Starbucks Prices Are Rising: How Its New CEO Plans to Save the Company | WSJ

- You gotta find out what makes your brand magnetic or loved. And when you find out what that is, you gotta do everything you can to make sure people understand it and that you're delivering it every single time. - [Narrator] This is Starbucks new CEO, Brian Niccol.

And these charts show why he was hired. Starbucks is in a slump. The price of coffee has been rising, though mobile orders have increased, so have wait times, and sales are lagging.

Niccol thinks these problems can be traced back to one source. - We spent a lot of time trying to figure out how to cost-save our way to a very efficient drink and not enough time on what is the experience that Starbucks provides - [Narrator] Right now, some customers say, "That experience isn't positive. " Free-to-the-public bathrooms have caused loitering and long lines and mobile orders have created what former Starbucks CEO Howard Schultz calls a mosh pit, a crowd of waiting customers discouraging people from staying to enjoy their drink in store and possibly order more.

WSJ's restaurant reporter Heather Haddon sat down with Niccol to learn where he thinks Starbucks's problems lie, and how he plans to revamp mobile ordering and store layout to bring customers back in. - Let's talk about speed of service. I know you're committed to making beverages at four minutes, most beverages.

How are you gonna do that given the volume of business that you have? - What I fully believe is, if we bring order to mobile order and we use some technology to sequence those orders, our partners, those are the Green Apron baristas that you see in our stores, can be very successful at creating in-store drinks and food in roughly four minutes or less. - [Narrator] As fast-growing chains like Dutch Bros and 7 Brew prioritize their to-go business and many independent coffee shops cater to dine-in customers, Starbucks is trying to do both.

- Right now, when you mobile-order, you'll get sometimes a message that says the beverage will be ready in three minutes. Well, you physically can't get there in three minutes. - Mm.

- And so we're mismatching when the customer wants it and when we should be making it. And the number one request actually is, let me pick what time I can come pick up my beverage. - So in a year, will mobile order be fixed?

- I sure hope so, or at a minimum, we will be a lot better than where we are today. - [Narrator] Fixing the algorithm to better sequence the order of drinks is vital. In early 2024, in-app demand caused one in eight users to abandon orders due to wait times.

- Why are shorter wait times so important for turning around Starbucks? - Customers are finding, "Oh wow, I have more time to enjoy my beverage in-store," and more people are selecting to get it in a ceramic mug now and then just take a moment in our stores, which, that's the experience we want. - [Narrator] Niccol has also implemented a new code of conduct which ends the company's policy of allowing access to stores and bathrooms regardless of purchase.

The previous policy had caused safety concerns in some cafes and presented a more challenging environment for baristas to control. (mug thuds) - So what was the new code of conduct in response to and what is it trying to fix? - I'll give you a great example.

I got a story the other day. An individual decided to buy food somewhere else, walked into our store, sat down as if they were gonna eat lunch in our store, which, that's fine, but you should be buying a beverage from us if you're going to be doing that. And our partner handled it correctly.

He was like, "Hey, look, you're more than welcome to have lunch here, but you do need to buy something. If not, you're gonna have to eat that somewhere else. " It's not fair to our partners to be running a store where right across the street is another coffeehouse that doesn't have to deal with this.

- And dealing with this being just. - Just being, like not respectful and not respecting others that are customers or not respecting the partner that's trying to run a really good shop. I think this is just a practical common sense approach where we're in the business first and foremost to serve our customers and we gotta do it in a way where our partners feel safe, they feel confident, and that they believe they can provide that experience.

So that's why we've rolled it out. The feedback I've gotten for the most part has been like, "You know what? Thank you," both from the partners and from our customers.

- [Narrator] Some baristas said that not providing bathroom access and free water are at odds with Starbucks's message of hospitality. - How about the Sharpie writing? So that's gotten a lot of attention.

I know a lot of customers like it. I've heard some baristas maybe are a little overwhelmed, trying to do it on every single order. What do you envision this looking like and why is it important?

- You know, what I've heard from partners is, when they do it, they're surprised at how meaningful it is to the customer. And I think also our customers are surprised how meaningful a little smiley face is or a have a good day is unexpectedly, and I think we should strive to do that for every customer, every transaction. Just today, I got some egg bites and they just put a smiley face on the packaging and you know what?

I was like, ah, that's nice. - [Narrator] Some baristas have complained that this new policy has slowed down their working speed and is forcing a connection with customers. - What problem are you trying to solve by bringing back the condiment bar?

- Well, look, it'll help with our speed of service, first of all. And frankly, just about every coffee shop allows you to do your own cream and sugar. And so, it was really one of those things where it could free up service for our baristas.

And then two, also give the customer the control of the customization that they want a control of. Usually when you do those types of things, you're rewarded with more business. - So during COVID, a lot of stores, some of it was COVID-related, then it was also a safety matter.

A lot of them don't have furniture anymore. And I know - - Which is a shame. - that's something you're also interested in.

Talk about the process of bringing back comfy couches and just restoring the environment. - Yeah, look, that's on our plan. That's a little bit longer lead time in order to get the furniture, get the aesthetic that we want back into the store.

We're in the process of procuring those items so that we can create great seats again in our coffee shops. - Stepping back, how did we get to the place that we are in and you're working to turn around where there has been consecutive quarters of same store sales declines. - Yeah, look, obviously, I wasn't here, but when I look at the situation, I think we lost focus on that moment of connection and I think we got confused that mobile ordering could solve the entire business.

I think we got a little confused that the drive-through could solve the entire business. And I think we got over rotated on trying to just drive everything through our rewards program. And like anything, you have to have a balanced approach and you have to protect the integrity of your brand.

And that's what I'm just getting back to doing. - [Narrator] To help accomplish that, Niccol is also overhauling Starbucks's corporate arm. The company expects to announce layoffs in March and a number of veteran Starbucks execs have left.

- So stepping back even further, talk about your experience in the restaurant business and how you're bringing that experience here. - You know, the one thing that I've learned over time is, you gotta find out what makes your brand magnetic or loved. And when you find out what that is, you gotta do everything you can to make sure people understand it and that you're delivering it every single time.

I experienced that on Scope Mouthwash to Chipotle. Now, I'm trying to bring that discipline to Starbucks. - In the next year, what do you wanna accomplish at Starbucks?

- I'd like everybody to know what the Starbucks brand is all about, right? The craft, the commitment to quality, what goes into our beans from farm to ultimately the store, how we take care of our partners. And then I also wanna see mobile order not be a problem.

It should be a advantage, okay? More access to Starbucks should be a good thing. And right now, we've made more access a challenge for our partners and our customers, and so we're gonna fix that.

I'm also confident we're gonna have a great coffeehouse vibe because we're gonna have great seats with great experiences that people are gonna wanna hang out and kind of experience life with other people.