Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. All Right, Brian, congratulations
Speaker 1: on the recent quarter. Obviously, investors I had been looking
Speaker 1: for some sort of sense that there would be a
Speaker 1: return to growth under your leadership in the thirteen months
Speaker 1: that you've been on the job one percent on the
Speaker 1: same store sales basis. Do you have confidence that the
Speaker 1: performance that you saw in your physical fourth quarter is
Speaker 1: not only going to be repeatable, but more importantly something
Speaker 1: that you can build on for the current quarter and beyond.
Speaker 2: Yeah, Rollian, great to be here, and absolutely we believe
Speaker 2: this was a critical moment in our turnaround plan of
Speaker 2: the back to Starbucks strategy.
Speaker 3: You know, it was great to see.
Speaker 2: Once we got the green Apron service standard into the business,
Speaker 2: we saw a lot of really good things happen, you know,
Speaker 2: most specifically, our partners were set up with bigger rosters,
Speaker 2: more hours, and they were able to give customers better connection,
Speaker 2: great craft products, which then translated into transaction increases.
Speaker 3: As you saw in September.
Speaker 2: We have positive comps driven by those transaction gains that
Speaker 2: continued into October, and we believe we can build from
Speaker 2: here because we've got a strong operational footing and really
Speaker 2: excited about what we've got coming for holiday.
Speaker 3: So we think it was a.
Speaker 2: Critical moment in the fourth quarter for the turnaround of
Speaker 2: the US business. And when you think about North America,
Speaker 2: the thing that's great is Canada had a great quarter
Speaker 2: as well.
Speaker 3: They were low mid single digit.
Speaker 2: COMP growth driven by transactions as well, and they've done
Speaker 2: a really great job there. And then when you look
Speaker 2: around the world, we had terrific successes in many markets,
Speaker 2: and most notably China had its second consecutive quarter of
Speaker 2: comp growth. So it was a critical moment for us,
Speaker 2: and we're optimistic about where we go from here.
Speaker 1: You've put a lot of emphasis on service. Obviously with
Speaker 1: the Green Apron project. What does that look like in
Speaker 1: terms of US staffing though, I mean, you obviously have
Speaker 1: to hire more people, but more importantly, you have to
Speaker 1: retrain a lot of your existing staff as well. I
Speaker 1: guess receptive have they been to that and have you
Speaker 1: faced any challenges?
Speaker 3: You know, I got to give our partners a lot
Speaker 3: of credit.
Speaker 2: They really have embraced both the back to Starbucks strategy
Speaker 2: and the Green Apron service standard. And when I'm in stores,
Speaker 2: you know, what I hear from folks is.
Speaker 3: Like thank you.
Speaker 2: We're getting back to being a great coffeehouse again. Our
Speaker 2: baristas and partners, they love doing the craft. They love
Speaker 2: having the moments of connection with our customers, and our
Speaker 2: customers love it as well. And so the fact that
Speaker 2: we've staffed the stores up and we've added more people,
Speaker 2: we've added more hours, it actually has set them up
Speaker 2: to be able to do their job I think with excellence.
Speaker 2: And you know, it's always terrific to be able to
Speaker 2: hire more people. And when you've got great leaders in
Speaker 2: the stores, they're able to train the new people, I think,
Speaker 2: really quickly. And we've tried to keep this very focused
Speaker 2: on what we're looking for, right. We want a great
Speaker 2: greeting when people walk in. We want a great experience
Speaker 2: at the handoff. We're working on doing these uplifts so
Speaker 2: then our customers have great seats if they just I
Speaker 2: had to stay. And we've put some technology in behind
Speaker 2: the scenes to help put order to all those orders
Speaker 2: coming in, whether it's through the drive through, mobile order
Speaker 2: or in the cafe. So you know, we're seeing great
Speaker 2: responses from our partners, and I couldn't be prouder of
Speaker 2: the progress they've made.
Speaker 3: In really short order. You know, we've only been doing
Speaker 3: this since the middle of August.
Speaker 1: Yeah, And with regards to the actual physical Starbucks locations,
Speaker 1: I mean, there are a lot of layers to what
Speaker 1: you're doing here. Of one, obviously trying to make the
Speaker 1: interior is a little bit more accommodating and comfortable, but
Speaker 1: at the same time also efficient. You're also looking to
Speaker 1: sort of create more I guess lower cost models for
Speaker 1: building and operating some of these locations. Are those two
Speaker 1: in conflict with each other those strategies.
Speaker 3: No, Actually, they can work really well together.
Speaker 2: You can have great design, you can have a great seat,
Speaker 2: you can have a great atmosphere, and then also be
Speaker 2: very cost conscious. And that's what we're doing here, is
Speaker 2: we want to make sure all our base costs go
Speaker 2: into giving the partner the back of house they need
Speaker 2: to be successful, and then the customer the front of
Speaker 2: house experience where they love being in our coffee houses.
