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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News here right now with

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Speaker 1: Brian Nicol, fresh off his investor day here in New

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Speaker 1: York City and fresh off an earnings report that actually

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Speaker 1: seemed to please a lot of investors. Your five quarters

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Speaker 1: right now into your tenure as CEO of Starbucks, and

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Speaker 1: you put together a couple of quarters of growth, something

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Speaker 1: that the company hadn't seen in quite some time.

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Speaker 2: Yeah, it was a great quarter for us.

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Speaker 3: You know. The thing that was really exciting is to

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Speaker 3: see the growth was driven by transactions and also the

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Speaker 3: fact that the initiatives that we put in place around operating,

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Speaker 3: supporting our partners with the green Apron service model, and

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Speaker 3: then really getting back to great customer service, I think

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Speaker 3: really showed it. It showed up in the results this

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Speaker 3: last quarter. So we're pretty excited.

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Speaker 1: So when you say transactions, are you getting more people

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Speaker 1: in the store.

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Speaker 2: Yeah, that's exactly right.

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Speaker 1: Yeah.

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Speaker 3: So what was great to see too, is the growth

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Speaker 3: in transactions came from existing customers that are in our

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Speaker 3: rewards program as well as customers that are not in

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Speaker 3: a rewards program that frankly, we had been struggling to

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Speaker 3: kind of reclaim momentum with that group. In this quarter,

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Speaker 3: we had both groups growing in visits, and as a result,

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Speaker 3: our market share increased in visitation as well.

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Speaker 1: I'm curious about the actual amount of money that they're

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Speaker 1: spending as far as a growth in tickets that was

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Speaker 1: actually a little bit underpacing what you actually saw in

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Speaker 1: transactions themselves. What explains that that's right?

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Speaker 3: So, you know, we saw about a little less than

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Speaker 3: a point of ticket growth, and that's really driven by

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Speaker 3: the fact that we've launched this new program around protein,

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Speaker 3: so you get a protein cold foam on any drink,

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Speaker 3: and that's a modification. And then obviously the balance of

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Speaker 3: the growth came from just more people coming to Starbucks,

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Speaker 3: either more often or coming back to the brand that

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Speaker 3: hadn't been here in a while.

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Speaker 1: Since you took over, you've put a big emphasis on,

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Speaker 1: I guess, reimagining the stores to a certain extent. This

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Speaker 1: may seem like a dumb question, but why. I mean,

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Speaker 1: when I look at where your revenue comes from, a

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Speaker 1: lot of that is coming from the drive through, it's

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Speaker 1: coming from takeout, on the apps, it's coming from delivery.

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Speaker 1: But you've put a big emphasis on the instore experience,

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Speaker 1: and I don't understand why, Yeah.

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Speaker 3: Sure, well thanks for the question, because I do believe

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Speaker 3: Starbucks is defined by the cafe and the coffee house experience.

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Speaker 3: That really is where you get the human too human

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Speaker 3: connection with our baristas.

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Speaker 2: It's where you see the craft.

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Speaker 3: Of Starbucks, and then you also get just the soul

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Speaker 3: of Starbucks. So you know, our in store business is

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Speaker 3: still over twenty percent. The thing that I always like

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Speaker 3: to remind people too, is people access Starbucks in all

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Speaker 3: these channels. So they may go via the drive through

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Speaker 3: or mobile order Monday through Friday, but Saturday, when they've

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Speaker 3: got a little bit more time to dwell, they want

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Speaker 3: to hang out in a great space. And so just

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Speaker 3: this past month the data, I saw a sixty percent

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Speaker 3: of our customers made at least one purchase from the counter.

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Speaker 3: And that doesn't include our mobile order pickup people that

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Speaker 3: come into the store to pick up their coffee or

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Speaker 3: their drink or their food. So you know, obviously the

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Speaker 3: entire business work because we have the right access modes,

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Speaker 3: right mobile order, pickup, delivery, drive through, and then obviously

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Speaker 3: the inc cafe. But I just believe the cafe experience

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Speaker 3: and this idea of a community location the third place,

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Speaker 3: it's critical to people, and it's critical to what makes

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Speaker 3: Starbucks Starbucks.

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Speaker 1: It's who we are and you think that's what customers want.

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Speaker 1: We've seen some new entrance into the coffee space, both

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Speaker 1: domestically as well as some folks like Luck in coming

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Speaker 1: to the US taking a much different business model basically

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Speaker 1: grab and.

