WEBVTT - Starbucks Chairman & CEO Brian Niccol Talks Company Turnaround, Growth Outlook 0:00:02.520 --> 0:00:08.640 Bloomberg Audio Studios, Podcasts, Radio News. I'm here right now 0:00:08.640 --> 0:00:11.799 with Brian Nicol, fresh off his investor day here in 0:00:11.880 --> 0:00:14.400 New York City and fresh off an earnings report that 0:00:14.400 --> 0:00:16.480 actually seemed to please a lot of investors. Your five 0:00:16.560 --> 0:00:19.960 quarters right now into your tenure as CEO of Starbucks, 0:00:20.000 --> 0:00:22.800 and you put together a couple of quarters of growth, 0:00:22.960 --> 0:00:24.840 something that the company hadn't seen quite some time. 0:00:25.160 --> 0:00:28.240 Yeah, it was a great quarter for us. 0:00:28.760 --> 0:00:30.280 You know, the thing that was really exciting is to 0:00:30.280 --> 0:00:34.239 see the growth was driven by transactions and also the 0:00:34.240 --> 0:00:37.680 fact that the initiatives that we put in place around operating, 0:00:39.000 --> 0:00:41.839 supporting our partners with the green Apron service model, and 0:00:41.840 --> 0:00:44.880 then really getting back to great customer service, I think 0:00:44.920 --> 0:00:47.360 really showed it. It showed up in the results this 0:00:47.400 --> 0:00:48.920 last quarter. So we're pretty excited. 0:00:48.960 --> 0:00:50.920 So when you say transactions, are you getting more people 0:00:50.960 --> 0:00:51.840 in the store. 0:00:51.840 --> 0:00:52.760 Yeah, that's exactly right. 0:00:52.800 --> 0:00:53.000 Yeah. 0:00:53.040 --> 0:00:55.440 So what was great to see too, is the growth 0:00:55.680 --> 0:00:59.880 in transactions came from existing customers that are in our 0:01:00.040 --> 0:01:02.320 wards program as well as customers that are not in 0:01:02.320 --> 0:01:05.560 a rewards program that frankly, we had been struggling to 0:01:06.560 --> 0:01:10.120 kind of reclaim momentum with that group. In this quarter, 0:01:10.160 --> 0:01:14.000 we had both groups growing in visits, and as a result, 0:01:14.040 --> 0:01:16.679 our market share increased in visitation as well. 0:01:16.840 --> 0:01:18.960 I'm curious about the actual amount of money that they're 0:01:19.000 --> 0:01:21.400 spending as far as a growth in tickets that was 0:01:21.440 --> 0:01:24.360 actually a little bit underpacing what you actually saw in 0:01:24.440 --> 0:01:26.800 transactions themselves. What explains that that's right? 0:01:26.840 --> 0:01:29.680 So, you know, we saw about a little less than 0:01:29.680 --> 0:01:33.560 a point of ticket growth, and that's really driven by 0:01:33.600 --> 0:01:36.200 the fact that we've launched this new program around protein, 0:01:37.000 --> 0:01:39.360 so you get a protein cold foam on any drink, 0:01:39.480 --> 0:01:43.600 and that's a modification. And then obviously the balance of 0:01:43.640 --> 0:01:46.320 the growth came from just more people coming to Starbucks, 0:01:46.360 --> 0:01:49.120 either more often or coming back to the brand that 0:01:49.160 --> 0:01:50.120 hadn't been here in a while. 0:01:50.400 --> 0:01:52.800 Since you took over, you've put a big emphasis on, 0:01:53.320 --> 0:01:56.200 I guess, reimagining the stores to a certain extent. This 0:01:56.280 --> 0:01:58.280 may seem like a dumb question, but why. I mean, 0:01:58.320 --> 0:02:00.040 when I look at where your revenue comes from, a 0:02:00.040 --> 0:02:01.960 lot of that is coming from the drive through, it's 0:02:01.960 --> 0:02:04.880 coming from takeout, on the apps, it's coming from delivery. 0:02:05.000 --> 0:02:07.320 But you've put a big emphasis on the instore experience, 0:02:07.400 --> 0:02:08.720 and I don't understand why. 0:02:08.720 --> 0:02:11.440 Yeah, sure, well thanks for the question, because I do 0:02:11.600 --> 0:02:15.840 believe Starbucks is defined by the cafe and the coffee 0:02:15.840 --> 0:02:18.840 house experience. That really is where you get the humanto 0:02:18.880 --> 0:02:21.640 human connection with our baristas. It's where you see the 0:02:21.680 --> 0:02:23.799 craft of Starbucks, and then you also get just. 0:02:23.800 --> 0:02:25.000 The soul of Starbucks. 