Yumna Mohamed

11ESA
Business Presentation
6 May 2024
Mr. Reitz
Starbucks just had a ‘disappointing’ quarter. Here’s how it
plans to turn things around
By Jordan Valinsky, CNN
3 minute read
Updated 8:27 AM EDT, Wed May 1, 2024

Starbucks is brewing a turnaround plan that involves speedier service and expanding the number of
promotions after its most recent quarter was “disappointing,” in the words of its own chief executive.

Shares fell more than 12% in premarket trading Wednesday after the coffee giant reported a decline in
same-store sales for the first time since 2020 and slashed its full-year sales outlook, culminating in a
concerning quarter for Starbucks, which traditionally reports strong earnings .

“Let me be clear from the beginning, our performance this quarter was disappointing,” said CEO
Laxman Narasimhan on the earnings call.

Same-store sales in the United States fell 3%, a sharp reversal from the same quarter a year ago, when
they grew 12%. In China, the chain’s second-largest market, sales fell a staggering 11%, with the
company blaming competition from “value players” in the country.

In total, global revenue dipped nearly 2%, to $8.56 billion, coming in below analysts’ expectations.
Starbucks is now forecasting revenue to grow in the low single digits, a steep decline from its
previous forecast of 7% to 10%.

“We face a challenging operating environment,” Narasimhan said. “Headwinds discussed last quarter
have continued in a number of key markets, we continue to feel the impact of a more cautious
consumer, particularly with our more occasional customer, and a deteriorating economic outlook has
weighed on customer traffic and impact felt broadly across the industry.”

Those difficulties he mentioned include Starbucks’ Middle East franchisee, Alshaya Group, recently
cutting thousands of jobs at its coffee shops because of a “challenging” work environment as the chain
grapples with boycotts over the brand relating to Israel’s war against Hamas in Gaza.

What’s changing?
A number of changes are in store for Starbucks in a turnaround plan it’s billing as a “Triple Shot
Reinvention with Two Pumps” strategy that Narasimhan will deliver on “limitless potential” for the
brand.

Starbucks app users will soon see an upgrade, with the focus on attracting “occasional customers”
who have abandoned the chain, plus new promotions and “significant improvements” to the wait time
metric that will hopefully cut down on the number of people abandoning their drinks during the order
process because cafes are too busy.

Narasimhan said that despite strong mobile order and pay sales, customers using the feature “put
items into their cart and sometimes chose not to complete their order, citing long wait times of
product and availability.”

The menu is also being tweaked, with the chain introducing its first tapioca-style pearls, the chain’s
first “texture” for drinks. A “reimagined” blueberry muffin also recently hit stores.
Starbucks is also hoping to attract health-conscious customers, too. Five sugar-free customization
options, like syrups, are coming soon and the chain is launching a zero-to-low-calorie energy
beverage that has been popular at its rivals.

Lastly, Starbucks sees opportunity overnight. A pilot program to serve customers from 5 pm to 5 am, when
its cafes are usually closed, doubled its business and it envisions a $2 billion business from that over the next
five years.
“As you can see, there is significant demand in the morning and even more potential during afternoon,
overnight, and the weekend we have yet to realize,” Narasimhan said. “We are accelerating our
execution engines to meet it.”
 Topic 1: Creative thinking and problem solving

Headline: Starbucks just had a ‘disappointing’ quarter. Here’s how it plans to turn things around
Source: CNN
Date of publication: 1 May 2024

Summary of article

 Starbucks reported a decline in same-store sales for the first time since 2020 and slashed its full-
year sales outlook.

 CEO Laxman Narasimhan called the company's performance in the most recent quarter
"disappointing"

 Starbucks is launching a turnaround plan called the “Triple Shot Reinvention with Two Pumps”
strategy

 The focus is on attracting occasional customers who have abandoned the chain and new
promotions to cut down on the number of people abandoning their drinks during the order
process

 Despite strong mobile order and pay sales, customers using the feature sometimes put items into
their cart and sometimes chose not to complete their order due to long wait times

 Seattle-based Starbucks is introducing its first tapioca-style pearls and five sugar-free
customization options to attract health-conscious customers

 Alshaya Group, Starbucks' Middle East franchisee, recently cut thousands of jobs due to a
"challenging" work environment.
The problems that the business is facing:

 Starbucks is seeing "economic volatility" in the Middle East, where the Israeli-Palestinian conflict is
ongoing. Additionally, many customers have boycotted Starbucks since late 2023 after the company sued
the Workers United union for trademark infringement over a now-deleted social media post expressing
solidarity with Palestine.

 Starbucks is facing fierce competition from rival "value" chains in China, where same-store sales
dropped 11% last quarter, according to Narasimhan.

 Starbucks stores worldwide has been facing a major decline in sales due to the company’s support of
Israel in the Palestine-Israel war. Many people have been boycotting their stores around the world. 61
stores around the world have closed down in the past year due to the decline of sales.

 When Starbucks was seen as a firm supporter of Israel, many people started protests inside and outside
Starbucks stores which drove people away from the stores due to the loudness and unpleasant
experience. It also made customers aware of the company’s support towards a genocide.

 In South Africa, due to the high prices that Starbucks charges for their products and the boycott, people
have opted to buy their morning coffee’s and beverages from cheaper alternatives such as McCafé,
Vida e Caffè and Seattle Coffee Company.

How the business applied creative thinking to solve these problems

 Starbucks hopes to encourage customers to start visiting more by launching exciting new menu items
and adding new in-app value offers.

 Starbucks also plans on investing more in its supply chain to ensure it can meet demand for popular
foods and beverages.

 In the US, the company is working on 5 sugar-free customization options, like syrups, the chain is
launching a zero-to-low-calorie energy beverage that has been popular at its rivals. This strategy aims to
attract health conscious customers.

 Starbucks has promised to introduce new drinks to their menu.

 Starbucks has embraced takeaway and delivery services, enabling customers to enjoy their favourite
beverages and food on the go. By leveraging mobile ordering apps and partnering with third-party
delivery platforms, the company has successfully capitalized on the demand for convenience, enhancing
customer satisfaction.

 Starbucks has teamed up with a popular brand called Stanley, that specialises in producing a handmade
beverage cup that is trending heavily on social media. The cup is expensive due to the hype that social
media has created around the product, and the fact that it can keep beverages cold for many hours. The
cup starts at a price of $49.99 which is approximately R925.