Reasons Behind Starbucks Struggles in Recent Months
Discover why Starbucks, a globally recognized brand with billions in revenue, is facing challenges and substantial losses in the S&P 500. Learn about the shift in consumer behavior and how Starbucks is striving to regain its market position by adapting to changing consumer needs.
Install Tubelator On Chrome
Video Summary & Chapters
1. Starbucks Overview
Overview of Starbucks as a global brand
2. Current Challenges
Recent struggles and performance decline
3. Strategic Shift
Transition towards value-seeking consumers
4. Enhancing Customer Experience
Efforts to improve service and connection
5. Operational Efficiency
Testing order preparation time at Starbucks
6. Stock Performance
Analysis of Starbucks stock price fluctuations
7. Earnings Analysis
Quarterly earnings performance review
8. Customer Behavior
Impact of wallet pressure and incomplete orders
9. Focus on Efficiency
Efforts to reduce wait times and increase efficiency
10. CEO Perspective
Howard Schultz's view on company direction
11. Industry Competition
Challenges from growing coffee market competition
12. Shift in Consumer Behavior
Transition to independent coffee shops
13. Market Dynamics
Intense competition and price-conscious consumers
14. Positioning Challenges
Balancing convenience and uniqueness in the market
15. Pricing Strategy
Comparison of Starbucks and McDonald's pricing trends
16. Value Wars Begin
Emergence of fast food value wars in 2024
17. Starbucks Pricing Strategy 🌟
Introduction of discounted pairings menu and pricing innovation.
18. Starbucks Global Expansion 🌍
Challenges faced in China and focus on growth in India and China.
19. Labor Relations at Starbucks 👥
Strained relationship with Workers United union and management.
20. Starbucks and Social Issues 🌐
Impact of the Israel-Hamas conflict and social media boycotts.
21. Analyzing Starbucks Challenges 📊
Size of business, revenue, and market share in the industry.
22. Re-engineering for Growth 📈
Strategies to improve sales and financial performance.
23. Streamlining In-Store Operations 🔄
Introduction of the siren craft system for efficiency.
24. The Challenge of Linear Batch Flow 🔄
Discussing the impact of linear batch flow on Starbucks.
25. Collaboration with Elliott Investment Management 🤝
Exploring the partnership with Elliott to boost stock price.
26. Adapting to Choosy Customers 🛒
Addressing the evolving customer preferences.
27. Improving Customer Experience 🌟
Efforts to reduce wait times and enhance service quality.
28. Challenges and Hopes for Starbucks 🌱
Reflecting on the company's journey and prospects.
29. Finding the Path Again 🛤️
Discussing the possibility of recovery for Starbucks.
30. Hope Amidst Challenges 🌅
Exploring the resilience and potential for growth.
Video Transcript
With over 38,000 stores worldwide and nearly $36
billion in net
revenue. It's one of the most recognizable brands in
the world.
Starbucks love the long term chart here.
We think they
Have more control over their own destiny right now than
a lot of other consumer names.
It's Willy Wonka in the in the Cold brew factory.
But in recent months, Starbucks isn't looking like the
company that many Americans once fell in love with.
Jim, when we look at The Biggest Loser today, it's
going to be Starbucks.
It's among the worst performers in the S&P 500.
It's down double digits.
There's no question that the occasional customer is
cutting back on visits to us.
We have not been able to communicate to them the value
that we provide.
They were banking on a consumer that looked a lot like
the 2022 aspirational
consumer. Uh, not a value seeking consumer.
But Starbucks is trying to turn things around.
The company is focusing on making that experience
better for you, making the wait times shorter, ensuring
that you get your beverage in a timely fashion, and
that you have a good experience and a good connection
with the baristas.
With consumers spending their dollars more carefully
than ever before, will improved workflows and a push
towards value be enough for Starbucks to get back on
track?
I'm walking into the CNBC offices in midtown
Manhattan, which is one of the busiest parts of New
York City. I'm about to place an order in the
Starbucks app, and we're going to see how long it takes
to prep a drink.
Starbucks stock price peaked in July of 2021 at over
$125 per share, after
having tanked with the rest of the market during the
pandemic.
The start of 2022 led to a sharp decline in its share
price, as the company battled tension with its union,
faced ongoing Covid lockdowns in China and overall
just weaker margins.
