majority of that business to the private equity firm, Boyu.
What is Starbucks going to look like, particularly in China and the rest of the countries?
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