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Speaker 2: Go more or less.

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Speaker 3: The thing I like to remind everybody is we actually

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Speaker 3: execute those channels right. So we have a mobile order

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Speaker 3: pickup business, which is one of the competitors. We have

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Speaker 3: the biggest drive through business. It's a well over a

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Speaker 3: ten billion dollar business. It actually would be a fortune

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Speaker 3: five hundred company just.

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Speaker 2: On its own.

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Speaker 3: So we know how to operate and give great experiences

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Speaker 3: in all access modes. What we've seen over and over

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Speaker 3: again though, is when we have all these channels with

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Speaker 3: a great coffee house, we really are unmatched. And so

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Speaker 3: that's our point difference. And that's not to say we

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Speaker 3: can't be great in these other access modes and compete effectively.

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Speaker 1: I mean that sounds great on paper, but that sounds

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Speaker 1: also complex. I mean, how do you maintain the integrity

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Speaker 1: of everything when you're trying to have this experience in

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Speaker 1: store at the same time, somebody who wants to grab

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Speaker 1: and go, or a delivery driver showing up to grab

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Speaker 1: in order as well.

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Speaker 3: And that is why it's so important that we get

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Speaker 3: this green Apron service model dialed in, and really at

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Speaker 3: the foundation was making sure we have the right number

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Speaker 3: of people on the roster, the people are deployed correctly,

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Speaker 3: our partners then know what they're accountable to execute, and

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Speaker 3: what we've been able to see is between technology and

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Speaker 3: I think simplification of the actual operating model, our partners

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Speaker 3: can do a great job.

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Speaker 2: A cafe experience happens.

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Speaker 3: In less than four minutes from order to drink with

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Speaker 3: a personal handoff mobile order. We're more on time and

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Speaker 3: accurate than we ever have been, and our drive through

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Speaker 3: during peaks are below four.

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Speaker 2: Minutes as well.

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Speaker 3: So it can be done, but we have to be

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Speaker 3: intentional about it, and we have to set our partners

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Speaker 3: up to be successful to operate that omni channel experience. So,

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Speaker 3: you know, I love the fact that we're seeing the

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Speaker 3: success that we're seeing, and I love that, you know,

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Speaker 3: people are talking about the Starbucks experience again like that shine,

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Speaker 3: that soul that really is magnetic, that vibe.

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Speaker 1: But I think one of your executives said yesterday, your

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Speaker 1: investor Day is back.

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Speaker 2: Yeah.

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Speaker 1: Yeah, the cultural relevancy for Starbucks that's back.

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Speaker 3: That's back, as well our marketing, our menu innovation. One

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Speaker 3: of the things we set out to do is part

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Speaker 3: of this turnaround is get back into culture, get back

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Speaker 3: to leading culture. And you know you got to do

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Speaker 3: that with the right drinks, the right food, and then frankly,

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Speaker 3: the right representation of the brand showing up in the

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Speaker 3: right place is at the right time, with the right communication.

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Speaker 3: And Tresie Lieberman, who leads our marketing efforts, she's done

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Speaker 3: a phenomenal job. We are, in my opinion, Starbucks is

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Speaker 3: back well.

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Speaker 1: Speaking of her your Investor Day yesterday, she talked a

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Speaker 1: lot about your rewards program. It's re launching, being reimagined,

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Speaker 1: I believe in early March, talk about the need to

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Speaker 1: retain your existing customer base, but how that rewards program helps,

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Speaker 1: if at all, and bringing in new customers, those who

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Speaker 1: aren't exposed to Starbucks on a daily base.

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Speaker 2: Yeah.

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Speaker 3: So, look, we got a lot of feedback on the

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Speaker 3: rewards program. It's been a great program, but the feedback

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Speaker 3: we got was it's not very personalized, and so really,

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Speaker 3: what the team has done is made it more personal

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Speaker 3: and the feedback we get from people that don't participate,

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Speaker 3: it's like, look, you know, maybe I don't go to

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Speaker 3: Starbucks with enough frequency to really benefit from the rewards program.

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Speaker 2: We're changing that.

