Dive Brief:
- Starbucks followed through on its restructuring promise in an effort to improve profits amid slowing sales, laying off 350 corporate employees — about 5% of its non-restaurant workforce, according to Bloomberg. Marketing, creative, product, technology and store development teams will lose staff in the process.
- The coffee giant hired a Hyatt and Yum Brands vet as CFO in October, then dismissed almost all 190 workers in its Amsterdam support center and vowed to restructure its London office. Latin American licensee Alsea SAB will take control of more markets, including some in Europe.
- Fourth-quarter sales beat expectations, as 2018 comparable sales jumped 2% due to 3% higher check averages. Starbucks’ stock, in which billionaire Bill Ackman recently disclosed a 1.1% stake, has also surged 18% this year to about $68 a share.
Dive Insight:
Starbucks seems focused on understanding rapidly evolving consumer preferences. It vowed to cut back 30% on limited-time drinks and has already consolidated its analytics teams to assure faster, more targeted response to shifting trends. Trimming corporate staff could also help meet this goal, as departments will be more nimble.
These smaller, more agile teams hope to deliver swift lab-to-market innovation, especially as domestic sales compete in a tense market with other coffee brands and quick-service cafes. Dunkin’, for instance, just announced an espresso revamp that will bring more sophisticated cappuccinos and lattes at 60 cents less than equivalent Starbucks items. Last year, McDonald’s updated its McCafe menu for the first time since its 2009 launch, and is testing cold-brew and running limited-time promotions such as the famed $1 any-sized coffee available in Canada through mid-December.
Despite these corporate changes, Starbucks’ store-level approach appears to be staying the course, according to the Wall Street Journal. Employees are spending less time on administrative tasks and more on customer service, particularly in off-peak times later in the day. In an effort to catch customers who want coffee on-the-go, new stores will open with drive-thru windows if space permits. The company might also join the delivery wave, depending on the success of its pilot market in Miami.
The chain has invested in mobile innovation as well. In March, Starbucks made its app available to any customer rather than only those enrolled in the company’s loyalty program, attracting 4 million new users in the fourth quarter. Mobile orders now account for 14% of all transactions, and loyalty enrollment has also jumped 15% year-over-year — a good sign for customer retention.
These layoffs, which likely affected vice presidents and senior vice presidents — as CEO Kevin Johnson suggested when he first announced plans for corporate restructuring — could signal a slow-down of major administrative shuffles for now. Whether or not they help the chain reach its target growth is an open question, but the market of late has been good to the coffee company and licensing deals in Europe could also be a future bright spot.
