WEBVTT - Starbucks CEO Brian Niccol Talks Earnings, Growth, Unions 0:00:02.480 --> 0:00:08.440 Bloomberg Audio Studios, Podcasts, Radio News here right now with 0:00:08.600 --> 0:00:11.680 Brian Nicol, fresh off his investor day here in New 0:00:11.760 --> 0:00:14.360 York City and fresh off an earnings report that actually 0:00:14.360 --> 0:00:16.639 seemed to please a lot of investors. Your five quarters 0:00:16.680 --> 0:00:19.720 right now into your tenure as CEO of Starbucks, and 0:00:19.760 --> 0:00:22.920 you put together a couple of quarters of growth, something 0:00:22.920 --> 0:00:24.520 that the company hadn't seen in quite some time. 0:00:24.840 --> 0:00:27.920 Yeah, it was a great quarter for us. 0:00:28.440 --> 0:00:29.920 You know. The thing that was really exciting is to 0:00:29.960 --> 0:00:33.920 see the growth was driven by transactions and also the 0:00:33.920 --> 0:00:37.360 fact that the initiatives that we put in place around operating, 0:00:38.680 --> 0:00:41.519 supporting our partners with the green Apron service model, and 0:00:41.520 --> 0:00:44.560 then really getting back to great customer service, I think 0:00:44.600 --> 0:00:47.040 really showed it. It showed up in the results this 0:00:47.080 --> 0:00:48.600 last quarter. So we're pretty excited. 0:00:48.640 --> 0:00:50.600 So when you say transactions, are you getting more people 0:00:50.640 --> 0:00:51.520 in the store. 0:00:51.520 --> 0:00:52.440 Yeah, that's exactly right. 0:00:52.479 --> 0:00:52.680 Yeah. 0:00:52.720 --> 0:00:55.120 So what was great to see too, is the growth 0:00:55.360 --> 0:00:59.560 in transactions came from existing customers that are in our 0:00:59.600 --> 0:01:02.000 rewards program as well as customers that are not in 0:01:02.000 --> 0:01:05.240 a rewards program that frankly, we had been struggling to 0:01:06.240 --> 0:01:09.800 kind of reclaim momentum with that group. In this quarter, 0:01:09.840 --> 0:01:13.679 we had both groups growing in visits, and as a result, 0:01:13.720 --> 0:01:16.360 our market share increased in visitation as well. 0:01:16.520 --> 0:01:18.640 I'm curious about the actual amount of money that they're 0:01:18.680 --> 0:01:21.080 spending as far as a growth in tickets that was 0:01:21.120 --> 0:01:24.039 actually a little bit underpacing what you actually saw in 0:01:24.120 --> 0:01:26.479 transactions themselves. What explains that that's right? 0:01:26.520 --> 0:01:29.360 So, you know, we saw about a little less than 0:01:29.360 --> 0:01:33.240 a point of ticket growth, and that's really driven by 0:01:33.280 --> 0:01:35.880 the fact that we've launched this new program around protein, 0:01:36.680 --> 0:01:39.039 so you get a protein cold foam on any drink, 0:01:39.160 --> 0:01:43.280 and that's a modification. And then obviously the balance of 0:01:43.319 --> 0:01:46.000 the growth came from just more people coming to Starbucks, 0:01:46.040 --> 0:01:48.800 either more often or coming back to the brand that 0:01:48.840 --> 0:01:49.800 hadn't been here in a while. 0:01:50.080 --> 0:01:52.480 Since you took over, you've put a big emphasis on, 0:01:52.960 --> 0:01:55.880 I guess, reimagining the stores to a certain extent. This 0:01:55.960 --> 0:01:57.960 may seem like a dumb question, but why. I mean, 0:01:58.000 --> 0:01:59.680 when I look at where your revenue comes from, a 0:01:59.680 --> 0:02:01.640 lot of that is coming from the drive through, it's 0:02:01.640 --> 0:02:04.560 coming from takeout, on the apps, it's coming from delivery. 0:02:04.680 --> 0:02:07.000 But you've put a big emphasis on the instore experience, 0:02:07.080 --> 0:02:08.920 and I don't understand why, Yeah. 0:02:08.680 --> 0:02:11.680 Sure, well thanks for the question, because I do believe 0:02:12.360 --> 0:02:16.280 Starbucks is defined by the cafe and the coffee house experience. 0:02:16.639 --> 0:02:18.760 That really is where you get the human too human 0:02:18.800 --> 0:02:20.200 connection with our baristas. 