0:02:25.000 --> 0:02:28.040 So you know, our in store business is still over 0:02:28.080 --> 0:02:30.720 twenty percent. The thing that I always like to remind 0:02:30.760 --> 0:02:33.639 people too is people access Starbucks in all these channels. 0:02:33.680 --> 0:02:36.160 So they may go via the drive through or mobile 0:02:36.280 --> 0:02:39.440 order Monday through Friday, but Saturday, when they've got a 0:02:39.440 --> 0:02:41.560 little bit more time to dwell, they want to hang 0:02:41.600 --> 0:02:44.560 out in a great space. And so just this past 0:02:44.600 --> 0:02:47.120 month the data, I saw a sixty percent of our 0:02:47.120 --> 0:02:50.000 customers made at least one purchase from the counter. And 0:02:50.000 --> 0:02:52.480 that doesn't include our mobile order pickup people that come 0:02:52.560 --> 0:02:55.440 into the store to pick up their coffee or their 0:02:55.520 --> 0:02:59.600 drink or their food. So you know, obviously the entire 0:02:59.639 --> 0:03:02.200 business works because we have the right access modes, right 0:03:02.480 --> 0:03:05.959 mobile order, pickup, delivery, drive through, and then obviously the 0:03:06.080 --> 0:03:09.640 in cafe. But I just believe the cafe experience and 0:03:09.680 --> 0:03:13.120 this idea of a community location the third place, it's 0:03:13.280 --> 0:03:17.359 critical to people, and it's critical to what makes Starbucks Starbucks. 0:03:17.360 --> 0:03:17.919 It's who we. 0:03:17.880 --> 0:03:20.240 Are and you think that's what customers want. Because we've 0:03:20.240 --> 0:03:23.080 seen some new entrance into the coffee space, both domestically 0:03:23.080 --> 0:03:25.000 as well as some folks like Luck in coming to 0:03:25.040 --> 0:03:29.080 the US taking a much different business model basically grab 0:03:29.120 --> 0:03:29.799 and go more or less. 0:03:30.000 --> 0:03:31.560 The thing I like to remind everybody is we actually 0:03:31.639 --> 0:03:35.200 execute those channels right. So we have a mobile order 0:03:35.680 --> 0:03:39.400 pickup business, which is one of the competitors. We have 0:03:39.600 --> 0:03:42.040 the biggest drive through business. It's a well over a 0:03:42.080 --> 0:03:45.080 ten billion dollar business. It actually would be a fortune 0:03:45.120 --> 0:03:46.080 five hundred company just. 0:03:46.040 --> 0:03:46.600 On its own. 0:03:47.480 --> 0:03:50.640 So we know how to operate and give great experiences 0:03:50.840 --> 0:03:53.440 in all access modes. What we've seen over and over 0:03:53.480 --> 0:03:55.680 again though, is when we have all these channels with 0:03:55.800 --> 0:03:59.520 a great coffee house, we really are unmatched. And so 0:03:59.640 --> 0:04:02.320 that's our point of difference. And that's not to say 0:04:02.320 --> 0:04:04.360 we can't be great in these other access modes and 0:04:04.360 --> 0:04:05.160 compete effectively. 0:04:05.360 --> 0:04:07.200 I mean that sounds great on paper, but that sounds 0:04:07.200 --> 0:04:09.520 also complex. I mean, how do you maintain the integrity 0:04:09.560 --> 0:04:11.880 of everything when you're trying to have this experience in 0:04:11.920 --> 0:04:14.160 store at the same time somebody who wants to grab 0:04:14.160 --> 0:04:16.600 and go or a delivery driver showing up to grab 0:04:16.800 --> 0:04:17.440 in order as well. 0:04:17.760 --> 0:04:19.160 And that is why it's so important that we get 0:04:19.200 --> 0:04:23.480 this green Apron service model dialed in and really at 0:04:23.480 --> 0:04:25.360 the foundation was making sure we have the right number 0:04:25.360 --> 0:04:28.200 of people on the roster, the people are deployed correctly, 0:04:28.480 --> 0:04:33.240 our partners then know what they're accountable to execute, and 0:04:33.360 --> 0:04:36.040 what we've been able to see is between technology and 0:04:36.120 --> 0:04:40.159 I think simplification of the actual operating model, our partners 0:04:40.160 --> 0:04:41.000 can do a great job. 0:04:41.360 --> 0:04:43.240 A cafe experience happens. 