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Speaker 3: Because now when you get into the Green Tier, and

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Speaker 3: there's three tiers now, so you're gonna have the Reserve tier,

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Speaker 3: the Gold Tier, and the Green tier Reserve Top Reserve

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Speaker 3: would be the top. You know, you'll actually get a

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Speaker 3: Black Reserve Starbucks card, which you know will be pretty

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Speaker 3: cool because everything seems to be so virtual anymore. I

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Speaker 3: think people like every once in a while to get

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Speaker 3: something tangible. But the Green Tier then allows you to

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Speaker 3: redeem stars and you can get you know, a reward

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Speaker 3: with not that much engagement, and so it just gets

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Speaker 3: people to be more connected to the brand. And then

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Speaker 3: ideally over time, you know, they'll migrate into Gold or

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Speaker 3: you know, for some of those folks that migrate into Reserve,

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Speaker 3: I think they'll find it's a really special experience.

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Speaker 1: You've managed to sort of get sales back up. There

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Speaker 1: are still some analysts that look at some of the

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Speaker 1: growth rate that you have four percent. I think we'll

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Speaker 1: say in the most recent quarter, I think your guidance

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Speaker 1: is what three to five percent a little bit longer term,

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Speaker 1: but there are some analysts there looking back to the

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Speaker 1: heyday from a decade or two ago, when Starbucks is

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Speaker 1: more a mid single digits and even up into the teams.

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Speaker 1: Is that even realistic to get back to those levels.

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Speaker 3: Look, I've looked at I've looked at this as I've

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Speaker 3: come in and a company at our scale, you know,

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Speaker 3: we have forty thousand coffee houses around the world over

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Speaker 3: four hundred thousand Green Apron partners. I think if we

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Speaker 3: can consistently deliver a comp that is three percent or better,

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Speaker 3: you know, revenue growth that is, you know, five percent

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Speaker 3: or better, and then earnings growth that outpaces that, that

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Speaker 3: would be world class.

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Speaker 2: And we're a world.

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Speaker 3: Class company and we will deliver I think world class

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Speaker 3: results as we get going on this turnaround. So make

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Speaker 3: no mistake, we are a growth company at scale, which

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Speaker 3: is really exciting.

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Speaker 1: I think on the top line, when does the bottom

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Speaker 1: line catch up?

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Speaker 3: So the bottom line will start You'll start to see

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Speaker 3: us make improvements. I think as we get into the

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Speaker 3: back half of this year and then every year from

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Speaker 3: here on out, and that's really what we guided people

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Speaker 3: towards is we'll get into the thirteen to fifteen percent

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Speaker 3: range on margins here by twenty twenty eight. And then

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Speaker 3: actually that's just I think a mile marker. There's an

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Speaker 3: opportunity for us to grow even beyond that.

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Speaker 1: What's holding back that margin expansion, that profitability right now?

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Speaker 3: You know, look, initially we had to do some reinvesting

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Speaker 3: in the business to get again the right people. We

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Speaker 3: invested over I think it's five hundred million clus to

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Speaker 3: six hundred million dollars into the labor experience. And you know,

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Speaker 3: the best way for you to then start driving earnings

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Speaker 3: is we've got to get the top line going.

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Speaker 2: We've done that, and then obviously.

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Speaker 3: We'll work on the middle of the l as well

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Speaker 3: on the cost side of things, which we've got clear

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Speaker 3: line of sight on how over the next two years

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Speaker 3: we'll probably be able to stay close to two billion

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Speaker 3: dollars while we're growing the top line. So it's a

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Speaker 3: combination of growth and smart cost management.

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Speaker 1: I am curious, at least here in the US, with

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Speaker 1: regards to those growth plans, how much have you taken

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Speaker 1: into account the economic environment. I mean, a lot of

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Speaker 1: your products are still if not premium, certainly proceed as

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Speaker 1: premium priced products here, does that work against you if

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Speaker 1: we do end up in the economic downturn.

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Speaker 3: You know, Look, I think at the end of the day,

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Speaker 3: the thing that I'm excited about is people are saying

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Speaker 3: the experience they're getting at Starbucks, the whole package.

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Speaker 2: They're saying, it's worth it.

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Speaker 3: And we're we're seeing some of our highest scores through

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Speaker 3: consumer claimed statements. And that's why I think it's so

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Speaker 3: important that we have this great cafe experience, we have

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Speaker 3: this great customer experience where it's a connection between our

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Speaker 3: barista and then look, we've always been unwavering in the

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Speaker 3: quality of our coffee, our drinks, and the ingredients that

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Speaker 3: we use. So yeah, you know, we're going to be

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Speaker 3: an affordable luxury item, but if you look at it,

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Speaker 3: we're priced pretty darn competitively. And then I think for

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Speaker 3: what you get for the premium that we provide, I

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Speaker 3: think customers are saying, yeah, you know, I'm all in

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Speaker 3: on that.

