A crowd of more than 14,000 Starbucks managers danced to pumping music inside the Thomas & Mack arena on a hot June afternoon in Las Vegas. They cheered whenever one of them appeared dancing on the giant screen in the center of the arena. They were particularly enthusiastic when the camera panned to a guy holding a tray of popcorn.
They erupted into a standing ovation when CEO Brian Niccol walked onto the stage in the center of the arena.
After the ovation died down, a guy in the crowd shouted, “I love you, Brian!”
“I love you too,” Niccol replied.
Niccol has been CEO of the coffee shop giant for nine months. He took some time to soak in the reception as the crowd started cheering again. “This is fun,” he said. “Everybody is fired up.”
Brian Niccol receives a standing ovation from 14,000 Starbucks managers. | Photo by Jonathan Maze
The reception was akin, in a way, to the one Wall Street gave to Niccol when he was somewhat surprisingly recruited from Chipotle to take on the task of revitalizing the world’s largest coffee chain.
Yet while many of those investors, along with those Vegas-addled Starbucks store leaders, remain firmly in Niccol’s corner, the task with which he was given has proven more stubborn than expected. The chain’s same-store sales continue to lag, a five-quarter negative streak in the U.S. that’s as bad as any since the Great Recession.
And that enthusiasm doesn’t extend to all corners of the Starbucks universe. An analyst’s review of Glassdoor found Starbucks to have some of the industry’s lowest ratings from employees. Baristas have complained loudly about a variety of the company’s moves on social media sites like Reddit, often backed by the union representing some of the chain’s locations.
Niccol, for his part, did not shy away from the task as he spoke to the crowd. “We’ve had challenges in the business,” he said.
Brian Niccol on stage. | Photo courtesy of Starbucks
But he also told the crowd that their job wasn’t just about serving coffee. The world needs Starbucks, and not just to give consumers a shot of morning caffeine. Consumers need the connection that’s at the center of Niccol’s plan for the company.
“Starbucks is too important to each of us, and the world, for us not to be hugely successful.,” he said.
The coolest guy in high school
Starbucks’ weak performance started in November 2023 and worsened in 2024. By the fall of last year, its same-store sales fell 6% in the U.S., including a 10% decline in traffic.
Starbucks was considered a hot brand for many years, popular with young consumers who flocked to its locations for complicated, customized beverages. That may no longer be the case.
For years, Starbucks jockeyed with Chick-fil-A for the top spot on the Piper Sandler’s semi-annual “Taking Stock with Teens” survey. In the fall of 2023, Starbucks was No. 2, named as the top restaurant chain by 13% of participants.
It wasn’t in the Top 5 at all by spring of 2024 and hasn’t been named among the top restaurants in the two surveys since then.
Restaurant Business sister company Technomic surveys consumers about 162 U.S. restaurant chains. Starbucks has the lowest value ratings of all of them.
That performance led the company’s board to authorize Mellody Hobson, who chaired the Starbucks board, to make a call to Niccol. He got that call while on a vacation with his family.
“I’m like, ‘Hey honey, sorry, but I gotta take a phone call from Mellody Hobson,’” Niccol said. He was unexpectedly named CEO in August, and by September, he was announcing the title of his turnaround plan, “Back to Starbucks.”
Hobson called Niccol a “central casting CEO” and said that Niccol in that first phone call “played it like he was the coolest guy in high school.”
She flew to talk with Niccol in person. “I’m on a plane for 12 hours,” she said. “I’m telling myself, ‘Don’t oversell.’ I felt like a girl in high school trying to get a guy to like me. I got there and I told him, ‘You know we’re having some challenges, but you know what to do.’”
At the same time, it’s difficult to truly appreciate just how much Starbucks employees have been through in recent years.
Since Starbucks’ last Leadership Experience event in 2019, the chain has endured a global pandemic, a shaky recovery, supply chain and labor challenges, the ouster of one management team, the return of former CEO Howard Schultz, the hiring of a new CEO, a sudden fall in sales and then that CEO’s ouster. When Niccol arrived in September of last year, he was the chain’s fourth CEO in three years.
