Starbucks' New CEO Vows Menu Simplification & 4 Minute Drinks

[Alpha8472]

The new CEO of Starbucks vows to simplify the menu and reduce drink times to 4 minutes or less. This includes getting rid of the time consuming olive oil drinks and iced energy drinks.

Starbucks has seen falling sales recently.

https://finance.yahoo.com/news/starbuck ... 42046.html

[rwsandiego]

I read that he is bringing back Sharpies to the stores, which I hope means bringing an end to the ridiculous system where your shaken iced tea waits behind my six Trenta extra-shot no water sugar free mochas, three with whip, two with caramel drizzled inside of the cup, and one with the caramel on the top.

[storewanderer]

I think bringing back the Sharpies to mark orders on the cups is stupid and I preferred the method with the stickers on the cups from the POS system. It was more professional and should have been more efficient (but maybe it wasn't). This was one of the things I liked better about Peet's was they did the sticker from POS on the cup thing 15-20 years ago and it seemed much cleaner and more professional.

I assume the computer generated sticker system will continue for mobile orders.

Casino units still use the Sharpies to this day.

[ClownLoach]

There isn't really anything new here. They are going to remodel all the locations, even stores that are opening this week need to be redone. I would put an immediate halt to every single new site except for relocations they're stuck doing until they can straighten things out.

The difference is that the new CEO is a better communicator and sets very simple expectations for the team. He also recognizes the scam that Starbucks has been pulling with pricing, raising prices to offset sales declines in an effort to prop up earnings while sometimes recognizing the sudden need to amp up traffic by doing these blowout sale events. The entire thing doesn't work because it demonstrates to the occasional customer that they can sell for much less and as a result they stop coming in unless there is a promotion. He pulled the plug on all of that, stopped up charge for alternative milks, and is going to need to further streamline pricing over the next year to strip out all the other weird manipulation where for example one flavor of a crappy thaw and serve muffin is one price while a different flavor costs more.

But if you dig into the press announcements and such, he is basically following the same footprint set by the last CEO. It's almost like Wall Street didn't believe him so they wanted a second opinion and got the same diagnosis and treatment plan but it sounds better the second time around.

There are a bunch of questions I would have as a barista. One is that the company is in the midst of rolling out a very cool new brewed coffee program called Clover Vertica. This system is a compact machine that fits in the same space as an old fashioned vertical tank brewer. It grinds the beans to order and brews the cup of coffee in about 30 seconds so it is always perfectly fresh. It allows Starbucks to offer 6 varieties at all hours of the day, and reduces sidework for the employees to simplify their jobs. So now the new CEO is stating that they're going back to the cashier dispensing brewed coffee to expedite service. Does that mean they're going to scrap this program that is in rollout right now, which has been a major R&D effort for the company for over a decade, and go back to old fashioned tanks? Because if you're talking about the cashier quickly dispensing coffee this device is not the solution. It's basically a device similar to the ones at fancy gas stations that grind and brew, but it is smaller and tastier.

The next big problem he faces is that the marketing is totally broken and must be fixed. Right now commercials address the image of the company as some weird lifestyle brand with aspirations to reshape society. That doesn't sell drinks. The new commercials are extremely simple right now, macro shots and sounds of coffee brewing process ending with something like "It's a great day for coffee." I think it's a placeholder but the lack of a more complex message is a message in itself.

Next, as discussed, they have a need to fully revamp the restaurants from seats to floors to the entire kitchen area and this will not be cheap. The new program discussions ultimately accomplish returning comfort for the customer while separating the online pickup orders from the regular orders. The fact that there is so much confusion, such as brand new stores opening without the Siren System equipment while brand new remodels have it, equipment issues like the Clover Vertica I discussed above, etc. indicates that he has a big mess that is not at all nailed down. But he simplifies the message to the press and communicates it well so they think there's a solution underway, he says he wants to make it like Chipotle separate assembly lines while failing to mention that was his predecessors plan not his.

What I do not see is any discussion about how to fix their biggest problem and that is the disconnect between the current menu versus what the customer wants. He says they need to simplify the menu. I agree with removing energy drinks that were thrown in as a slap dash measure to compete with Dutch Bros, but we also know that they are a very different operator capturing a different customer Starbucks wasn't servicing in the first place. If you dig into their social media feedback, you'll find the crux of the problems. They don't need to necessarily simplify the menu. They do need to bring back exactly what the customer is asking for, and that does not add complications at all. Customers want the Salted Caramel Mocha back for example, that means adding one topping shaker and one syrup to the rack. It should be an immediate slam dunk for sales. There are other examples customers scream for like the S'Mores Frappuccino and Starbucks doesn't deliver. But what has changed is Starbucks competitors read their comments and make their versions to take that business. Dunkin Donuts proves menu complication is not the issue, they are rapidly making their menu more complex by adding their versions of Starbucks dropped drinks. The Dunkin S'Mores drink was a massive hit this summer and brought them new business. Starbucks competitors don't need to spend a fortune with a lab creating drinks like Apple based espresso drinks nobody asked for, they just need to look up all the favorites Starbucks fails to bring back. They also need to blow up the entire food program and start again as it's awful. This was part of that siren program which would basically cook large batches of sandwiches all at once and then bag them up and put them on a hot rack ready to go for expedited service. But there wasn't any discussion about making better food too.