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Speaker 1: Do you think you have that pricing power right now?

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Speaker 1: Should you feel like you need to pull that lever?

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Speaker 3: You know, Look, pricing is one of those things that

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Speaker 3: will always be the last lever that will pull. There

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Speaker 3: are times where you do have to put some pricing

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Speaker 3: into the business, you know, But fortunately we've been able

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Speaker 3: to hold off for the last little more than a year.

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Speaker 3: So we'll see how things evolve. But you know, if

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Speaker 3: we need to do it, we'll do it very strategically

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Speaker 3: and we'll try to do it as minimal as possible.

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Speaker 1: You're spending a lot to revamp your stores. I know

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Speaker 1: that's a temporary costs in theory, but there are other

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Speaker 1: additional costs you're having to deal with, including labor costs

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Speaker 1: and things that are going to be a long more,

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Speaker 1: longer term and permanent. How has that factored into the forecast?

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Speaker 3: Yeah, you know, look, obviously you always have to think

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Speaker 3: through what does it cost in order to make sure

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Speaker 3: we maintain the integrity of the experience. And right now

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Speaker 3: we're having to come back in we call it our

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Speaker 3: Coffee House Uplift program, where we are just basically retouching

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Speaker 3: all of our cafes. So we want to have great seats,

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Speaker 3: great atmosphere, a place that feels warm, place you want

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Speaker 3: to be. And then obviously we have been and will

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Speaker 3: always be some of the best benefits, best wages you.

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Speaker 2: Can find as a.

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Speaker 3: Partner, and so when you look at it in retail,

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Speaker 3: there's no doubt we have one.

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Speaker 2: Of the best jobs in retail.

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Speaker 3: And that's the reason we can also see it is

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Speaker 3: we have the lowest turnover in our industry by a lot.

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Speaker 3: Our turnover is below fifty percent at the hourly level.

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Speaker 3: In this industry, turnover is usually over one hundred and

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Speaker 3: twenty five percent.

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Speaker 2: So we're definitely doing something right.

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Speaker 3: And the feedback I'm getting from our partners is they

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Speaker 3: definitely feel supported, they're engaged, and they love doing the

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Speaker 3: work that they're doing.

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Speaker 1: I am curious though about somebody union as draw that

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Speaker 1: kind of predated you, but obviously still there as well.

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Speaker 1: Have you spoken with those unions in any sort of

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Speaker 1: meaningful way recently. Are they still demanding more than what

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Speaker 1: you've already offered?

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Speaker 2: You know, Look, I think we've talked about this.

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Speaker 3: I'd love to be able to find a deal so

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Speaker 3: that we could get a contract and move on, but

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Speaker 3: it's going to have to be reasonable, and it's going

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Speaker 3: to have to reflect the fact that we are the

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Speaker 3: leader in benefits wages for people that work twenty hours

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Speaker 3: or more in our company because it has to be

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Speaker 3: sustainable so that all four hundred thousand partners and all

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Speaker 3: two hundred and fifty thousand partners in the United States

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Speaker 3: can continue to have a great experience, a great career,

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Speaker 3: and frankly get great development and growth personally and professionally.

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Speaker 3: So you know, we're always going to continue to have

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Speaker 3: the conversation, and you know, I'm a believer in that

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Speaker 3: you can find a solution, but it's going to have

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Speaker 3: to be reasonable so that everybody can be successful long term.

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Speaker 1: The US is obviously your primary market for quite some time,

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Speaker 1: and made a real big push into China. At one

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Speaker 1: point you were the largest coffee chain in China. You've

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Speaker 1: chunched from that just a little bit, and you've recently

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Speaker 1: entered into a partnership to effectively sell off the majority

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Speaker 1: of that business to the private equity firm. Boyu, what

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Speaker 1: is Starbucks going to look like, particularly in China and

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Speaker 1: the rest of the rest of the countries.

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Speaker 3: Yeah, Look, I think the one thing I want to

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Speaker 3: be clear on is we do believe China is a

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Speaker 3: tremendous growth market. You know, today we have over eight

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Speaker 3: thousand coffee houses.

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Speaker 2: We believe with our.