0:02:20.440 --> 0:02:22.080 It's where you see the craft. 0:02:21.720 --> 0:02:23.919 Of Starbucks, and then you also get just the soul 0:02:24.000 --> 0:02:27.320 of Starbucks. So you know, our in store business is 0:02:27.320 --> 0:02:30.040 still over twenty percent. The thing that I always like 0:02:30.040 --> 0:02:32.760 to remind people too, is people access Starbucks in all 0:02:32.800 --> 0:02:35.320 these channels. So they may go via the drive through 0:02:35.400 --> 0:02:38.919 or mobile order Monday through Friday, but Saturday, when they've 0:02:38.960 --> 0:02:40.960 got a little bit more time to dwell, they want 0:02:40.960 --> 0:02:43.680 to hang out in a great space. And so just 0:02:43.760 --> 0:02:46.560 this past month the data, I saw a sixty percent 0:02:46.600 --> 0:02:49.200 of our customers made at least one purchase from the counter. 0:02:49.560 --> 0:02:51.920 And that doesn't include our mobile order pickup people that 0:02:52.000 --> 0:02:54.960 come into the store to pick up their coffee or 0:02:54.960 --> 0:02:58.880 their drink or their food. So you know, obviously the 0:02:59.040 --> 0:03:01.640 entire business work because we have the right access modes, 0:03:01.720 --> 0:03:05.560 right mobile order, pickup, delivery, drive through, and then obviously 0:03:05.600 --> 0:03:08.760 the inc cafe. But I just believe the cafe experience 0:03:09.240 --> 0:03:12.040 and this idea of a community location the third place, 0:03:12.560 --> 0:03:16.119 it's critical to people, and it's critical to what makes 0:03:16.120 --> 0:03:17.040 Starbucks Starbucks. 0:03:17.040 --> 0:03:19.359 It's who we are and you think that's what customers want. 0:03:19.760 --> 0:03:22.200 We've seen some new entrance into the coffee space, both 0:03:22.200 --> 0:03:24.600 domestically as well as some folks like Luck in coming 0:03:24.600 --> 0:03:28.480 to the US taking a much different business model basically 0:03:28.480 --> 0:03:28.960 grab and. 0:03:28.880 --> 0:03:29.480 Go more or less. 0:03:29.680 --> 0:03:31.240 The thing I like to remind everybody is we actually 0:03:31.320 --> 0:03:34.880 execute those channels right. So we have a mobile order 0:03:35.360 --> 0:03:39.080 pickup business, which is one of the competitors. We have 0:03:39.280 --> 0:03:41.720 the biggest drive through business. It's a well over a 0:03:41.760 --> 0:03:44.760 ten billion dollar business. It actually would be a fortune 0:03:44.800 --> 0:03:45.760 five hundred company just. 0:03:45.720 --> 0:03:46.280 On its own. 0:03:47.160 --> 0:03:50.280 So we know how to operate and give great experiences 0:03:50.520 --> 0:03:53.120 in all access modes. What we've seen over and over 0:03:53.160 --> 0:03:55.360 again though, is when we have all these channels with 0:03:55.480 --> 0:03:59.240 a great coffee house, we really are unmatched. And so 0:03:59.320 --> 0:04:02.080 that's our point difference. And that's not to say we 0:04:02.120 --> 0:04:04.920 can't be great in these other access modes and compete effectively. 0:04:05.040 --> 0:04:06.880 I mean that sounds great on paper, but that sounds 0:04:06.880 --> 0:04:09.200 also complex. I mean, how do you maintain the integrity 0:04:09.240 --> 0:04:11.560 of everything when you're trying to have this experience in 0:04:11.640 --> 0:04:13.840 store at the same time, somebody who wants to grab 0:04:13.840 --> 0:04:16.280 and go, or a delivery driver showing up to grab 0:04:16.480 --> 0:04:17.120 in order as well. 0:04:17.400 --> 0:04:18.840 And that is why it's so important that we get 0:04:18.880 --> 0:04:23.160 this green Apron service model dialed in, and really at 0:04:23.160 --> 0:04:25.040 the foundation was making sure we have the right number 0:04:25.040 --> 0:04:27.880 of people on the roster, the people are deployed correctly, 0:04:28.160 --> 0:04:32.920 our partners then know what they're accountable to execute, and 0:04:33.040 --> 0:04:35.720 what we've been able to see is between technology and 0:04:35.800 --> 0:04:39.839 I think simplification of the actual operating model, our partners 0:04:39.839 --> 0:04:40.680 can do a great job. 0:04:41.040 --> 0:04:42.920 A cafe experience happens. 