I can see them easily fixing the marketing, the pricing, the ordering process, but I think they are still in over their heads on the expensive need to revamp all the restaurants. And there is not enough being done to fix the drink and food menu problem besides low hanging fruit. That stagnant and weird menu program is the #1 problem with the business, their competitors see it, but the impression from the discussion is they do not recognize the severity of that problem. It seems pretty obvious to me that is the easiest and fastest way to increase sales.

[BillyGr]

There are a bunch of questions I would have as a barista. One is that the company is in the midst of rolling out a very cool new brewed coffee program called Clover Vertica. This system is a compact machine that fits in the same space as an old fashioned vertical tank brewer. It grinds the beans to order and brews the cup of coffee in about 30 seconds so it is always perfectly fresh. It allows Starbucks to offer 6 varieties at all hours of the day, and reduces sidework for the employees to simplify their jobs. So now the new CEO is stating that they're going back to the cashier dispensing brewed coffee to expedite service. Does that mean they're going to scrap this program that is in rollout right now, which has been a major R&D effort for the company for over a decade, and go back to old fashioned tanks? Because if you're talking about the cashier quickly dispensing coffee this device is not the solution. It's basically a device similar to the ones at fancy gas stations that grind and brew, but it is smaller and tastier.

The location here has that, and when getting just regular coffee, the person who took the order and payment went over to set up the cup and start it running (rather than others off to the side that were doing other drinks).

So that may be all that is meant by cashier dispensed.

[ClownLoach]

There are a bunch of questions I would have as a barista. One is that the company is in the midst of rolling out a very cool new brewed coffee program called Clover Vertica. This system is a compact machine that fits in the same space as an old fashioned vertical tank brewer. It grinds the beans to order and brews the cup of coffee in about 30 seconds so it is always perfectly fresh. It allows Starbucks to offer 6 varieties at all hours of the day, and reduces sidework for the employees to simplify their jobs. So now the new CEO is stating that they're going back to the cashier dispensing brewed coffee to expedite service. Does that mean they're going to scrap this program that is in rollout right now, which has been a major R&D effort for the company for over a decade, and go back to old fashioned tanks? Because if you're talking about the cashier quickly dispensing coffee this device is not the solution. It's basically a device similar to the ones at fancy gas stations that grind and brew, but it is smaller and tastier.

The location here has that, and when getting just regular coffee, the person who took the order and payment went over to set up the cup and start it running (rather than others off to the side that were doing other drinks).

So that may be all that is meant by cashier dispensed.

I doubt it. There is a massive time difference. It takes less than ten seconds to fill a cup from a regular brewer. The Vertica is 30 seconds for a tall and closer to a minute for a Venti. If he is dead set focused on the customer being able to enter any Starbucks, place an order for any drink, and leave drink in hand in 4 minutes or less then they are not going to be able to use this device in this manner which might doom the entire Clover division at Starbucks. That would be a real shame as they bought this technology which was unsurpassed in the brewing of regular coffee and as a result countless upscale independents were forced to retire their machines as they were no longer supported and needed to have a server connection to operate. The specifics of each individual roast determine the brewing time (steep time), temperature, etc. and are downloaded to the machine. It gives Starbucks a huge competitive advantage as it allows them to have multiple flavors available without waste and ensures a perfect fresh cup for every customer.

This is the kind of quandary they're stuck with trying to fix. They can't deliver the best quality, best service, and fastest experience all together. They have to make compromises and this is a big one. They made a similar compromise when they decided to eliminate the "real" espresso machines and move to the automated ones. They are on their third generation automatic machine (Verismo, then Mastrena, now Mastrena II) and each unit costs $40,000 plus delivery, installation, and maintenance. So when you see a old established store that machine sitting on the counter is the 4th generation in the building. And it still does not deliver better coffee than the first La Marozzco one which was scrapped almost two decades ago at Starbucks but otherwise is the backbone of the coffee industry today. So once again the question is do they want the best product, the best service, or the fastest experience. Ironically they chose the worst product decision and fastest service with the heavily automated espresso machine. With brewed coffee it is in reverse, the most automated machine is going to produce the best cup of coffee but it sounds like they are going to go with the worst quality again back to brew vats that sit around because it's faster to serve.

