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Key Takeaways
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The Back to Starbucks comeback campaign includes an algorithm for mobile orders and high-tech menus, CEO Brian Niccol said.
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Cafes will have 30% fewer menu options, as well as new seating options.
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Smaller and mid-size store formats will repackage this approach and help the chain double its U.S. footprint, the CEO said.
Starbucks’ comeback effort includes some back-to-basics moves, but also some new twists.
The coffee chain will use a mobile order-pacing algorithm and high-tech menus, CEO Brian Niccol said on a conference call Tuesday. Store aesthetics are also under review, as Starbucks (SBUX) tests new types of seating and brings back touches like ceramic mugs and accessible condiment bars.
The "Back to Starbucks" campaign—a nod to analog days announced last quarter—aims to stem declines in sales and traffic while positioning the chain to double its U.S. footprint. Net sales dipped 0.3% year-over-year and same-store sales fell 4% year-over-year in the fiscal first quarter, coming in slightly above analysts’ expectations.
"We believe it's the fundamental change in strategy we needed to solve our underlying issues, restore confidence in our brand, and return the business to sustainable long-term growth," Niccol said on the call, according to a transcript made available by AlphaSense. “We’re seeing nice progress.”
Starbucks Working on Speeding Orders and Changing Up Its Cafes
The chain's algorithm is intended to sequence mobile orders as the company aims to serve in-store customers within four minutes, Niccol said. Cafes currently fill a flood of mobile orders as they come in; pick-up orders pile up on the counter, and lines form at the register, he said.
“In most stores, it is not driven by a lack of capacity; it’s more the process,” Niccol said of hurdles to hitting the four-minute hand-off.
Starbucks aims to install digital menu boards at all its stores within a year-and-a-half, which Niccol said will display a pared-back menu and ways to customize orders. The company will cut about 30% of the drink and food menu by the end of September, he said. (It stopped charging more for non-dairy milk ingredients in November.)
“That does give us the flexibility to do the merchandising of different food experiences or drink experiences in the afternoon versus the morning,” Niccol said, according to the transcript.
New and additional seating is coming to cafes, which beginning this week have brought back condiment bars, expanded free refills and required those in the store to make a purchase. Employees will once again write customer names on to-go orders, and serve drinks and food using ceramic mugs and dishes.