America's Largest Coffee Chain Is In Major Trouble, Data Shows
Starbucks has long reigned as the top coffee chain in America and beyond, boasting more than 40,000 stores globally and raking in nearly $32 billion in the United States alone last year. But throughout 2024, the coffee giant has seen its popularity take a major hit—and it's now kicking off some big initiatives in a bid to reclaim its past success.
One of the first signs of trouble for Starbucks came in late 2023, when the chain's annual Red Cup Day "did not drive a significant spike in overall weekly visits," according to a report from foot traffic platform Placer.ai. Its woes only continued to pile up from there. For three consecutive quarters now, Starbucks' global same-store sales have been on the decline.
In the United States alone, same-store sales and traffic dropped by 6% and 10% last quarter, respectively. Per Restaurant Business Magazine, this is the worst sales period for Starbucks in 14 years.
Over the summer, Starbucks hired former Chipotle CEO Brian Niccol as its new CEO, while Laxman Narasimhan resigned from the position after less than a year and a half. Then in a September open letter, Niccol outlined a few factors he believes contributed to Starbucks' recent struggles.
Starbucks, Niccol wrote, had drifted away from its roots as a welcoming gathering space where guests can score consistently good, high-quality coffee.
"Many of our customers still experience this magic every day, but in some places—especially in the U.S.—we aren't always delivering. It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic. These moments are opportunities for us to do better."
To improve the overall Starbucks experience and entice customers back into stores, Niccol said they're focused on menu execution, taking care of their baristas, and re-establishing the chain as a "community coffeehouse." These efforts entail technology investments, supply chain improvements, and changes to the app and mobile ordering platform.
Niccol is also taking a different approach to marketing than his predecessor. During an October earnings call, he said the company had been heavily focusing its marketing on Starbucks Rewards members rather than occasional customers, who accounted for most of its traffic declines over the past year. Moving forward, Niccol believes Starbucks' marketing "needs to tell our coffee story and showcase our premium coffee beverages."
While Starbucks is still in the early stages of this new era, the chain is already seeing some potential signs of improvement. Placer.ai data shows that this year's Red Cup Day drove a 42.4% boost in daily traffic and a 9.4% increase in weekly traffic, higher increases than in the previous two years.
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