Incoming Starbucks CEO Brian Niccol may target mobile apps | Real Time Headlines

has become a familiar sight to everyone Starbucks Cafe: Counters are crowded with mobile orders, customers are waiting frustratedly for their drink orders and baristas are overwhelmed.

Addressing the issue is likely to be a top priority for incoming Chief Executive Brian Niccol in his bid to turn around the troubled coffee giant. Get into character September 9th.

Investors and executives have cited operational problems as one reason the chain’s sales have lagged in recent quarters. Other reasons for recent same-store sales declines include consumer weakness, boycotts and deterioration of the Starbucks brand.

Former CEO Howard Schultz, who does not have an official role at the company but is still involved, also took aim at the mobile app. He said on the show that this has become “Starbucks’ biggest Achilles heel.” Get Podcast June.

Mobile orders account for about a third of Starbucks’ total sales and tend to be more sophisticated. While add-ons like cold brew or syrup are more profitable for Starbucks, they tend to take up more of baristas’ time and frustrate both them and customers.

“I agree with Howard Schultz,” said Robert Byrne, senior director of consumer research at Technomic, a restaurant market research firm. “It’s not in the data, it’s in the store. That’s the problem.”

In late April, current CEO Laxman Narasimhan says The company struggled to keep up with demand in the morning and scared away some customers who had waited longer.

Schultz said he experienced the problem firsthand during a visit to a Chicago location at 8 a.m.

“Everybody showed up, and all of a sudden we had a rave pit, and it wasn’t Starbucks,” Schultz said on “The Takeover.”

Improving the efficiency of mobile orders is one of Nicol’s key ways to reduce crowding at Starbucks.

When Schultz built Starbucks into the coffee giant it is today, he positioned it as a “third place” between work and home. Since then, the chain has lost that reputation as more customers rely on the convenience of ordering on the go rather than lingering in cafes.

“Because it’s a beverage and I drink it often in the car or on the go, it needs to be very convenient,” Byrne said.

But Starbucks also made no major changes to its operations to anticipate shifts in consumer behavior.

In 2017, Schultz resigned as CEO for the second time, handing over power to Kevin Johnson. Before joining the coffee chain as chief operating officer, Johnson served as chief executive of technology company Juniper Networks. Under his leadership, Starbucks invested in technology and continued to grow digital sales, but by the time he left the company, restaurant operations were in trouble.

When Johnson retires in 2022, Schultz returns as interim CEO.

“The company did a poor job of anticipating the technological improvements that would need to be implemented to avoid this happening… The company’s stock was at record highs, and the company didn’t invest upfront and didn’t pay attention until it was too late. ,” Schultz said.

Shareholders have also experienced frustrations with digital orders and see this as a key area that Nicoll needs to address.

“The problem in New York City, for example, is wait times,” said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, which owns stakes in Starbucks and Chipotle. “Then mobile orders take precedence over in-store orders. (Niccol’s) is going to have to reverse that somehow to get people to spend more time in stores and spend more money.”

Mobile ordering issues put even more pressure on baristas. Starting in 2021, the app contributed to employee burnout to the extent that it inspired some employees to join a union.

In November, Starbucks Workers United, which now represents workers at about 450 of the chain’s U.S. stores, Put pressure on companies Turn off mobile ordering when on sale. (Starbucks said at the time it was already making the change possible.)

For Nicole’s current employer, digital sales doesn’t feel the same burden; Chipotle.

In the most recent quarter, 35% of the company’s revenue From online order. The epidemic has promoted a shift to online ordering, and the trend of online ordering has continued, with the share of digital orders jumping from 18% in 2019.

When Niccol joined Chipotle in 2018, most of its restaurants had already installed a second prep line dedicated to digital orders, designed to avoid bottlenecks as online sales became more important to the business. That same year, the company also began adding drive-thru lanes specifically for online order pickup, calling them “Chipotlanes.”

During his six and a half years at Chipotle, Nicol and his executives have driven digital sales through different promotions: sports star favorite orders, limited-time offers, rewards programs and long-awaited promotions. Roll out the tortillas. In particular, tacos became a digital-only option because otherwise they would slow down operations.

Chipotle was also test automation In partnership with robotics company Hyphen, order burrito bowls through its mobile app.

In 2022, under Schutz’s leadership, Starbucks Launched a reinvention plan These include addressing bottlenecks through new equipment and other measures to speed up service.

Narasimhan largely stuck to this strategy. In February, its mobile app finally started showing order progress to customers, giving them a better idea of ​​when their drinks are ready. At the end of July, Starbucks launched “Siren Crafting System” Across North America, a series of processes make drinks faster and baristas’ jobs easier.

But the problems facing Starbucks may require stricter measures.

For example, equipment rollouts are proceeding slowly, with approximately 40% of North America expected to have new machines installed by the end of fiscal 2026. Reduce stress for baristas.

“It’s not going to be easy by any means because it requires time, training, investment and (capital expenditure),” TD Cowen analyst Andrew Charles said.

“In our view, Brian has extremely high credibility and if he tells investors, ‘Here’s the answer to the problem we’re facing’ and can explain why he believes that, he’s going to get a pass,” Charles said. .