There’s still a point about where Starbucks is today, nearly two years after joining the brand, frustrating CEO Brian Niccol.
It remains a bit of a mystery what customers are going to see, store by store, when they walk through the door.
Ultimately, he said, that won’t be the case. Guests will observe a “great coffee house.” Employees will have their eyes up. They’ll be smiling and engaged. “And I think you’re going to experience that around the world,” Niccol said at the Bernstein Strategic Decisions Conference. “And we’re already seeing this.”
Starbucks is coming off a Q2 where the company reported top- and bottom-line growth for the first time in two-plus years. North America and U.S. same-store sales bumped north of 7 percent, thanks to 4 percent transactions (traffic). The brand hadn’t enjoyed that kind of hike in three years.
Starbucks’ domestic corporate locations appreciated transaction growth across all dayparts and licensed restaurants posted positive same-store sales for the first run since Q1 2024.
In all, it was proof, Niccol said, the brand is ahead of schedule on its “Back to Starbucks” turnaround. Yet it’s not quite there.
Niccol walked through progress during his conversation and what he imagines Starbucks could look, and feel, like a few years from now. Understandably, there were a lot of threads.
He started, however, with the base. Starbucks, Niccol said, is operationally much stronger than when he arrived from Chipotle, a brand he led for more than six years—a tenure that saw its sales nearly double, profit jump sevenfold, and stock soar 800 percent.
He said Starbucks is now “building from a position of strength” and the labor it put in is performing against the $500 million “Green Apron Service model” implemented last calendar, which signaled the company’s biggest operating standards and customer investment in 55 years of history.
Today, there are clear metrics for how Starbucks holds itself accountable for performance (a growth scorecard) and repeated processes are showing up in customer experience. Additionally, menu and marketing innovation has evolved to satisfy consumer needs—updates like a Matcha menu reset, refreshing the bakery case, and, more recently, Starbucks’ energy refresher program, as well as a series of flavor fixes.
Marketing became more consumer and culturally relevant (a topic Niccol especially knows well from his pre-Chipotle days at Taco Bell, when he hired interns to run social media, devised a taco lens on Snapchat, and pushed food through Instagram via user-generated content). “You’ve seen us show up now more in culture, the way that Starbucks historically has shown up,” Niccol said, adding consumers will keep noticing that, from Coachella to the World Cup.
So, where did this start? Niccol came to Starbucks during a stretch when sagging performance married an unclear path forward. Founder Howard Schultz penned an open letter that May calling out some of the company’s issues. This after Starbucks’ domestic traffic fell 7 percent and same-store sales slid 3 percent. At the time, it was Starbucks’ worst report outside of the pandemic or Great Recession.
Schultz posted his statement on social media and, namely, pinpointed Starbucks’ U.S. operations as the “primary reason for the company’s fall from grace.”
“The answer does not lie in data,” he wrote. “But in the stores.”
Niccol explained it as, “we just drifted away from why people originally fell in love with Starbucks and why they will continue to be in love with Starbucks.”
It surfaced in marketing. Tech. Operations. Yet most visibly, it translated to experience.
Niccol said he always approaches tasks from the customer perspective. It was clear Starbucks had become a place you grabbed coffee on your way to do something, as opposed to a restaurant guests wanted to linger in and be a part of.
Amid that dynamic is where the proposition got lost. “Value” holds a lot of meanings. But generally, customers feel like they got a “good value” if they received a “good deal.” And that lies in evolution, consistency, or, on the flip side—becoming something unrecognizable.
Niccol said Starbucks got understaffed. It “hardened” restaurants. “And in a lot of cases,” he added, “we were building soulless experiences.”
“And I think at the crux of Starbucks is this soul in every transaction and every experience that needs to come forward,” Niccol said.
“Back to Starbucks” addressed these cues. When customers show up today, Niccol said, while it may not be a long conversation, interactions are on the rise. Staffers are leaning toward guests and writing notes on cups again.
There should be a moment of connection at the handoff, Niccol said.
And also, whether somebody decides to stick around or grab and depart, they’re traveling through a Starbucks that feels like it could work for either. Comparing it a Chinese restaurant that’s busy or empty, Niccol said the physical experience is critical regardless of occasion.
Starbucks had gotten away from some of those points. “And I think the trick for us going forward is making sure that every experience, people feel like that was a unique Starbucks experience and one that they ultimately say is, hey, that was worth it,” Niccol said. “I want to do it again.”
The path to the point
Niccol was asked what elements of Back to Starbucks took longer than expected, and which, perhaps, proved simpler than planned.
In its infancy, the concept was an uncomplicated one to articulate. This wasn’t an aspirational reworking of Starbucks’ roots or some reimagining of what it could become. So, Niccol said, employees tended to embrace it because they, too, missed what they remembered, both as tenured members of the company and customers who came to work for a brand they grew up frequenting. They observed that drift as well.