0:04:42.880 --> 0:04:45.400 In less than four minutes from order to drink with 0:04:45.480 --> 0:04:48.719 a personal handoff mobile order. We're more on time and 0:04:48.760 --> 0:04:50.880 accurate than we ever have been, and our drive through 0:04:50.960 --> 0:04:52.679 during peaks are below four. 0:04:52.520 --> 0:04:53.159 Minutes as well. 0:04:53.200 --> 0:04:56.000 So it can be done, but we have to be 0:04:56.120 --> 0:04:59.359 intentional about it, and we have to set our partners 0:04:59.400 --> 0:05:04.159 up to be six scessful to operate that omni channel experience. So, 0:05:04.640 --> 0:05:06.680 you know, I love the fact that we're seeing the 0:05:06.720 --> 0:05:09.320 success that we're seeing, and I love that, you know, 0:05:09.640 --> 0:05:13.240 people are talking about the Starbucks experience again, like that shine, 0:05:13.320 --> 0:05:17.080 that soul that really is magnetic, that vibe. 0:05:17.640 --> 0:05:19.920 I think one of your executives said yesterday, your investor 0:05:19.960 --> 0:05:20.479 Day is back. 0:05:20.600 --> 0:05:20.760 Yeah. 0:05:20.800 --> 0:05:23.440 Yeah, the cultural relevancy for Starbucks, that's back. 0:05:23.560 --> 0:05:28.000 That's back as well our marketing, our menu innovation. One 0:05:28.000 --> 0:05:29.320 of the things we set out to do is part 0:05:29.320 --> 0:05:31.960 of this turnaround is get back into culture, get back 0:05:32.000 --> 0:05:34.479 to leading culture. And you know you got to do 0:05:34.560 --> 0:05:38.320 that with the right drinks, the right food, and then frankly, 0:05:38.360 --> 0:05:40.280 the right representation of the brand showing up in the 0:05:40.320 --> 0:05:42.839 right place is at the right time, with the right communication. 0:05:43.000 --> 0:05:46.920 And Tresie Lieberman, who leads our marketing efforts, she's done 0:05:46.960 --> 0:05:50.919 a phenomenal job. We are, in my opinion, Starbucks is 0:05:50.960 --> 0:05:51.480 back well. 0:05:51.680 --> 0:05:54.359 Speaking of her your Investor Day yesterday, she talked a 0:05:54.360 --> 0:05:57.600 lot about your rewards program it's pre launching, being reimagined, 0:05:57.640 --> 0:06:01.960 I believe in early March, about the need to retain 0:06:02.040 --> 0:06:05.839 your existing customer base, but how that rewards program helps, 0:06:05.839 --> 0:06:08.160 if at all, and bringing in new customers, those who 0:06:08.160 --> 0:06:09.720 aren't exposed to Starbucks on a daily base. 0:06:09.839 --> 0:06:10.039 Yeah. 0:06:10.080 --> 0:06:12.599 So, look, we got a lot of feedback on the 0:06:12.600 --> 0:06:15.160 rewards program. It's been a great program, but the feedback 0:06:15.200 --> 0:06:18.240 we got was it's not very personalized and so really 0:06:18.279 --> 0:06:19.120 what the team has. 0:06:19.000 --> 0:06:20.799 Done is made it more personal. 0:06:21.160 --> 0:06:24.000 And the feedback we get from people that don't participate, 0:06:24.000 --> 0:06:26.000 it's like, look, you know, maybe I don't go to 0:06:26.040 --> 0:06:29.719 Starbucks with enough frequency to really benefit from the rewards program. 