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Speaker 3: Partner BOU that could be fifteen twenty thousand coffee houses,

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Speaker 3: and they are the great They are a great partner

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Speaker 3: for growth, and part of the reason why we decided

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Speaker 3: to do this is for our next chapter of growth.

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Speaker 3: We just believe we needed a local partner to help

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Speaker 3: us kind of figure out how we can grow faster

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Speaker 3: because one of the things that has really I think

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Speaker 3: been exciting to see and on the other hand, kind

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Speaker 3: of like whoa is the coffee category is really growing

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Speaker 3: and you know, some of these competitors that have emerged

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Speaker 3: in China have just I think, really ramped up their

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Speaker 3: new unit growth and so we're gonna have to get

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Speaker 3: more competitive in our new unit growth story. And I

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Speaker 3: still believe at the end of the day, we have

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Speaker 3: the best product and the best experience, So I believe

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Speaker 3: that'll set us up for success. And I think that's

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Speaker 3: why BOU is so excited to partner with us because

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Speaker 3: they see the opportunity as well.

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Speaker 1: You talked at your investor day about this being sort

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Speaker 1: of an asset light model that you're taking there. Does

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Speaker 1: that also mean that investors should expect maybe slimmer margins

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Speaker 1: because of the fact that you have to share a

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Speaker 1: lot of that money with Boyo.

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Speaker 3: No, you know, and look the way we've structured it

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Speaker 3: is obviously the partnerships are in the cases where we

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Speaker 3: have full license scenario, we don't end up deploying our

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Speaker 3: capital into the markets. We support the licensee in a

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Speaker 3: different fashion through you know, marketing and menu and technology

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Speaker 3: and you know design. So it just becomes less of

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Speaker 3: a requirement on our capital. But it's still you know,

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Speaker 3: in most cases you see the margin actually right and

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Speaker 3: becomes margin and creative.

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Speaker 2: To the total business. And the thing that's really.

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Speaker 3: Exciting is there's so much opportunity for growth and when

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Speaker 3: you have these local partners in these international markets, we

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Speaker 3: just end up, i think, getting access to the premieer

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Speaker 3: real estate and at a speed that we couldn't do

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Speaker 3: from our Seattle offices.

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Speaker 1: I am curious about the scale of this business, particularly

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Speaker 1: in light of some of the businesses that you ran before,

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Speaker 1: relatively successfully. For those who don't know a former brand

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Speaker 1: manager at P ANDNG. You went on, turned around Taco Bell,

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Speaker 1: you turned around Chipotle. Now you're Starbucks. Is Starbucks too

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Speaker 1: big to handle right now?

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Speaker 2: Oh? No.

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Speaker 3: The thing that's great about Starbucks is the brand is beloved,

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Speaker 3: it's iconic, and when you go around the world, there's

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Speaker 3: no doubt that people want to engage with the Starbucks brand.

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Speaker 3: As I was looking at the US, I think we

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Speaker 3: just moved too far away from what made Starbucks Starbucks.

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Speaker 3: And I think you were at our investor day yesterday

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Speaker 3: and I think Mike said it really well, which is,

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Speaker 3: we don't need to change who we are. We just

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Speaker 3: need to be great at who we are and what

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Speaker 3: we do. And that's what we're getting back to doing intentionally, right.

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Speaker 3: So it's like, we're going to be intentional about that

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Speaker 3: barista to customer interaction, the customer experience you get. We're

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Speaker 3: going to be intentional about making sure you have a

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Speaker 3: great seat. We're going to be intentional with the menu,

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Speaker 3: the marketing, the digital experiences that we provide. And what

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Speaker 3: I've seen just most recently from this quarter is when

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Speaker 3: we do that with excellence, you know, we get rewarded

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Speaker 3: with customer's business and loyalty.

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Speaker 1: Are you're going to be intentional about the locations. I mean,

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Speaker 1: under your predecessors, there was a big expansion plan where

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Speaker 1: at least here in New York City, I mean you

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Speaker 1: can walk down a single block and have like five Starbucks,

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Speaker 1: you know, all competing against each other. That's we're trenched

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Speaker 1: a lot.

