To get a sense of how granular Brian Niccol’s plan for Starbucks’ dives, the company soon will place Sharpies back in the hands of baristas so they can “put that additional human touch on every coffee experience.”

While a detail down to the literal ink, this kind of sentiment has surfaced often for Niccol since he left his CEO post at Chipotle in early September for the same role at Starbucks. There’s a stark disconnect between Starbucks of present and the brand people carried around like a status symbol years ago. And it weaves through nostalgic and broken touchpoints, pricing architectures, and, at the foundational level, the way restaurants are run and what they’re like to work in.

Niccol hosted his first earnings call Wednesday and laid out a vision for investors. It came on the heels of perhaps the worst public performance for Starbucks outside of the pandemic. The company took the rare step to reveal preliminary Q4 results last week and confirmed them Wednesday, with North America and U.S. same-store sales declining 6 percent. Notably, the comp was dragged by a 10 percent plunge in comparable transactions (traffic), partially offset by a 4 percent lift in average ticket. International same-store sales fell 9 percent on a 5 percent decrease in average ticket and a 4 percent decline in transactions. China was down 14 percent (8 percent lower ticket, 6 percent negative traffic). Consolidated net revenues fell 3 percent to $9.1 billion.

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CFO Rachel Ruggeri said traffic declined across all channels and dayparts. The most pronounced dip took place in the afternoon. In addition to the ongoing decline of non-Starbucks Rewards member visits, frequency also slowed across all member deciles in comparison to this time last year, which ultimately impacted spend.

Although rewards members overall lifted 4 percent, year-over-year, to 33.8 million, growth remained flat to Q3 “as our product innovation and offerings as well as promotions did not create sustained excitement or the stickiness we planned,” Ruggeri said.

Starbucks opened 722 net new stores globally in Q4 to exit the fiscal year with 40,199 (the U.S. and China have 16,941 and 7,596 restaurants, respectively). The brand noted about 40 percent of its U.S. company-run stores comped positive across 2024, with outsized contribution from new stores, especially in markets where store density remains low.

Starbucks will reduce the number of new stores and renovations in 2025 to accommodate a redesign and unlock capital to support its turnaround. The company also suspended guidance for 2025 given the transitory efforts ahead.

Ruggeri, a 20-year-plus vet of the brand, put it plainly: “… Our results do not reflect the strength of our brand and what we’re capable of.”

That, too, Niccol said, has been a recurrent theme. In past weeks, he’s framed the java chain’s reroute as a “Back to Starbucks” shift. “We have to get back to what has always set Starbucks apart,” he said.

Starbucks drive-thru with cars.
Starbucks wants to get faster at the drive-thru as well.

This webs out in a few ways. To start, Niccol thinks it’s become too difficult to be a Starbucks customer. And the company focused marketing too narrowly on rewards members.

Niccol said Starbucks is now working across the U.S. to support a clear throughput and quality goal. The directive being to get drinks to café customers in four minutes or less. For those ordering ahead and for delivery, make sure the product is there on time, every time.

On that latter note, more than 30 percent of Starbucks transactions are driven by mobile orders. It’s no great mystery, especially post COVID, this multi-channel rush, namely at peak, created an influx of orders that proved difficult for Starbucks to sequence and fulfill. It overwhelmed cafes and diluted the value proposition of ordering ahead.

Niccol said Starbucks will improve sequencing with a new algorithm that enables on-time mobile-order handoffs and supports its four-minute goal. The company is also placing “common sense guardrails” on mobile ordering. “And over the coming months, we plan to take steps to better separate mobile order pickup from the cafe experience,” Niccol said.

These “common sense guardrails” join a larger aim to reduce complexity. Niccol said Starbucks took a look at how it could simplify customization so it doesn’t get out of hand.

If a guest goes through the app currently, they see all kinds of options, which is essentially the same page for nearly everything you can order. Two things happen, Niccol said. One, the breadth makes it difficult for somebody to get through. Secondly, Starbucks—deliberately or not—has incentivized people to customize drinks that likely aren’t the best way to enjoy them. Also, those orders are time consuming to craft.