0:06:29.960 --> 0:06:30.720 We're changing that. 0:06:30.680 --> 0:06:33.280 Because now when you get into the Green Tier, and 0:06:33.320 --> 0:06:35.440 there's three tiers now, so you're gonna have the Reserve tier, 0:06:35.960 --> 0:06:37.120 the Gold tier. 0:06:36.800 --> 0:06:39.640 And the Green tier Reserve Top Reserve would be the top. 0:06:39.760 --> 0:06:43.080 You know, you'll actually get a Black Reserve Starbucks card, 0:06:43.800 --> 0:06:47.159 which you know will be pretty cool because everything seems 0:06:47.160 --> 0:06:48.960 to be so virtual anymore. I think people like every 0:06:48.960 --> 0:06:51.400 once in a while to get something tangible. But the 0:06:51.440 --> 0:06:55.200 Green Tier then allows you to redeem Stars and you 0:06:55.240 --> 0:06:58.720 can get you know, a reward with not that much engagement, 0:06:58.800 --> 0:07:01.839 and so it just gets people to be more connected 0:07:01.839 --> 0:07:04.240 to the brand. And then ideally, over time, you know, 0:07:04.279 --> 0:07:06.680 they'll migrate into Gold or you know, for some of 0:07:06.680 --> 0:07:08.839 those folks that migrate into Reserve, I think they'll find 0:07:08.839 --> 0:07:10.400 it's a really special experience. 0:07:10.760 --> 0:07:13.400 You've managed to sort of get sales back up. There 0:07:13.440 --> 0:07:15.440 are stales some analysts that look at some of the 0:07:15.440 --> 0:07:17.320 growth rate that you have four percent. I think we'll 0:07:17.360 --> 0:07:19.760 say in the most recent quarter, I think your guidance 0:07:19.800 --> 0:07:22.360 is what three to five percent a little bit longer term, 0:07:22.360 --> 0:07:24.280 but there are some analysts there looking back to the 0:07:24.280 --> 0:07:27.000 heyday from a decade or two ago, when Starbucks is 0:07:27.040 --> 0:07:29.520 more a mid single digits and even up into the teams. 0:07:29.560 --> 0:07:31.720 Is that even realistic to get back to those levels. 0:07:31.840 --> 0:07:34.040 Look, I've looked at I've looked at this as I've 0:07:34.040 --> 0:07:37.240 come in and a company at our scale, you know, 0:07:37.240 --> 0:07:40.560 we have forty thousand coffee houses around the world, over 0:07:40.600 --> 0:07:44.120 four hundred thousand Green Apron partners. I think if we 0:07:44.160 --> 0:07:47.720 can consistently deliver a comp that is three percent or better, 0:07:48.440 --> 0:07:51.240 you know, revenue growth that is, you know, five percent 0:07:51.320 --> 0:07:55.000 or better, and then earnings growth that outpaces that, that 0:07:55.040 --> 0:07:58.520 would be world class. And we're a world class company 0:07:58.680 --> 0:08:01.320 and we will deliver I think world class results as 0:08:01.360 --> 0:08:04.600 we get going on this turnaround. So make no mistake, 0:08:04.680 --> 0:08:08.480 we are a growth company at scale, which is really exciting. 0:08:08.520 --> 0:08:10.520 I think on the top line, when does the bottom 0:08:10.560 --> 0:08:11.240 line catch up? 0:08:11.400 --> 0:08:13.840 So the bottom line will start You'll start to see 0:08:13.880 --> 0:08:17.200 us make improvements. I think as we get into the 0:08:17.200 --> 0:08:18.960 back half of this year and then every year from 0:08:19.000 --> 0:08:22.040 here on, out and that's really what we guided people towards, 0:08:22.120 --> 0:08:25.600 is we'll get into the thirteen to fifteen percent range 0:08:25.600 --> 0:08:28.840 on margins here by twenty twenty eight. And then actually 0:08:28.920 --> 0:08:31.920 that's just I think a mile marker. There's an opportunity 0:08:31.960 --> 0:08:33.360 for us to grow even beyond that. 0:08:33.559 --> 0:08:37.439 What's holding back that margin expansion, that profitability right now? 0:08:37.520 --> 0:08:40.120 You know, look, initially we had to do some reinvesting 0:08:40.559 --> 0:08:42.959 in the business to get again the right people. We 0:08:43.280 --> 0:08:45.480 invested over I think it's five hundred million clus to 0:08:45.480 --> 0:08:51.120 six hundred million dollars into the labor experience. And you know, 0:08:51.800 --> 0:08:54.400 the best way for you to then start driving earnings 0:08:54.440 --> 0:08:55.960 is we've got to get the top line going. 