Howard Schultz and Brian Niccol on stage in Las Vegas. | Photo courtesy of Starbucks
A revolving door of management teams is not good for any company, even one as strong as Starbucks. Each new CEO brings with them new executives and new ideas that the company must implement. Staff are reassigned. Some lose their jobs amid layoffs and reorganizations. All that can affect performance.
The frequency of change hasn’t been lost on executives. Employees urged Mike Grams, recently named chief operating officer, to stay focused on the company’s initiative. “They’re like, ‘Mike, don’t change. Don’t let the pendulum swing the other way. Just stay focused on this,’” Grams said in an interview.
With that much change, perhaps it’s no surprise that Starbucks’ sales have struggled.
The restaurant guy
Niccol may come out of central casting, but he also represents a very different CEO from the one Starbucks typically hires.
The company had never hired someone with any sort of restaurant background before it hired Niccol, preferring to promote from within CEOs who themselves had a background in retail or consumer products goods. Not even Howard Schultz had such a background when he went to work for Starbucks in 1982 and ultimately turned what was a small retail coffee roastery into a chain of coffee shops.
Niccol’s first job was with the marketing executive factory-slash-consumer product company Procter & Gamble, before he went to work with Taco Bell, starting as its chief marketing officer before he became CEO. He then jumped to Chipotle, famously turning that chain around.
One of his first real tasks at Starbucks was to reverse one of former CEO Laxman Narasimhan's more curious moves, in which the chief marketing officer position was eliminated, with the tasks shifted to a market-by-market basis.
A major restaurant chain operating without a top marketing chief in the days of social media is akin to an NFL quarterback playing without a helmet. They may complete a few passes, but eventually they’ll get a concussion.
Starbucks named Tressie Lieberman chief brand officer. She had worked with Niccol at Taco Bell and Chipotle before she became chief marketing officer with Yahoo.
That’s not the only change. The company has added a number of new executives, including Grams, who had retired from Taco Bell last year and was sitting on his sofa when he got a call from Niccol imploring him to come to Seattle.
COO Mike Grams speaks at a full crowd in Las Vegas. | Photo courtesy of Starbucks
Cathy Smith was named CFO earlier this year. Meredith Sandland, another former Yum executive who most recently was CEO of Empower Delivery, was named chief coffeehouse design and development officer. Sanjay Shah, former GoPuff executive, was named chief supply chain officer.
The changes and reorganizations certainly affected corporate staff. The coffee shop giant laid off more than 1,000 workers, largely among support staff as part of changes designed to speed decision-making.
Starbucks made several other moves. It eliminated products such as the olive oil coffee line Oleato. It started advertising on television, including ads around the Super Bowl, with a promotion for free coffee on the following Monday. It brought back self-serve creamer bars, eliminated charges for alternative milks and started having baristas write names on cups with sharpies. In-store customers can get free refills and can use ceramic mugs.
A new “code of conduct” only allows customers to use the restroom and forces acceptable behavior. “I heard that the code of conduct is making a difference in your coffeehouses,” Grams said at the Leadership Experience, which elicited cheers from the baristas.
The results have had a moderate effect on sales. U.S. same-store sales declined 2% in the first three months of this year, including a 4% decline in transactions.
There appears to be some improvement since then, however. Traffic was up 0.7% in April, according to data from the foot traffic tracking firm Placer.ai, but it fell 0.9% again in May, though that was still better than the 4% decline in the first three months.
Seating arrangements
Almost immediately upon his arrival, Niccol focused his attention on the conflict between what Starbucks had become and what it was built to be.
Schultz patterned Starbucks after coffee shops in Italy where people would spend time together over an espresso. He developed the concept of the “third place” outside of home and work where people would spend time. While most of its customers still took their hot lattes to go, it was designed as a place to enjoy them inside.
Over the years, the company focused more on drive-thrus. Its mobile ordering platform became a vital channel. And most of its sales came from members of its Starbucks Rewards loyalty program. Meanwhile, more customers were requesting complex, expensive cold beverages, luring younger, social media-savvy consumers but adding operational steps.