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Speaker 3: Do you go back to that, Well, look, I think

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Speaker 3: there are opportunities for us to continue to grow in

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Speaker 3: New York City and frankly in a lot of communities

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Speaker 3: around the United States. We talked about the Essially, we

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Speaker 3: believe we can add five thousand stores. We've got line

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Speaker 3: of sight on that, and as we grow our afternoon

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Speaker 3: day part and grow the economics of the business, we'll

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Speaker 3: probably go well beyond those five thousand that we've identified.

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Speaker 3: So you'll see Starbucks continuing to to bring new stores.

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Speaker 3: We want to be smart about where we locate them

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Speaker 3: so that it's the right place for the customer most importantly,

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Speaker 3: and then also so that we can attract and retain

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Speaker 3: partners to have a great experience working in the stores.

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Speaker 1: Most of your revenue is still waited to the morning.

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Speaker 1: You mentioned the PM, if you will, afternoon what actually

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Speaker 1: gets people not only in the stores in the afternoon hours,

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Speaker 1: but also spending more.

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Speaker 3: Yeah, well, so we have an afternoon business today, but

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Speaker 3: I think there is a multi billion dollar opportunity to

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Speaker 3: grow our afternoon day part. You know, as we get

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Speaker 3: the cafe set up to be a great place for

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Speaker 3: you to you know, kind of reset, recharge, whatever you

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Speaker 3: want to do, and we pair that up with the

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Speaker 3: right beverage and ultimately the right food. I think there's

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Speaker 3: no reason why we can't have as strong of an

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Speaker 3: afternoon day part as we have in the morning.

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Speaker 1: And speaking of food, you are making some major menu changes.

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Speaker 1: One thing I noticed at the investor day there were

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Speaker 1: a lot of non caffeinated beverages now that are coming

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Speaker 1: down the menu. Y.

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Speaker 3: I think we were sampling a lot of the things

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Speaker 3: that we think are going to be right for the afternoon.

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Speaker 3: And you know, we talked about our new energy refresher platform,

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Speaker 3: or you'll be able to do, you know, completely decaffeinated

401
00:18:12,040 --> 00:18:15,240
Speaker 3: to what is our standard caffeination and then add a

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Speaker 3: little bit more and you'll be able to customize this. So,

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Speaker 3: you know, we want to have the right drinks for

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Speaker 3: you whether it's morning or afternoon. And what we're seeing

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Speaker 3: is in the afternoon, some people in certain cases aren't

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Speaker 3: looking for caffeine. In other cases, they're actually looking for

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Speaker 3: more caffeine. So we need to be able to provide

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Speaker 3: it all. And the thing that I love about Starbucks

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Speaker 3: is personalization slash customization is at the core of who

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Speaker 3: we are and what we do. So I'm really optimistic

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Speaker 3: about what we can do with food and what we

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Speaker 3: can do with beverages to be on trend right protein

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Speaker 3: five or forward on the food side of things, and

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Speaker 3: then on the beverage side of things, giving you that

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Speaker 3: personalization so that you can get the flavor experience that

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Speaker 3: you want with the energy experience that you want.

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Speaker 1: No olive oil, not right now. All right. You know, Brian,

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Speaker 1: you've done a good job so far, and you know

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Speaker 1: investors are going to demand a lot more. Done a

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Speaker 1: great job turning around other companies. I just have to

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Speaker 1: end this by asking you a really hard question hereverse

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Speaker 1: Miami University. Yeah, you guys are twenty one to zero.

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Speaker 1: First time you guys have really kind of been contender

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Speaker 1: since the Wally Serbiak area. It's going to be that

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Speaker 1: year where you guys get back to the NCAA.

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Speaker 3: You know, Look, it is as an alum of Miami Obio.

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Speaker 3: It is great to see the success team is having

428
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Speaker 3: and Coach Steele is having. Yeah, you know, I was

429
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Speaker 3: at Miami. I graduated in ninety six, So after I graduated.

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Speaker 3: We had that great run with Wally Zerbiak, and it

431
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Speaker 3: was fun to see they got to the Sweet sixteen.

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Speaker 3: It's fun to see the students having a great time,

433
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Speaker 3: and it's fun to see the school on the national stage.

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Speaker 3: It's a great school. I've got great friends, great memories,

435
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Speaker 3: so it's fun to see them having success. And I'll

436
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Speaker 3: tell you what, I'm watching every game and rooting really hard.

437
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Speaker 1: All right, Brian, we'll really appreciate you being with us here.

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Speaker 1: Turnaround going on right now at the Miami Universe. See

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Speaker 1: Enter Turnaround at Starbucks