0:08:56.760 --> 0:08:58.480 We've done that, and then. 0:08:58.360 --> 0:09:00.520 Obviously we'll work on the middle of the P and 0:09:00.600 --> 0:09:02.720 L as well on the cost side of things, which 0:09:02.800 --> 0:09:04.720 we've got clear line of sight on how over the 0:09:04.760 --> 0:09:07.880 next two years we'll probably be able to stay close 0:09:07.920 --> 0:09:10.280 to two billion dollars while we're growing the top line. 0:09:10.360 --> 0:09:15.520 So it's a combination of growth and smart cost management. 0:09:15.679 --> 0:09:17.600 I am curious, at least here in the US, with 0:09:17.640 --> 0:09:20.080 regards to those growth plans, how much have you taken 0:09:20.080 --> 0:09:22.680 into account the economic environment? I mean, a lot of 0:09:22.679 --> 0:09:26.760 your products are still, if not premium, certainly proceed as 0:09:26.840 --> 0:09:29.640 premium price products. Here does that work against you if 0:09:29.640 --> 0:09:31.160 we do end up in the economic downturn? 0:09:31.360 --> 0:09:32.920 You know, Look, I think at the end of the day, 0:09:33.080 --> 0:09:35.480 the thing that I'm excited about is people are saying 0:09:35.800 --> 0:09:39.400 the experience they're getting at Starbucks, the whole package, They're saying, 0:09:39.440 --> 0:09:42.360 it's worth it. And we're we're seeing some of our 0:09:42.440 --> 0:09:48.079 highest scores through consumer claimed statements, And that's why I 0:09:48.120 --> 0:09:50.640 think it's so important that we have this great cafe experience, 0:09:50.720 --> 0:09:53.280 we have this great customer experience where it's a connection 0:09:53.360 --> 0:09:56.360 between our barista and then look, we've always been unwavering 0:09:56.360 --> 0:09:59.200 in the quality of our coffee, our drinks, and the 0:09:59.360 --> 0:10:02.840 ingredients that we use. So, yeah, you know, we're going 0:10:02.880 --> 0:10:06.520 to be an affordable luxury item, but if you look 0:10:06.520 --> 0:10:10.080 at it, we're priced pretty darn competitively. And then I 0:10:10.080 --> 0:10:14.319 think for what you get for the premium that we provide, 0:10:15.240 --> 0:10:17.319 I think customers are saying, yeah, you know, I'm all 0:10:17.320 --> 0:10:17.720 in on that. 0:10:18.040 --> 0:10:20.280 Do you think you have that pricing power right now? 0:10:20.320 --> 0:10:22.040 Should you feel like you need to pull that lever? 0:10:22.280 --> 0:10:24.000 You know, Look, pricing is one of those things that 0:10:24.000 --> 0:10:27.040 will always be the last lever that will pull. There 0:10:27.080 --> 0:10:29.720 are times where you do have to put some pricing 0:10:29.720 --> 0:10:33.199 into the business, you know, but fortunately we've been able 0:10:33.240 --> 0:10:36.080 to hold off for the last little more than a year. 0:10:36.880 --> 0:10:41.360 So we'll see how things evolve. But you know, if 0:10:41.360 --> 0:10:43.480 we need to do it, we'll do it very strategically, 0:10:44.360 --> 0:10:46.400 and we'll try to do it as minimal as possible. 0:10:46.480 --> 0:10:48.720 You're spending a lot to revamp your stores. I know 0:10:48.800 --> 0:10:51.240 that's a temporary costs in theory, but there are other 0:10:51.280 --> 0:10:54.080 additional costs you're having to deal with, including labor costs 0:10:54.160 --> 0:10:55.559 and things that are going to be a long more, 0:10:55.600 --> 0:10:58.400 longer term and permanent. How has that factored into the forecast? 0:10:58.720 --> 0:11:00.840 Yeah, you know, look, obviously you always have to think 0:11:00.840 --> 0:11:04.600 through what does it cost in order to make sure 0:11:04.640 --> 0:11:07.600 we maintain the integrity of the experience. And right now 0:11:07.640 --> 0:11:09.880 we're having to come back in we call it our 0:11:10.080 --> 0:11:14.400 Coffee House Uplift program, where we are just basically retouching 0:11:15.240 --> 0:11:17.760 all of our cafes. So we want to have great seats, 0:11:17.880 --> 0:11:20.400 great atmosphere, a place that feels warm. 0:11:20.240 --> 0:11:21.680 Place you want to be. 0:11:22.440 --> 0:11:25.600 And then obviously we have been and will always be 0:11:26.880 --> 0:11:29.600 some of the best benefits, best wages you can find 0:11:29.760 --> 0:11:32.400 as a partner, and so when you look at it 0:11:32.400 --> 0:11:34.000 in retail, there's no doubt we have one of the 0:11:34.000 --> 0:11:38.080 best jobs in retail. And that's the reason we can 0:11:38.120 --> 0:11:41.160 also see it is we have the lowest turnover in 0:11:41.200 --> 0:11:42.920 our industry by a lot. 0:11:43.120 --> 0:11:45.720 Our turnover is below fifty percent at the hourly level. 