Speaker 2: And so that's what we're doing these coffee house uplifts.
Speaker 2: We're able to turn these around in a night or two.
Speaker 2: We don't have to close the store, and the transformation
Speaker 2: is meaningful. You know, the feedback we're getting from customers
Speaker 2: is really, really positive, both on the design as well
Speaker 2: as just the whole atmosphere, the vibe that they're getting.
Speaker 2: And I think the combination of the green Apron service
Speaker 2: with this coffee house uplift just really gets people to
Speaker 2: a different place and they believe now they're getting that
Speaker 2: Starbucks experience that frankly, you don't get anywhere else.
Speaker 1: How much will the pace of those uplifts pick up?
Speaker 1: I mean you've only done a few dozen stores at
Speaker 1: least in the most recent quarter here. I mean you've
Speaker 1: got more than ten thousand company operated locations right here
Speaker 1: in North America. So when do we start to see
Speaker 1: the other thousands of locations, I'll get that uplift.
Speaker 3: Yeah.
Speaker 2: So we've done about seventy so far, and we are
Speaker 2: focused on this fiscal year getting over a thousand done.
Speaker 2: And the good news is, once we get that scale
Speaker 2: operation going, we build know how, we will be able
Speaker 2: to then hopefully accelerate the build schedule accordingly into the
Speaker 2: out years because we would love to touch all the
Speaker 2: stores that need it. And then the good news is too,
Speaker 2: as we build new stores going forward, we're building the
Speaker 2: new stores.
Speaker 3: With the right design package, the right experience.
Speaker 2: So we have some work to do with our existing
Speaker 2: coffee houses, but I'm optimistic we will demonstrate that we're
Speaker 2: able to do this at scale, and then we'll build
Speaker 2: on our ability to do thousands of stores going forward.
Speaker 1: There is still cost involved in this. You had a
Speaker 1: restructuring charge in the most recent quarter. The sales growth
Speaker 1: is coming back, there are still some concerns about where
Speaker 1: the margins could be under pressure as you go through
Speaker 1: this transition. What do you tell investors who asked that question.
Speaker 2: Yeah, Look, I think the margins will follow the top
Speaker 2: line success, and I see no reason why we can't
Speaker 2: get back to earning what we used to earn.
Speaker 3: Even pre COVID.
Speaker 2: So I'm very optimistic for where we can get to
Speaker 2: on the bottom line. You know, kind of the way
Speaker 2: we've talked about it is our future is we're going
Speaker 2: to have more transactions, a bigger business, and every transaction
Speaker 2: is going to be more profitable than it currently is today.
Speaker 2: I love the fact that our culture has really adopted
Speaker 2: this mantra of we're going to be better tomorrow than
Speaker 2: we were today, and the same thing is true on
Speaker 2: the bottom line. So that's where we're headed, and I'm
Speaker 2: confident as we continue to put transactions into the business.
Speaker 2: Customers continue to experience the Starbucks experience, they see the
Speaker 2: tremendous value, it will flow to.
Speaker 3: The bottom line, and it'll reward everybody.
Speaker 1: Accordingly, you seem confident, you seem optimistic. I am curious
Speaker 1: as to why you didn't feel it was appropriate yesterday
Speaker 1: with regards to the earnings releasing the call to reinstate
Speaker 1: some sort of guidance. I know your CFO Kathy Smith
Speaker 1: said you would probably do that in January at an
Speaker 1: investor day, but why not now?
Speaker 2: You know, we basically believe we want to do it
Speaker 2: at the investor day so that we can give people
Speaker 2: a comprehensive look of where we're going, not just for
Speaker 2: the fiscal year twenty SI, but rather a long term
Speaker 2: look on how we're resetting this business up for success.
Speaker 2: I believe the reason why I'm here, why our leadership
Speaker 2: team is here, is not about what happens next week
Speaker 2: or frankly next month. It is about where we are
Speaker 2: three years from now. So I'm optimistical about what's going
Speaker 2: to happen in the short term, but we want to
Speaker 2: use this investor day to really give people guidance on
Speaker 2: where we see this business growing in the future. So
Speaker 2: we'll see everybody in late January, and I think we've
Speaker 2: got a great story to share with people, and I
Speaker 2: look forward to seeing people there.
Speaker 1: I want to talk about the coffee and the food. Obviously,
Speaker 1: one of the biggest buzz right now around Starbucks is
Speaker 1: to add on foam protein.
Speaker 3: I am curious.
Speaker 1: I mean, obviously it's in the zeitdece but is there
Speaker 1: any way you can articulate whether it's actually been a
Speaker 1: cretive with regards to sales and the bottom line. I mean,
Speaker 1: what do transactions look like for those protein drinks.