Niccol said when employees realized the company was going to be doing things to make their job about customer connection and craft, “they were energized and engaged.”
“To get 250,000 partners at the store level to basically hear what is the strategy and how we’re going back on our front foot—that is hugely powerful,” Niccol said. “That adoption went a lot faster than I had expected. It also helped that we did the all-manager conference … a couple of months in as well.”
Niccol also realized Starbucks was glacial when it came to innovation. There wasn’t clear accountability and the company couldn’t make decisions quickly to get things done.
When he landed, if, for instance, Starbucks wanted to try a raspberry syrup, timelines were 18 months or more. It’s now down to eight months, with line of sight to four.
What you’ll see going forward, because Starbucks fixed the backend, is news every three to four weeks because there’s operational capability in-store to stand up launches. Then, every couple of months, a “big mover” will emerge, akin to Starbucks’ energy Refreshers, protein platform, Matcha, and so forth.
“We’re going to have the ability to be in culture with a healthy drumbeat because this business has unbelievable frequency and it has unbelievable loyalty,” Niccol said. “So, if you want people to stay engaged, you’ve got to stay top of mind and you’ve got to be culturally relevant.”
Plainly, the speed of decision-making was muddier than anticipated. It took time to get the right people in the right roles with the proper accountability, Niccol said.
“I feel really good about the leadership team that we put together and the culture that we’re creating that values the idea of speed and performance,” he said.
CFO Cathy Smith, named to the role last March from Nordstrom, added there was a “clear, obvious” underinvestment in restaurants and employees at Starbucks. And it showed in customer experience “everywhere.”
“We were asking our partners in the coffee house to do a lot with very little,” she said.
Hence, the $500 million Green Apron plan. Smith noted Starbucks needed to invest in its supply chain as well to address frequency and replenishment cycles. The company stopped “doing a lot of stuff” (she didn’t divulge deeper) at the support center that weren’t as important as serving customers and employees and restructured a few of its support models, like the licensed business.
Niccol added Starbucks halted its remodel and Siren program “cold” and replaced it with an uplift strategy focused on getting “the coffee house back to being a coffee house.”
It’s a front-of-house effort. Starbucks has finished about 600 so far. It’ll get above 1,000 in 2026 and have a couple of thousand tacked on next year as it works through all 8,000 that need the work.
This is a big reroute, Niccol explained, because Starbucks went from spending millions and closing locations for three to four months to deploying about $150,000 and getting back online overnight.
And one thing Starbucks did with this as well, in addition to decor changes, is return seats to the cafe.
The evolution of the journey
Access points have never been a problem for Starbucks. It’s historically been on the front lines of just about every channel available to QSR. Mobile order pickup. Delivery. Drive-thru. Queuing in-café.
This, as much as ambiance, was wobbling at the seams. Niccol invested in a technology Starbucks calls “Smart Queue.”
Going back to pre-Niccol days, Starbucks, in May 2024, explained to investors it witnessed a mid-teens percent order completion rate within its mobile order and pay channel. What that meant was customers were tapping the option, putting items into their cart, and choosing not to hit send, “citing long wait times of product and availability.”
It’s why Niccol, even before delving into less granular realities, like Sharpies and the condiment bar, started talking about throughput. He wanted Starbucks to execute a 4-minute standard where somebody in-store could order and get a drink in that time from POS to hand-off. The same from order board to pull away at the drive-thru. For mobile order pickup, Starbucks merely wanted to be “on time,” or less than 10–12 minutes and accurate.
The brand had a first in, first out system. Niccol pivoted to making sure “Smart Queue” could sync up mobile orders for when a customer arrives. So, lobbies wouldn’t end up with a crowd of people standing around Starbucks’ pickup station.
Also, the technology can recognize a situation where, as an example, there’s a queue of drive-thru guests here right now and a line of people in the café. The next phase, Niccol said, will empower Starbucks to recognize somebody’s mobile order when they’re on-premises so employees can queue accordingly.
That will allow Starbucks to orderly manage multiple access points.
Again, what was happening before, Niccol said, was if a customer went up to the POS and tried to order inside the restaurant, unknown to them, 20 mobile orders could slot ahead. They’d stand around waiting despite having asked a barista to make a drink moments ago.
And, in tandem, the barista didn’t know what the line was like for mobile orders. They could see what was in front of them but couldn’t get to the ticket of the person ambling about.
That, understandably, created a difficult situation, Niccol said, because the customer showing up to order was hoping for face-to-face service while the off-premises user wasn’t even there yet. And still, Starbucks made the drink of the latter and let it sit idly on the counter.
Simply, it was chaotic and led to guests getting queued up behind an invisible customer.
So, while writing notes on cups grabbed headlines, less front-facing fixes unfolded behind the curtain. Starbucks prioritized order and sequencing into channels.
Additionally, by adding Smart Queue, the brand’s delivery business took off. It expanded more than 30 percent year-to-date in Q2 across corporate shops.