0:11:45.960 --> 0:11:48.559 In this industry, turnover is usually over one hundred and 0:11:48.640 --> 0:11:49.440 twenty five percent. 0:11:49.559 --> 0:11:51.760 So we're definitely doing something right. 0:11:51.840 --> 0:11:54.680 And the feedback I'm getting from our partners is they 0:11:54.720 --> 0:11:57.720 definitely feel supported, they're engaged, and they love doing the 0:11:57.720 --> 0:11:58.440 work that they're doing. 0:11:58.600 --> 0:12:01.000 I am curious though about some of the unionization draw 0:12:01.480 --> 0:12:04.440 that kind of predated you, but obviously still there as well. 0:12:05.040 --> 0:12:07.680 Have you spoken with those unions in any sort of 0:12:07.679 --> 0:12:10.600 meaningful way recently. Are they still demanding more than what 0:12:10.600 --> 0:12:11.400 you've already offered? 0:12:11.960 --> 0:12:14.440 You know, Look, I think we've talked about this. 0:12:15.160 --> 0:12:18.120 I'd love to be able to find a deal so 0:12:18.160 --> 0:12:21.400 that we could get a contract and move on, but 0:12:21.440 --> 0:12:23.080 it's going to have to be reasonable, and it's going 0:12:23.120 --> 0:12:24.760 to have to reflect the fact that we are the 0:12:24.880 --> 0:12:29.200 leader in benefits wages for people that work twenty hours 0:12:29.280 --> 0:12:31.880 or more in our company because it has to be 0:12:31.960 --> 0:12:35.559 sustainable so that all four hundred thousand partners and all 0:12:35.559 --> 0:12:38.120 two hundred and fifty thousand partners in the United States 0:12:38.720 --> 0:12:41.080 can continue to have a great experience, a great career, 0:12:41.280 --> 0:12:45.959 and frankly get great development and growth personally and professionally. 0:12:46.000 --> 0:12:49.360 So you know, we're always going to continue to have 0:12:49.360 --> 0:12:53.320 the conversation, and you know, I'm a believer in that 0:12:53.360 --> 0:12:55.280 you can find a solution, but it's going to have 0:12:55.320 --> 0:12:57.959 to be reasonable so that everybody can be successful long term. 0:12:58.080 --> 0:13:00.599 The US is obviously your primary market at Starbucks for 0:13:00.679 --> 0:13:02.760 quite some time, and made a real big push into China. 0:13:02.760 --> 0:13:05.520 At one point you were the largest coffee chain in China. 0:13:06.000 --> 0:13:07.880 You've changed from that just a little bit, and you've 0:13:07.920 --> 0:13:11.440 recently entered into a partnership to effectively sell off the 0:13:11.480 --> 0:13:14.439 majority of that business to the private equity firm. Boyu, 0:13:14.760 --> 0:13:17.600 what is Starbucks going to look like, particularly in China 0:13:17.640 --> 0:13:19.480 and the rest of the rest of the countries. 0:13:19.559 --> 0:13:21.520 Yeah, Look, I think the one thing I want to 0:13:21.559 --> 0:13:23.520 be clear on is we do believe China is a 0:13:23.520 --> 0:13:27.080 tremendous growth market. You know, today we have over eight 0:13:27.120 --> 0:13:31.640 thousand coffee houses we believe with our partner BOU, that 0:13:31.679 --> 0:13:35.800 could be fifteen twenty thousand coffee houses and they are 0:13:35.840 --> 0:13:39.000 the great They are a great partner for growth and 0:13:39.160 --> 0:13:40.720 part of the reason why we decided to do this 0:13:40.960 --> 0:13:43.360 is for our next chapter of growth. We