Speaker 2: Yeah, so we're early days in the protein platform, but
Speaker 2: it's proving to be very incremental, which is terrific to see.
Speaker 2: One of the best early indicators is our rewards. Customers
Speaker 2: that had some low frequency, we're seeing their frequency pick up.
Speaker 2: We're also seeing our awareness build. And as the awareness
Speaker 2: builds and we see people try whether it's a protein
Speaker 2: cold foam or the protein latte execution, we see them
Speaker 2: actually loving it and coming back and doing it more often,
Speaker 2: and in some cases even doing it in the afternoon,
Speaker 2: so they may get a different experience in the morning
Speaker 2: and then they come in the afternoon and get the
Speaker 2: protein latte solutions. So we're looking really promising on this
Speaker 2: protein platform. Obviously we'll learn a lot, we'll listen to
Speaker 2: what customers say. But I love the fact that over
Speaker 2: ninety percent of the drinks now you can get protein added,
Speaker 2: and it's very much on trend with how people want
Speaker 2: to eat and drink, and so look, I think this
Speaker 2: is a piece of Starbucks getting into the right health
Speaker 2: and wellness frame of reference and then also giving customers
Speaker 2: the personalization that they want around protein.
Speaker 1: I am curious about price, particularly in light of some
Speaker 1: upstart competitors that have come into this space like Dutch Bros.
Speaker 1: As well as Seven Brew, Lucking Coffee, and a few
Speaker 1: others here. Do you feel like you need to compete
Speaker 1: with those names on price or can you sort of
Speaker 1: maintain this sort of a relative premium or luxury model
Speaker 1: that I think Starbucks has had a perception of being.
Speaker 2: Yeah, Look, we're always going to compete, okay, And one
Speaker 2: of the things that I love is we're competing from
Speaker 2: a position of strength, and that strength comes from the
Speaker 2: fact that one thing I like to remind people is
Speaker 2: we are the biggest coffee drive through business. We are
Speaker 2: the biggest mobile order or digital coffee business. Now I
Speaker 2: think we're also the biggest delivery coffee business, and then
Speaker 2: obviously we are the biggest cafe coffee business. And when
Speaker 2: we provide people the experience, meaning the connection, the community aspect,
Speaker 2: the humanity of Starbucks combined with the craft of our
Speaker 2: coffee and the personalization, we see customers saying this is
Speaker 2: tremendous value and it is well worth it. And so
Speaker 2: I always say to our team, we have to be
Speaker 2: on the offense. We have to recognize the scale that
Speaker 2: we have, and then we have to do the customer
Speaker 2: experience better than anybody else. And we are, after being
Speaker 2: the world's greatest customer service company, and I think that's
Speaker 2: a place of strength when you compare a lot of
Speaker 2: the other competitors that you mentioned before I let you.
Speaker 1: Go, Brian, I do want to ask you a little
Speaker 1: bit more about international strategy, particularly with regards to China.
Speaker 1: Starbucks is at a footprint there since at least the
Speaker 1: late nineteen nineties. Bloomberg reported this week that you are
Speaker 1: close to finalizing the deal for a partnership with a
Speaker 1: private equity firm that would allow you to expand your
Speaker 1: footprint in China even further. How much further do you
Speaker 1: want to go with that and how far along are
Speaker 1: you in sealing that partnership.
Speaker 3: Yeah.
Speaker 2: Look, I'm really excited for our China business. You know,
Speaker 2: they've had two consecutive quarters of comp growth. The team,
Speaker 2: I think is really doing a great job of listening
Speaker 2: to customers, reacting and building on the strength of the
Speaker 2: Starbucks brand as it relates to finding a partner for
Speaker 2: our China business. This process I think is really I
Speaker 2: think validated what I knew, which is China is a
Speaker 2: tremendous growth opportunity. And the process is also demonstrated to
Speaker 2: us that the partners that we were fortunate that came
Speaker 2: to the table are excited about getting this brand to
Speaker 2: go from eight thousand stores to fifteen twenty thousand stores,
Speaker 2: and their expertise is.
Speaker 3: In the local China market.
Speaker 2: I think it's going to help our team get into
Speaker 2: those Tier three, four or five cities faster and with
Speaker 2: the right execution so that we are able to build
Speaker 2: on this positive momentum that we have. So I'm looking
Speaker 2: forward to wrapping up the process and I'm looking forward
Speaker 2: to our China team being one hundred percent focused on
Speaker 2: just growing that business into the future in a big way.
Speaker 1: You think wrapping up that process will happen before the
Speaker 1: investor day in January.
Speaker 2: You know, you never know on the timing on these things,
Speaker 2: but you know, I love the partners that we're working with,
Speaker 2: and I'm optimistic that we're going to get this deal
Speaker 2: done in the not too distant future.