But the stock rallied as the company revealed plans to
reinvent its store operations and promised investors
ambitious growth.
This chart looks at the company's quarterly earnings
over the past few years.
Between 2021 and 2023, the company only missed Wall
Street expectations twice.
2024, however, has broken that streak as the company
reported two quarters of consecutive earnings misses
quarter three. Earnings per share did meet Wall Street
expectations, but missed revenue expectations by
$130 million.
At the end of July, the share price was still down
more than 15% since the start of the year.
I think what we are seeing is pressures on the wallet
for some of our most occasional customers.
It had another issue, though, that was interesting high
rates of incomplete orders in the mid-teens on its
mobile app and mobile order and pay has become
increasingly important for Starbucks.
So people would hypothetically kind of put in an
order, see the wait time, or perhaps see the price, and
then not complete the order.
It was ready in just three minutes.
I've been at this exact same location before, around
the same time, and it has taken upwards of 15 to 20
minutes, so there's clearly a focus on lowering wait
times and increasing efficiency.
That's because longer wait times have been a problem.
Survey data shows that about 25% of Starbucks visitors
say their wait time has gotten longer, up from about
16% just two years ago in May.
Former Starbucks CEO Howard Schultz took to LinkedIn
to express his feelings about the company's second
quarter earnings miss.
He stressed the importance of coffee forward
innovation as well as a reinforcement of being
experiential, not transactional.
Video Summary & Chapters
No chapters for this video generated yet.
Video Transcript
With over 38,000 stores worldwide and nearly $36 billion in net revenue, it's one of the most recognizable brands in the world.
Starbucks.
Love the long term chart here.
We think they have more control over their own destiny right now than a lot of other consumer names.
It's Willy Wonka and the Cold Brew Factory.
But in recent months, Starbucks isn't looking like the company that many Americans once fell in love with.
Jim, when we look at the biggest loser today, it's going to be Starbucks.
It's among the worst performers in the S&P 500.
It's down double digits.
There's no question that the occasional customer is cutting back on visits to us.
We have not been able to communicate to them the value that we provide.
They were banking on a consumer that looked a lot like the 2022 aspirational consumer, not a value seeking consumer.
But Starbucks is trying to turn things around.
The company is focusing on making that experience better for you, making the wait time less.
shorter, ensuring that you get your beverage in a timely fashion and that you have a good experience and a good connection with the
baristas. With consumers spending their dollars more carefully than ever before, will improved workflows and a push towards value be
enough for Starbucks to get back on track?
I'm walking into the CNBC offices in Midtown Manhattan, which is one of the busiest parts of New York City.
I'm about to place an order in the Starbucks app and we're going to see how long it takes to prep a drink.
Starbucks stock price peaked in July of 2021 at over $125 per share after having tanked with the rest of the market during the pandemic.
The start of 2022 led to a sharp decline in its share price as the company battled tension with its union, faced ongoing covid lockdowns in China and overall just weaker margins.
But the stock rallied as the company revealed plans to reinvent its store operations and promised investors ambitious growth.
This chart looks at the company's quarterly.
earnings over the past few years.
Between 2021 and 2023, the company only missed Wall Street expectations
twice. 2024, however, has broken that streak as the company reported two
quarters of consecutive earnings misses.
Quarter three earnings per share did meet Wall Street expectations, but
missed revenue expectations by $130 million.
At the end of July, the share price was still down more than 15 percent
since the start of the year.
I think what we are seeing is pressures on the wallet for some of our most
occasional customers. It had another issue, though, that was interesting.
High rates of incomplete orders in the mid teens on its mobile app and mobile
order and pay has become increasingly important for Starbucks.
So people would hypothetically kind of put in an order, see the wait time or
perhaps see the price and then not complete the order.
It was ready in just three minutes.
I've been at this exact same location before around the same time, and it has
taken upwards of 15 to 20 minutes.
So there's clearly a focus on lowering wait times and increasing efficiency.
That's because longer w—
Wait times have been a problem.
Survey data shows that about 25% of Starbucks visitors
say their wait time has gotten longer,
up from about 16% just two years ago.
In May, former Starbucks CEO Howard Schultz
took to LinkedIn to express his feelings
about the company's second quarter earnings miss.
He stressed the importance of coffee forward innovation,