just believe 0:13:43.400 --> 0:13:46.560 we needed a local partner to help us kind of 0:13:46.600 --> 0:13:49.120 figure out how we can grow faster because one of 0:13:49.120 --> 0:13:51.400 the things that has really I think been exciting to 0:13:51.400 --> 0:13:53.160 see and on the other hand, kind of like whoa 0:13:53.640 --> 0:13:57.120 is the coffee category is really growing and you know, 0:13:57.480 --> 0:14:00.760 some of these competitors that have emerged in k have 0:14:01.040 --> 0:14:03.480 just I think, really ramped up their new unit growth 0:14:03.520 --> 0:14:05.520 and so we're gonna have to get more competitive in 0:14:05.600 --> 0:14:08.640 our new unit growth story. And I still believe at 0:14:08.640 --> 0:14:10.360 the end of the day, we have the best product 0:14:10.440 --> 0:14:13.560 and the best experience. So I believe that'll set us 0:14:13.600 --> 0:14:15.320 up for success. And I think that's why BOU is 0:14:15.320 --> 0:14:18.040 so excited to partner with us because they see the 0:14:18.080 --> 0:14:19.160 opportunity as well. 0:14:19.440 --> 0:14:21.560 You talked at your investor day about this being sort 0:14:21.560 --> 0:14:24.520 of an asset light model that you're taking there. Does 0:14:24.560 --> 0:14:28.600 that also mean that investors should expect maybe slummer margins 0:14:28.680 --> 0:14:30.920 because of the fact that you have to share a 0:14:30.920 --> 0:14:31.880 lot of that money with Boyo. 0:14:32.440 --> 0:14:34.480 No, you know, and look the way we've structured it 0:14:34.560 --> 0:14:38.360 is obviously the partnerships are in the cases where we 0:14:38.400 --> 0:14:42.400 have full license scenario, we don't end up deploying our 0:14:42.440 --> 0:14:46.520 capital into the markets. We support the licensee in a 0:14:46.520 --> 0:14:50.400 different fashion through you know, marketing and menu and technology 0:14:50.600 --> 0:14:54.520 and you know design. So it just becomes less of 0:14:54.560 --> 0:14:58.240 a requirement on our capital. But it's still you know, 0:14:58.320 --> 0:15:00.480 in most cases you see the margin actually rise and 0:15:00.520 --> 0:15:02.040 becomes margin and creative. 0:15:01.840 --> 0:15:04.200 To the total business. And the thing that's really. 0:15:04.040 --> 0:15:06.840 Exciting is there's so much opportunity for growth and when 0:15:06.880 --> 0:15:09.480 you have these local partners in these international markets, we 0:15:09.640 --> 0:15:13.320 just end up, i think, getting access to the premieer 0:15:13.400 --> 0:15:15.880 real estate and at a speed that we couldn't do 0:15:16.480 --> 0:15:18.760 from our Seattle offices. 0:15:19.040 --> 0:15:21.560 I am curious about the scale of this business, particularly 0:15:21.600 --> 0:15:23.640 in light of some of the businesses that you ran before, 0:15:23.720 --> 0:15:26.280 relatively successfully. For those who don't know a former brand 0:15:26.360 --> 0:15:28.760 manager at P ANDNG. You went on, turned around Taco Bell, 0:15:28.880 --> 0:15:32.160 you turned around Chipotle. Now you're Starbucks. Is Starbucks too 0:15:32.200 --> 0:15:33.640 big to handle right now? 0:15:33.920 --> 0:15:34.120 Oh? 0:15:34.160 --> 0:15:34.240 No. 0:15:34.840 --> 0:15:37.720 The thing that's great about Starbucks is the brand is beloved, 0:15:37.800 --> 0:15:41.440 it's iconic, and when you go around the world, there's 0:15:41.480 --> 0:15:44.040 no doubt that people want to engage with the Starbucks brand. 0:15:44.560 --> 0:15:46.520 As I was looking at the US, I think we 0:15:46.680 --> 0:15:49.800 just moved too far away from what made Starbucks Starbucks. 