So that puts them not in a war for best quality, where they need to be, but back in a war for fastest service. That means being more like McDonald's and Dunkin. But everything they're saying is they need to differentiate themselves and become the best coffee place again.

Do you see the inherent conflict and ultimately why they are in the mess they are? The pros and cons of every decision weigh big, and many times the priorities are in direct conflict with each other. What a mess.

They're trying to do too many different things, too many different ways, all with in effect the same building (plus or minus a drive thru). Space is a problem too. So in certain locations they're going to have to make tough decisions, possibly even elimination of the mobile order system in those locations that it overcomplicated operations. In others they may have to move entirely to only mobile order, a concept they're already testing. And the mobile system and procedures are so poorly designed that they have competition like Dunkin that runs circles around them already and already has next generation technology in restaurants today that uses Bluetooth and GPS location to determine exactly what order to produce each order in so that like magic the order is finished the moment the customer walks up to the counter or gets to the drive thru window to pick it up. Not a minute too early or too late, so all the stress of the operations Starbucks employees have does not exist at all even in busy Dunkin stores. I have to believe there are a lot of people at the corporate office at Starbucks who are resistant to making change because they are the ones who made the system what it is today and proposing change would be a self-sacrifice in their turbulent organization resulting in their unemployment.

[storewanderer]

I think Starbucks has too many locations, and continues to over-expand...

They are playing defense trying to chase after other chains for real estate. I am curious how many unprofitable locations they have.

I don't really see how they can decrease prices. The move to not surcharge alternate milks was in effect a price decrease for many customers though.

[Romr123]

The "no upcharge for plant milk" is interesting as the plant milks are all aseptic/ambient temperature products where the dairy milk are all refrigerated/fresh....when volume of those dwindles the delivery cost/unit goes up substantially. It's always amusing to see the licensed locations in supermarkets use the house brand of dairy milk when the standalone stores always have weird packer labels.

Definitely supply chain optimization is a thing for them!

[ClownLoach]

I think Starbucks has too many locations, and continues to over-expand...

They are playing defense trying to chase after other chains for real estate. I am curious how many unprofitable locations they have.

I don't really see how they can decrease prices. The move to not surcharge alternate milks was in effect a price decrease for many customers though.

Their final operating margin in the US is 18.7%. As we know most retailers are in the low single digits once the rent is paid, bills are paid, etc. There is a tremendous amount of corporate overhead too, way too much in my opinion as it has caused them to become a stagnant, slow moving monster corporation which has contributed to their current problems.

It is a wildly profitable business and frankly is too profitable because Wall Street is never satisfied so they've cut too much labor out, played too many price optimization games so the blueberry muffin costs more than the chocolate chip muffin and the pumpkin muffin costs more than the previous two, and so on.

They close a lot of stores annually, in the hundreds, but new openings still far out pace closures. Nearly every closure is the traditional in-line format. Some of the in-line stores I've seen close are frankly shocking to me, stores in the heart of major entertainment and big box centers that were not replaced with a drive thru on site. One I used to frequent in college was in front of a 26 screen Regal theater in a big box center with a Walmart, Sam's, Lowe's, and at least a dozen other big boxes but they gave up on it and just let the Barnes & Noble cafe take over the business at that center despite their less convenient location. They had also fully torn down and remodeled that Starbucks a few years before closure.

I doubt any store that is unprofitable is kept open long. Small suites like Starbucks in-line stores occupy usually have annual escape clause. They do potentially run more risk on a drive thru site which may have longer required term, but I would imagine those are so much more profitable that it all works out for them.

I do think that they are perfectly happy to close profitable stores if they are negative comp. They are in trouble on Wall Street for the negative sales, so even if those sites make money they're going to be closed for dragging down comp sales results. My college store example above was in business 25 years and a "flagship" type location in the market. You bet that it was negative comp suddenly being next to the theaters that we know have had problems the last five years or so. It used to be a midnight or 1am closing site but once the theaters shut down for COVID and slowly recovered it moved to 8pm closures. I remember the lines out the door at 9 and 10pm of people getting a big Frappuccino before their movie started. They lost that night business and I would guess started dropping negative 40% or more comps so they were closed immediately. I'll bet they were still profitable.

[ClownLoach]

The "no upcharge for plant milk" is interesting as the plant milks are all aseptic/ambient temperature products where the dairy milk are all refrigerated/fresh....when volume of those dwindles the delivery cost/unit goes up substantially. It's always amusing to see the licensed locations in supermarkets use the house brand of dairy milk when the standalone stores always have weird packer labels.

Definitely supply chain optimization is a thing for them!

They must have some sort of deal in SoCal with Safeway, that predates the Albertsons acquisition. Starbucks company owned and operated stores have been using Lucerne milk for decades here. Not just the ones in the grocery stores.