New Starbucks Boss Reportedly Pulling Back on Discounted Drinks
Discounted drinks are reportedly becoming rarer under the leadership of Starbucks’ new CEO.
Brian Niccol became chief executive in August, and the company has since scaled back the array of discounts it has been offering in the last year, The Wall Street Journal (WSJ) reported Monday (Oct. 14), citing interviews with baristas and Starbucks executives.
As the report notes, Starbucks and other chain eateries have spent this year relying on discounts to bring back diners after spending the year increasing menu prices to cover high costs and rising wages.
Now, Starbucks is shifting tactics as Niccol focuses on the company’s reputation for higher-end, handcrafted coffee, the report said. The company had long avoided discounts and promotions, but had recently begun offering reduced prices as traffic waned and customers complained of long waits and steep prices.
The company has begun dialing back its discounts, and has no plans for broad offers for the holidays. Instead, the company will market its seasonal drinks via advertising, the report said, pointing to a strategy update issued to store leaders.
PYMNTS wrote about the struggles Starbucks has been facing last month, noting that the company’s operational troubles came into sharp relief during a mobile ordering outage in the third quarter of the year.
“The disruption not only led to widespread customer frustration but also contributed to a decline in sales,” that report said. “The outage impacted in-store and digital transactions, disrupting the chain’s key revenue streams during a critical sales period as consumers continued to draw back from nonessential purchases.”
Research by PYMNTS Intelligence has shown that 98% of consumers who live paycheck to paycheck and have issues paying bills are reducing their dining out expenses, as are 95% of those who live paycheck to paycheck but have no issues paying bills.
Rising beverage prices are one of the burdens facing these consumers, the report said, with costs surging by an estimated 16% to 29%.
Against this backdrop, Starbucks hired Niccol, touted for a track record of innovation and transformation and his leadership at Chipotle, where he revitalized the brand with digital upgrades and operational refinements.
When Starbucks announced his appointment over the summer, Greg Zakowicz, senior eCommerce expert at Omnisend, told PYMNTS that Niccol could be the perfect fit for the global coffee chain.
“He has an impressive background, especially in the food industry where products are nonessential items and has successfully led companies like this during challenging economic times,” Zakowicz said.
“With a continual increase of consumers trading down on items like groceries, I don’t think this should be understated. He knows how to appeal to consumers at times when their wallets are tight. That is one thing Starbucks desperately needs.”
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