Somewhere amid the Frappuccinos, fans say Starbucks lost something

For 32 years, Greg Tutunjian, 73, has picked up his coffee at Starbucks. He’s partial to its dark-roast Red Eye, but starting to question his loyalty to the chain that serves it up.

While waiting for his order, Tutunjian watches impatiently as baristas whip up Iced Brown Sugar Oatmilk Shaken Espressos or other foamy, iced, caramel-topped drinks for drive-thru or mobile-app orders. Minutes tick by before he is finally handed his coffee (dark-roast coffee with a shot of espresso).

Even more annoying for Tutunjian is when Starbucks’s mobile app tells him that a bag of his favorite coffee beans — Komodo Dragon — is in stock when it isn’t.

“I will go to four or five Starbucks in my local area and have the same experience. I check the app right before I go inside and it says it’s there, but when I arrive, the people working there say, ‘Oh, we don’t use or look at the app,’” said Tutunjian, a software consultant from Newton, Massachusetts. “I walk out empty-handed.”

Tutunjian’s frustrations are now Brian Niccol’s problems.

Niccol took over as the Starbucks CEO on Sept. 9 and quickly laid out what’s wrong at the company. During his first week on the job, he panned the Starbucks store experience in a letter posted on the company’s website: “It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic.”

The numbers bear him out. Last week, the coffee giant issued a preliminary report that showed a 7% drop in global same-store sales for the fourth quarter amid “a pronounced traffic decline” — 10% lower than it was a year earlier. The company, in a sign that it will take time for Niccol to fix Starbucks’ issues, suspended its financial guidance for the 2025 fiscal year.

Investors will be tuning in Wednesday to hear Niccol’s early efforts to remedy the maladies he has diagnosed. The company will officially report its fourth-quarter earnings in the afternoon, and there are high expectations for Niccol, who was wooed from a successful run at Chipotle with a compensation package worth more than $100 million.

But Starbucks faces challenges that won’t necessarily be easy to address.

Some customers, already squeezed by inflation, are simply balking at $8 lattes, while others are boycotting the chain for a variety of reasons. Still others have switched to coffee shop competitors that are popping up across the country.

Starbucks is also a victim of its own success. It pioneered the customized coffee drink, allowing customers to add an extra espresso shot, two pumps of sugar-free vanilla syrup and matcha cream cold foam to top it off. A simple cup of coffee became an expression of individualism or caloric abandon. But those eight-ingredient drinks can take a couple of minutes to make. And with more than a third of transactions in recent quarters coming from mobile app orders, that can lead to long waits for customers who order in person.

“The traditional Starbucks experience is being greeted by name, having a friendly conversation with the barista and given a drink that tastes good,” said Ari Bray, a barista at a store near the University of Washington in Seattle, one of about 500 stores in the country that are unionized. “When there is a 15-minute wait and nobody can talk to you because they’re so slammed, that’s not a good experience for anyone.”

Some customers pine for the 1990s, when Starbucks cafes encouraged customers to curl up on a cozy chair or chat with friends while sipping lattes. Like most other restaurant chains in the postpandemic world, Starbucks has focused a lot of attention on drive-thru and pickup orders. Seating has been reduced or even removed in some of its stores.

“My first date was at a Starbucks. One of my favorite things to do was get a coffee and read a book at Starbucks,” said Nicole Simone, a 39-year-old musician in Los Angeles. “Now it feels like a fast-food restaurant. It has the sterility of a Taco Bell or McDonald’s.”

Analysts expect Niccol to first tackle the problems facing stores in North America, which make up about 43% of the company’s nearly 40,000 stores around the world and provide about three-quarters of its revenue.

But China, where Starbucks has more than 7,300 stores and a rapid expansion plan, is a sore spot for the company. Same-store sales there fell 14% in the fourth quarter, according to preliminary earnings. China’s lackluster economy, combined with heightened competition from other coffee and tea shops in the country, has led some analysts to wonder if Starbucks might slow its expansion plans or even spin the China business off entirely.

Starbucks declined to comment for this article, saying the company was in its quiet period before earnings results. But in a video posted last week, Niccol said the company needed to “address staffing in our stores, remove bottlenecks and simplify things for our baristas.” He also called for improving the mobile system for ordering and paying so that mobile orders do not overwhelm the cafes.

And Niccol is moving quickly to simplify the menu, even removing the olive oil drinks promoted by the company’s longtime leader, Howard Schultz, according to Bloomberg News.

Still, customers hoping to pay less for their pumpkin spice lattes or pink drinks are likely to be out of luck. This summer, the chain offered certain drinks for half-price, resulting in long lines and waits. Analysts expect the company to end those sorts of promotions and discounts.

Instead, they expect Niccol to try to lift Starbucks above the competition by restoring it to a premium brand and experience. One of the first changes he made to the company’s executive ranks was bringing in a global chief brand officer, Tressie Lieberman, who worked with him as Chipotle’s vice president of digital marketing.

“They are a premium brand, and I think they will lean further into that,” said Peter Saleh, an analyst at the investment banking firm BTIG. Though he would not be surprised, he said, if the company occasionally dropped some free things into customers’ mobile accountants, as Chipotle has done with its rewards program.

As for reducing wait times for drinks and making the lives of frenzied baristas a bit better, Saleh hopes the company will roll out its so-called Siren System a bit faster. Introduced two years ago, the system is intended to make tasks easier and faster, cutting the time to make, say, a frappuccino by a third, the company claimed.

But in most cases the system requires the closure of the store to redesign the work area layout and train employees. So far, only about 10% of Starbucks stores have installed it.

“Brian maybe doesn’t have an opinion yet on whether to speed up the rollout of the Siren, but if it truly does what it was intended to do and it can significantly cut the time it takes to make frappuccinos, that is a lot of labor hours and efficiencies gained right there,” Saleh said.

This article originally appeared in The New York Times.