0:15:49.840 --> 0:15:52.280 And I think you were at our investor day yesterday 0:15:52.360 --> 0:15:54.320 and I think Mike said it really well, which is, 0:15:54.600 --> 0:15:56.240 we don't need to change who we are. We just 0:15:56.280 --> 0:15:57.760 need to be great at who we are and what 0:15:57.800 --> 0:16:01.680 we do. And that's what we're getting back to do intentionally, right, 0:16:01.720 --> 0:16:04.600 So it's like, we're going to be intentional about that barista, 0:16:04.680 --> 0:16:07.760 the customer interaction, the customer experience you get. We're going 0:16:07.800 --> 0:16:10.040 to be intentional about making sure you have a great seat. 0:16:10.160 --> 0:16:12.720 We're going to be intentional with the menu, the marketing, 0:16:13.080 --> 0:16:16.440 the digital experiences that we provide. And what I've seen 0:16:16.600 --> 0:16:18.400 just most recently from this quarter is when we do 0:16:18.480 --> 0:16:21.480 that with excellence, yeah, you know, we get rewarded with 0:16:21.520 --> 0:16:22.720 customer's business and loyalty. 0:16:22.760 --> 0:16:24.960 Are you're going to be intentional about the locations. I mean, 0:16:25.040 --> 0:16:27.880 under your predecessors, there was a big expansion plan where 0:16:27.920 --> 0:16:29.440 at least here in New York City. I mean, you 0:16:29.440 --> 0:16:31.960 can walk down a single block and have like five Starbucks, 0:16:32.040 --> 0:16:34.280 you know, all competing against each other. That's we're trenched 0:16:34.320 --> 0:16:34.720 a lot. 0:16:34.920 --> 0:16:36.960 Do you go back to that, Well, look, I think 0:16:37.000 --> 0:16:39.560 there are opportunities for us to continue to grow in 0:16:39.600 --> 0:16:43.920 New York City and frankly in a lot of communities 0:16:43.960 --> 0:16:45.000 around the United States. 0:16:45.240 --> 0:16:47.280 We talked about the essally, we believe we can. 0:16:47.240 --> 0:16:50.080 Have five thousand stores. We've got line of sight on that, 0:16:50.480 --> 0:16:53.000 and as we grow our afternoon day part and grow 0:16:53.040 --> 0:16:55.640 the economics of the business, we'll probably go well beyond 0:16:55.800 --> 0:16:59.520 those five thousand that we've identified. So you'll see Starbucks 0:16:59.560 --> 0:17:02.640 continuing to bring new stores. We want to be smart 0:17:02.680 --> 0:17:05.440 about where we locate them so that it's the right 0:17:05.480 --> 0:17:09.399 place for the customer, most importantly, and then also so 0:17:09.440 --> 0:17:12.000 that we can attract and retain partners to have a 0:17:12.000 --> 0:17:13.320 great experience working in the stores. 0:17:13.400 --> 0:17:15.679 Most of your revenue is still waited to the morning. 0:17:15.720 --> 0:17:18.719 You mentioned the PM, if you will, afternoon what actually 0:17:18.720 --> 0:17:21.520 gets people not only in the stores in the afternoon hours, 0:17:21.520 --> 0:17:22.520 but also spending more. 0:17:23.280 --> 0:17:26.119 Yeah, well, so we have an afternoon business today, but 0:17:26.200 --> 0:17:28.840 I think there is a multi billion dollar opportunity to 0:17:28.960 --> 0:17:32.120 grow our afternoon day part. You know, as we get 0:17:32.160 --> 0:17:34.159 the cafe set up to be a great place for 0:17:34.200 --> 0:17:37.480 you to you know, kind of reset, recharge, whatever you 0:17:37.520 --> 0:17:39.919 want to do, and we pair that up with the 0:17:40.000 --> 0:17:44.480 right beverage and ultimately the right food. I think there's 0:17:44.480 --> 0:17:46.399 no reason why we can't have as strong of an 0:17:46.440 --> 0:17:48.639 afternoon day part as we have in the morning. 0:17:48.960 --> 0:17:51.800 And speaking of food, you are making some major menu changes. 0:17:51.840 --> 0:17:54.119 One thing I noticed at the investor day there were 0:17:54.160 --> 0:17:58.440 a lot of non caffeinated beverages now that are coming 0:17:58.480 --> 0:17:59.000 down the menu. 0:17:59.119 --> 0:18:01.520 Y well, I think we were sampling a lot of 0:18:01.520 --> 0:18:03.440 the things that we think are going to be right 0:18:03.520 --> 0:18:04.399 for the afternoon. 0:18:05.320 --> 0:18:06.880 And you know, we talked about our new. 0:18:06.880 --> 0:18:09.719