“So we have some cleanup to do, is the way I would describe it,” Niccol said. “And then, I also think we have some pricing architecture tied to guardrails to ensure that we end up with no surprises for, frankly, anybody on what was the price of what they just built, and then also that we can execute it consistently every time.”

Starbucks, regarding pricing, said it hopes to take zero lifts this coming year at corporate restaurants. And, on November 7 when Starbucks launches holiday items, the company will eliminate the upcharge for non-dairy milks at corporate North America cafes. Given it’s the most popular customization after an extra shot of espresso, nearly half of consumers could see a price reduction of 10 percent or more when they choose a non-dairy milk going forward. Non-dairy modifiers presently account for roughly 1 percent of sales and profit. “It’s a great start, but we have more work to do to make our pricing architecture straightforward and logical,” Niccol said. Modifiers overall total a $1 billion business for Starbucks (60 percent of beverages).

There are tie-ins between customization, price, and blurry value. Guests at Starbucks start with one price and begin making adjustments. Presently, Niccol said, everything has a different upcharge. Whether it’s one pump, two, four, etc., frankly, he’s still trying to understand how the system works. If the CEO is confused, it’s probably a safe bet to assume guests don’t fully get it, either.

“And that’s part of the reason why I know we have to simplify it,” he said. “What I have found is when you get simplification in place on pricing, people understand, OK, this is what I’m paying and this is what I’m getting. And right now, I think we’re surprising people a little bit on what they’re paying through the customization process, and we’ve got to fix that.”

Returning to the outline, Starbucks will begin its race toward four-minute throughput via proper staffing. Its working to get partners hours and schedules they’re hoping for and to ensure units have the correct number of workers on the floor, especially during morning peak and shoulder hours. The company is making a commitment to identify internal hires for 90 percent of retail leadership roles and said it will host a store manager conference this coming year.

A more tangible change, like the Sharpies, though, will return condiment coffee bars to all cafes by early 2025. Alongside guests requesting the throwback, Niccol said employees wanted it. They believe it will make it easier to deliver speed.

Essentially, Starbucks needed clarity of where the barista handoff experience happens. If a guest orders a brewed cup of coffee, Starbucks wants to hand it to them at the terminal, and then they can go to the condiment bar and doctor up their drink. BTIG estimates hot brewed coffee represents a mid-to-high single-digit percent of sales at Starbucks.

But while seemingly a major change for a modest sales mix, analyst Peter Saleh wrote Thursday, the bars plus Siren system should address nearly 70 percent of Starbucks mix (more on Siren momentarily).

Starbucks also expects to complete the rollout of Clover Vertica brewers to all corporate stores by the end of next year, Niccol added. It’s a machine that can serve a cup of coffee on demand in less than 30 seconds, topped by six hoppers that don’t require paper filters.

Meanwhile, Starbucks said it will continue to scale its investment in Siren equipment and Siren Craft processes—“a critical enabler in helping to achieve our four-minute wait time aspiration,” Niccol explained.

“Siren” is a larger topic that’s floated in the backdrop since being introduced in September 2022. It includes process improvements and kitchen layout and equipment upgrades that achieve everything from cutting the need for workers to open refrigerators while making cold drinks to features like a custom ice dispenser, faster blenders, and a milk-dispensing system. The setup also slices the time to make a Frappuccino in half.

There’s flexibility in how much, or how little, can go in, store-to-store.

“What I want the organization rotating toward is how do we unlock throughput at less than four minutes in that store? If that store requires the full Siren Craft system, put it in,” Niccol said. “If it requires some pieces of it, put that in. If it just requires staffing and better deployment, we’ll implement that. So I really, I think we need to re-rotate ourselves to this idea of we are going to be a great coffee craft company that has now really good throughput and operational standards for how we’ll perform for each of these access modes.”