0:04:42.560 --> 0:04:45.080 In less than four minutes from order to drink with 0:04:45.160 --> 0:04:48.400 a personal handoff mobile order. We're more on time and 0:04:48.440 --> 0:04:50.560 accurate than we ever have been, and our drive through 0:04:50.640 --> 0:04:52.359 during peaks are below four. 0:04:52.200 --> 0:04:52.839 Minutes as well. 0:04:52.880 --> 0:04:55.680 So it can be done, but we have to be 0:04:55.800 --> 0:04:59.039 intentional about it, and we have to set our partners 0:04:59.120 --> 0:05:03.839 up to be successful to operate that omni channel experience. So, 0:05:04.320 --> 0:05:06.360 you know, I love the fact that we're seeing the 0:05:06.400 --> 0:05:09.000 success that we're seeing, and I love that, you know, 0:05:09.320 --> 0:05:12.920 people are talking about the Starbucks experience again like that shine, 0:05:13.000 --> 0:05:16.760 that soul that really is magnetic, that vibe. 0:05:17.120 --> 0:05:19.240 But I think one of your executives said yesterday, your 0:05:19.240 --> 0:05:20.159 investor Day is back. 0:05:20.279 --> 0:05:20.440 Yeah. 0:05:20.480 --> 0:05:23.119 Yeah, the cultural relevancy for Starbucks that's back. 0:05:23.240 --> 0:05:27.680 That's back, as well our marketing, our menu innovation. One 0:05:27.680 --> 0:05:29.000 of the things we set out to do is part 0:05:29.000 --> 0:05:31.640 of this turnaround is get back into culture, get back 0:05:31.680 --> 0:05:34.159 to leading culture. And you know you got to do 0:05:34.240 --> 0:05:38.000 that with the right drinks, the right food, and then frankly, 0:05:38.040 --> 0:05:39.960 the right representation of the brand showing up in the 0:05:40.000 --> 0:05:42.520 right place is at the right time, with the right communication. 0:05:42.680 --> 0:05:46.600 And Tresie Lieberman, who leads our marketing efforts, she's done 0:05:46.640 --> 0:05:50.599 a phenomenal job. We are, in my opinion, Starbucks is 0:05:50.640 --> 0:05:51.160 back well. 0:05:51.360 --> 0:05:54.039 Speaking of her your Investor Day yesterday, she talked a 0:05:54.040 --> 0:05:57.279 lot about your rewards program. It's re launching, being reimagined, 0:05:57.320 --> 0:06:01.200 I believe in early March, talk about the need to 0:06:01.240 --> 0:06:05.520 retain your existing customer base, but how that rewards program helps, 0:06:05.520 --> 0:06:07.840 if at all, and bringing in new customers, those who 0:06:07.839 --> 0:06:09.440 aren't exposed to Starbucks on a daily base. 0:06:09.520 --> 0:06:09.719 Yeah. 0:06:09.760 --> 0:06:12.279 So, look, we got a lot of feedback on the 0:06:12.279 --> 0:06:14.840 rewards program. It's been a great program, but the feedback 0:06:14.880 --> 0:06:17.920 we got was it's not very personalized, and so really, 0:06:17.960 --> 0:06:20.479 what the team has done is made it more personal 0:06:20.839 --> 0:06:23.680 and the feedback we get from people that don't participate, 0:06:23.680 --> 0:06:25.680 it's like, look, you know, maybe I don't go to 0:06:25.720 --> 0:06:29.400 Starbucks with enough frequency to really benefit from the rewards program. 0:06:29.640 --> 0:06:30.400 We're changing that. 0:06:30.360 --> 0:06:32.960 Because now when you get into the Green Tier, and 0:06:33.000 --> 0:06:35.120 there's three tiers now, so you're gonna have the Reserve tier, 0:06:35.640 --> 0:06:38.599 the Gold Tier, and the Green tier Reserve Top Reserve 0:06:38.640 --> 0:06:40.560 would be the top. You know, you'll actually get a 0:06:40.600 --> 0:06:44.839 Black Reserve Starbucks card, which you know will be pretty 0:06:44.839 --> 0:06:47.880 cool because everything seems to be so virtual anymore. I 0:06:47.920 --> 0:06:49.520 think people like every once in a while to get 0:06:49.520 --> 0:06:53.440 something tangible. But the Green Tier then allows you to 0:06:53.520 --> 0:06:56.599 redeem stars and you can get you know, a reward 0:06:56.800 --> 0:06:59.640 with not that much engagement, and so it just gets 0:06:59.680 --> 0:07:02.600 people to be more connected to the brand. And then 0:07:02.640 --> 0:07:05.400 ideally over time, you know, they'll migrate into Gold or 0:07:05.680 --> 0:07:07.880 you know, for some of those folks that migrate into Reserve, 0:07:07.920 --> 0:07:10.080 I think they'll find it's a really special experience. 