After the pandemic, the company shifted dramatically away from in-store service. Comfortable seating was replaced with harder, more industrial furniture. More than 30,000 seats were removed from the Starbucks system. In some cases, power outlets were covered up and removed. Customers couldn’t find seats, and when they did, they didn’t have power.
“I think we lost a connection,” Grams said. “Mobile order took off for everybody. COVID hit for everybody. I don’t think it was their idea to pull out the outlets and chairs. I think it was a decision in an emotional moment for the world, when we lost our way a little bit.”
Starbucks plans to add them back in, starting in New York and Los Angeles. The company has already started testing new coffeeshop designs to make it friendlier for those in-store customers.
Yet Starbucks also had challenges with the customers it was working to recruit, the mobile-order customer. The company didn’t have any sort of governor in its mobile-ordering system, so a bunch of orders could come in at the same time, creating long waits. The company has already made changes to that system, adding expected wait times, designed to ease that challenge.
By August, it will also be adding more labor into stores with a new “Green Apron” service model that gives managers more say in how that labor is deployed. Niccol called it “the biggest human capital investment in connection in the history of Starbucks.”
That could improve speed, an important component of Niccol’s overall strategy. He wants the company to get orders out in four minutes or less, a worthy goal that will require more people.
It’s not an insignificant goal. According to Technomic data, customers who get their order in five minutes or less are 50% more likely to recommend Starbucks, return to the coffee shop or consider the chain.
The labor investment, plus the addition of assistant managers, is also important because the company plans to open 10,000 more company-owned locations in the U.S., double the current unit count. It also wants to hire 90% of management-level employees from within. So, the company will need to hire and develop workers fast enough to accomplish both goals.
On the food front, the company is testing a number of items, including a protein cold foam that plays to consumers demanding more protein in everything, and fresh-baked croissants and cookies.
Starbucks is testing fresh-baked croissants and cookies. | Photo courtesy of Starbucks
Even that is designed to elevate the experience inside the coffee shop, as the chain looks to improve the overall ambiance inside its shops, including the smell of fresh-baked goods.
Indeed, executives several times brought up the aroma and the ambiance inside the shops themselves. “You open the door, and it feels like home,” Grams said, describing how he sees customers’ experience of walking inside one of the shops. “You smell coffee. The barista says ‘Hello.’ You hear the grinder, soft music playing. You can see people chatting in small groups in your café.”
The company has no plans to ignore technology or mobile ordering. It revealed a few new pieces of technology during the event, like digital menu boards and an AI manager assistant. But as Niccol said, “When they come in to pick up their mobile order, they’re going to pick it up in the world’s best coffeehouse.”
The need
Niccol’s “Back to Starbucks” plan has a key backer in Schultz himself, the man who returned to the chain three years ago after what he saw were problems inside the shops—and who publicly called out his handpicked CEO after a particularly brutal earnings report.
Schultz is still revered by the managers. He received a three-minute standing ovation, followed by two more, after Niccol brought him out to the stage, enough that he implored the audience to let him speak. “We’ll never get through this,” he said.
“This is the Starbucks that I’ve known, the Starbucks that I’ve loved, and I’m so optimistic about the future of the company,” Schultz said.
“When I heard you speak for the first time about ‘Back to Starbucks,’ I did a cartwheel in my living room,” he added.
And both Schultz and Niccol said that this wasn’t just about improving sales at a coffee shop chain, though that is certainly their goal. They insisted that this is something the world needs right now. “Half of U.S. adults feel lonely,” Niccol said. “There’s like three out of four people that say they don’t even feel like they belong in their own community. And community is exactly what you see when you walk into a Starbucks.”
“A stronger Starbucks builds a stronger opportunity, creates more opportunity for everyone and then guess what, the cycle repeats itself and we do it again,” Niccol added. “This company, and frankly this whole world, needs to see this happen.
“The world needs Starbucks.”
Las Vegas' Sphere was given the Starbucks treatment.| Photo courtesy of Starbucks