facebook pixal
Financing

Starbucks on track for recovery, thanks to its loyal customers

More mobile ordering and strong drive-thru performance are also helping the coffee giant’s sales recover from the pandemic.
Photo courtesy of Starbucks

Starbucks is on pace to fully recover from the pandemic by the end of March in its U.S. business, where same-store sales are down just 2% in January, the company said on Tuesday.

The company can thank its loyal customers for that. Membership in the Starbucks Rewards loyalty program grew by 2.5 million members to a record 21.8 million—15% higher than in the same quarter a year ago.

Those customers spent more money. Starbucks Rewards members accounted for half of U.S. company-operated sales in the chain’s fiscal first quarter ended Dec. 27—up from 43% a year ago. In other words, loyal customers have been the driving force behind the chain’s improvement in its sales over the course of the pandemic.

“The strong member growth that we’re seeing is not only surpassing our pre-COVID highs, it’s pushing well beyond,” Chief Operating Officer Roz Brewer said on Thursday.

At least some of that was due to a change in the program, called “Stars for Everyone,” enabling people to collect loyalty credit no matter how they pay for their coffee. Downloads of the chain’s mobile app grew by more than 5%, Brewer said. “We’re just seeing an expansion of our customer and just more love for the brand as we apply” Stars for Everyone, Brewer said. “We have addressed a significant concern with payment removal.”

The Seattle-based coffee giant was hit hard by the pandemic in March and April as the chain shut down non-drive-thru stores as a result of the quarantine—the company does not have the drive-thru penetration of rival Dunkin’ and has a high concentration of locations in urban areas.

But the company has been shifting more of its business to takeout in the months since even as it opened locations to dine-in service. It added curbside and changed its loyalty program and spent time working on speed through its drive thru.

Those locations have proved important during the pandemic, enough to push the company to develop more of them in the future while shifting away from urban and mall locations. Same-store sales at drive-thru locations increased more than 10% last quarter. By contrast, Starbucks’ U.S. same-store sales in the period declined 5%.

The company is now working to improve its service through those lanes even further—the company is testing the use of handheld point-of-sale devices in 300 locations to determine if they improve throughput. And the company is eager to build more locations with drive-thru windows.

“When we look at our most productive model, it is the drive-thru,” Brewer said. “So in our go-forward position, you will see an increased number of drive-thrus that we’re building in the central United States and across the Southeast and the Southwest.”

As they have throughout the pandemic, customers are coming in less but are ordering more when they do.

Mobile orders represented 25% of sales in the U.S. last quarter—up from 17% before the pandemic. Same-store transactions in the U.S. plunged 21%. But average ticket grew 19% in the company’s fiscal first quarter.

Customers changed how they used Starbucks—visiting there for a break in the mid to late morning rather than stopping by one on the way to work. “Their Starbucks visit has evolved from the stop on the way to a destination to being the destination worth leaving home for because it is safe, familiar and convenient,” CEO Kevin Johnson said.

When they go, they make orders for more people. But they are also ordering more premium items, such as Irish Cream Cold Brew. And they’re ordering more food, such as the Impossible Breakfast Sandwich or the Snowman Cookie.

Company executives said on Tuesday they believe at least some of that will remain even as customers return to their pre-pandemic frequency—citing the shift toward more premium items, for instance, and the company’s innovation efforts on food and beverages.

“I do think there’s going to be a long-term positive impact on ticket,” Johnson said. “Customers have gotten very used to more premium beverages and had a higher degree of food attach. Ticket will come out of this higher than it was when we went into it.”

Want breaking news at your fingertips?

Get today’s need-to-know restaurant industry intelligence. Sign up to receive texts from Restaurant Business on news and insights that matter to your brand.

Trending

More from our partners