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Customised coffee orders are holding up the line at Starbucks. Unicorn Frappuccinos and Iced Vanilla Chais with Matcha Sweet Cream Cold Foam take longer to pour than a medium roast. Starbucks believes the answer to its falling sales is to add even more choices to the menu. This is a problem.
The Seattle-based coffee giant this month delivered a train wreck set of quarterly results. Same-store sales fell despite higher menu prices. The company took the axe to its full-year guidance for the second time this year. The stock shed nearly a fifth of its value within a week of results being published.
Laxman Narasimhan, who took over as chief executive just over a year ago, blames long wait times and price-conscious consumers in Starbucks’s biggest markets — the US and China — for the ugly numbers.
Narasimhan is accelerating the rollout of new equipment that will make it easier for baristas to prepare complicated drinks. The company plans to introduce new boba-inspired drinks and food items to attract weekend customers. It is looking to tap into late-night and overnight demand.
But adding food and drink options is counterintuitive if the goal is to reduce wait times. Starbucks’s menu is already staggering. There are more than 170,000 ways to customise drinks, according to the company.
Complicated drinks with multiple modifications come with higher prices, which means average ticket prices are rising. Modified drinks now account for 85 per cent of net beverage sales at Starbucks. The most complicated can be labour-intensive, becoming a source of frustration for baristas. They are one reason for the growing unionisation efforts at stores. Former boss Howard Schultz, who left the board last year but shared his lengthy thoughts on LinkedIn, argues that management needs to spend more time in stores (as well as backing “coffee-forward innovation”).
In reality, the case for Starbucks to simplify its menu and focus on the basics is straightforward enough. The company makes half its US sales during the morning rush hours, when people are looking to get their caffeine fix on their way to work or school. These are dedicated customers that Starbucks cannot afford to lose. Too many of these customers — a mid-teens percentage of them — are abandoning the orders placed on Starbucks’s mobile app because of long wait times and menu-item unavailability.
Consumers, particularly occasional customers, are becoming more cautious with their spending. Given fierce competition from the likes of Dunkin’ Donuts at one end and independent coffee shops at the other, keeping repeat customers happy is crucial. Trying to go in too many directions can leave a business going nowhere.
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