One reason the Siren package hasn’t been a direct rollout, Niccol said, is because Starbucks wasn’t sure previously what problem it was trying to solve. The business expanded to hot, cold, and through delivery, drive-thru, mobile, and café channels. All had different operating and time of service standards.

Clarity emerged with the four-minute throughput focus.

Niccol doesn’t consider the figure, which is also the drive-thru plan, an aspirational target. There are some long-tenured employees getting handcrafted drinks poured in about two-and-half minutes. He said “probably” about half of stores today are executing transactions in less than four. The equipment is there; Starbucks just wasn’t deploying to serve against that goal. Once you start measuring for throughput, Niccol said, you begin to see which stores need to aggressively adjust.

“During peak, we know it’s very doable,” he said. “We just need to do it in all our stores in every transaction. So we’re going to be maniacal about getting after it.”

Starbucks employee handing over coffee.
Can Starbucks becoming a coffeehouse vibe again?

The comeback of community

It’s also a well-worn notion at this stage that Starbucks’ “third-place” slid into the void during COVID, and definitely after. And really, it was headed there before the crisis thanks to the rise of mobile ordering and proliferation of suburban drive-thrus. But Starbucks got too far out, Niccol said. He wants the brand to reclaim the third place so cafes feel like the welcoming environments customers remember.

It doesn’t necessarily matter if somebody is flipping open a laptop or grabbing a cold brew off the counter and streaming out—Starbucks should look and feel like you’d be welcome to do either.

In the coming months, Niccol said, Starbucks intends to reintroduce more personal touches to elevate the café experience (such as Sharpies). In another example, it’s going to begin prioritizing serving coffee in ceramic mugs for those who decide to stay in.

Starbucks has begun to review and revise designs as well, Niccol continued, to bring back more comfortable seating and amenities and to ensure locations are a place “where customers want to sit, work, and meet.” Designers are examining layers, textures, and the details that bring it all together.

Niccol added employees told him they “they wanted their café dining room back.”

“They like leading the coffee house,” he said. “I think there’s a moment of pride, of saying, this is my place. They know our customers by name. They have their regulars. They want to have a great seat for them.”

Starbucks is trying to figure out ways to reduce the cost of its renovation program. As part of that, Niccol said, it’s also going to learn how to create experiences where “you’ve got a great coffee house chair or seat or vibe.”

And then, going back to execution, work to separate the counter experience (in-store and mobile order pickup). Niccol said the goal will be to create a defined area where it’s clear with mobile that your drink is ready and you can grab it.

“I know we’ve got it right when people are questioning whether or not they want to order mobile, because maybe if I have a few minutes, I’d rather stay in the cafe and get that cafe experience from our barista, where it’s handled,” Niccol said. “So I have strong belief that we can make the cafe experience, frankly, really terrific and something special, really welcoming, warm space where you want to spend some time.”

On the marketing front, Starbucks has already kicked off a coffee-centric campaign that tells a premium story. In turn, the brand reduced the frequency of discount-driven offers that proved, as Q4 traffic showed, ineffective in driving visits. They also diluted Starbucks’ DNA and overburdened employees, which detracted from a consistent customer experience.

Niccol said the way Starbucks gets to “value” will be through straightforward pricing, timely service, and a more enjoyable café experience. “Our customers find worth through quality, consistency, and a sense of value,” he said.

The brand’s newly launched campaign focuses on talking to all customers—not just rewards users—and elevates Starbucks through broad-reach media like linear TV. “It reminds customers across age groups that Starbucks serves the best coffee,” he said. Expect to see it ramp up throughout the holidays and into January.

The java message will also give Starbucks a chance to steady its innovation cycle. Niccol said when he arrived he was happy to see a stage-gate process (Chipotle operates through this lens) in place. However, it wasn’t being followed, at least not recently. Starbucks will get back to doing so versus rolling items into the marketplace so fast it stresses the supply chain and store-level crew. “It just wasn’t being used,” he said, “and now we’re going to reinstate it.”

Beverage, Finance, Story, Starbucks