Niccol said café business is up as well thanks to the flip. Mobile order, the same. Drive-thru has “hung in there.”
Drive-thru was an area, he said, executing well before the change. But that was partly, and unfortunately, at the expense of the café because employees had their backs turned to what was happening down the line. Their faces were out the window as opposed to seeing customers come in.
“I love the fact that we have the ability to use technology to manage it in a smart fashion so that everybody gets the customer experience that they want,” Niccol said.
More on the mission
Returning to the notion of Starbucks being “slow,” or the opposite of nimble, Niccol said, the company had too many people feeling they shouldered accountability. “And when everybody thinks they had a little bit of responsibility, that means nobody has any responsibility,” he said.
As a result, decisions weren’t made and everything bogged down.
Niccol said Starbucks has worked to give suppliers and partners clear direction on what it’s looking for and the organization’s expectations. It’s been a deliberate culture adjustment.
He wanted to add to the mix performance and speed without compromising mission and values.
Smith referenced it as, “we very much stand for a culture of getting things done now.”
“… If we don’t actually get the outcomes, it doesn’t matter,” she said of the larger premise. “And so, we really shifted the culture with getting things done. We put a premium on just completing tasks.”
“Last I checked, you can’t eat a PowerPoint presentation,” Niccol added. “You can’t drink a PowerPoint presentation. So, it’s how can I quickly get from the idea to actually in store so that we can actually see how customers and partners are able to experience what we’re trying to do.”
There are a lot of changes still to come. One concerns the units themselves. Starbucks is looking to build smaller locations compared to the 2,500-square-foot boxes popping up previously, which needed a full acre. At its Investor Day, the brand showcased a 1,350-square-foot model. There’s also an 1,850 store with 32 seats.
This should help Starbucks progress toward a wider goal of $2 billion in cost savings.
However Starbucks opens, Niccol said, it’s going to protect the growth it’s achieved thus far and build on it. And that’s going to boil down to not just winning the morning daypart.
He said Starbucks has made material gains later in the day thanks to its Matcha upgrades, energy Refreshers, and the fact it put seats into locations. Customers, especially younger ones, Niccol said, like to dwell in the afternoons.
And the reality is, even with sales improvements, Starbucks is not back to the traffic it reported in 2023. It’s definitely not at 2019 levels. “So, we have capacity to service more demand,” Niccol said.
That’s true early and later. Niccol said Starbucks can still build on its Refresher platform—a $2 billion one already—“dramatically.” That could mean more flavors, like an upcoming blue coconut option, sparkling, blended, sugar-free, and more.
“Usually, when you create great innovation on big platforms, big things continue to happen,” he said.
Platform innovation might sound like an oversimplification, Niccol continued, but it’s also practical. Starbucks doesn’t have to come out of left field with product launches to make an impact. It has enough equity to give customers what they’re asking for and do it with superior experience and scale.
“The things that we can control, we’re going to be maniacal about,” he said. “And the things that we can’t control, that’s where I think speed and the ability to pivot and learn is really valuable in the world in which we operate.”
An investor also posed the question of whether beverages as a category might cede momentum in the face of growing competition (kind of like what chicken endured).
Niccol said signs point to guests asking for more beverages done in a customized way, with a lean toward cold.
Like always, though, you can debate fad versus trend. But Niccol believes in paying attention to what customers vote for with their wallets. “And what I’ve seen over and over again is great experiences with great products always win,” he said. “We may find over time, yes, maybe people don’t want a blue drink, but that’s not what defines Starbucks. What defines Starbucks is going to be a community. It’s going to be the barista customer experience. And it’s going to be this idea of craft and customization. And those are not fads. Those are what people want.”
In fact, Niccol said, it’s only become more prevalent of late given the landscape. People are talking about how lonely they are and despite the fact society is supposedly more connected than ever (thanks to digital), the opposite is true. Having a “third place” built for the way you want to eat isn’t going to be a fleeting strength, he said.
“I think that is durability. And I think that is a path for long-term growth,” Niccol said. “Look, things come and go. But at the end of the day, those things that I just talked about are human truths and are the foundation of what makes Starbucks, Starbucks. And we’re going to be unrelenting on it.”
Niccol said Starbucks has clear sight for about 5,000 more corporate U.S. builds. That could double as some of those agile store models come into focus.
He said there are opportunities tracing from Michigan down to Texas and over to Virginia, where smaller builds can pop into suburban areas. There’s urban whitespace for compact in-line options as well.
Niccol noted licensed partners globally are building these creative models already. The company is taking learnings and translating them into reality stateside.
“I’m very optimistic for where we can get to,” he said.
Starbucks needed some time to readjust growth cadence after moving away from the remodel directive. But the sites are there.
“I just think there’s so much opportunity in this business because at the end of the day, it is a world-class brand with a differentiated experience and with, I think, craft and connection that nobody else can provide,” Niccol said.
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