0:07:10.440 --> 0:07:13.080 You've managed to sort of get sales back up. There 0:07:13.120 --> 0:07:15.120 are still some analysts that look at some of the 0:07:15.120 --> 0:07:17.000 growth rate that you have four percent. I think we'll 0:07:17.040 --> 0:07:19.440 say in the most recent quarter, I think your guidance 0:07:19.480 --> 0:07:22.040 is what three to five percent a little bit longer term, 0:07:22.040 --> 0:07:23.920 but there are some analysts there looking back to the 0:07:23.960 --> 0:07:26.680 heyday from a decade or two ago, when Starbucks is 0:07:26.720 --> 0:07:29.200 more a mid single digits and even up into the teams. 0:07:29.240 --> 0:07:31.400 Is that even realistic to get back to those levels. 0:07:31.520 --> 0:07:33.720 Look, I've looked at I've looked at this as I've 0:07:33.720 --> 0:07:36.920 come in and a company at our scale, you know, 0:07:36.920 --> 0:07:40.240 we have forty thousand coffee houses around the world over 0:07:40.280 --> 0:07:43.800 four hundred thousand Green Apron partners. I think if we 0:07:43.840 --> 0:07:47.400 can consistently deliver a comp that is three percent or better, 0:07:48.120 --> 0:07:50.920 you know, revenue growth that is, you know, five percent 0:07:51.000 --> 0:07:54.680 or better, and then earnings growth that outpaces that, that 0:07:54.720 --> 0:07:55.880 would be world class. 0:07:56.080 --> 0:07:57.720 And we're a world. 0:07:57.480 --> 0:08:00.200 Class company and we will deliver I think world class 0:08:00.280 --> 0:08:03.760 results as we get going on this turnaround. So make 0:08:03.800 --> 0:08:07.320 no mistake, we are a growth company at scale, which 0:08:07.360 --> 0:08:08.160 is really exciting. 0:08:08.200 --> 0:08:10.200 I think on the top line, when does the bottom 0:08:10.240 --> 0:08:10.920 line catch up? 0:08:11.080 --> 0:08:13.520 So the bottom line will start You'll start to see 0:08:13.560 --> 0:08:16.880 us make improvements. I think as we get into the 0:08:16.880 --> 0:08:18.640 back half of this year and then every year from 0:08:18.680 --> 0:08:21.360 here on out, and that's really what we guided people 0:08:21.360 --> 0:08:24.920 towards is we'll get into the thirteen to fifteen percent 0:08:25.000 --> 0:08:28.040 range on margins here by twenty twenty eight. And then 0:08:28.080 --> 0:08:31.160 actually that's just I think a mile marker. There's an 0:08:31.120 --> 0:08:33.040 opportunity for us to grow even beyond that. 0:08:33.240 --> 0:08:37.120 What's holding back that margin expansion, that profitability right now? 0:08:37.200 --> 0:08:39.760 You know, look, initially we had to do some reinvesting 0:08:40.240 --> 0:08:42.640 in the business to get again the right people. We 0:08:42.960 --> 0:08:45.160 invested over I think it's five hundred million clus to 0:08:45.160 --> 0:08:50.800 six hundred million dollars into the labor experience. And you know, 0:08:51.480 --> 0:08:54.080 the best way for you to then start driving earnings 0:08:54.120 --> 0:08:55.600 is we've got to get the top line going. 0:08:56.440 --> 0:08:58.839 We've done that, and then obviously. 0:08:58.440 --> 0:09:00.760 We'll work on the middle of the l as well 0:09:00.760 --> 0:09:03.080 on the cost side of things, which we've got clear 0:09:03.120 --> 0:09:05.640 line of sight on how over the next two years 0:09:06.320 --> 0:09:08.160 we'll probably be able to stay close to two billion 0:09:08.200 --> 0:09:12.520 dollars while we're growing the top line. So it's a 0:09:12.520 --> 0:09:15.200 combination of growth and smart cost management. 0:09:15.360 --> 0:09:17.280 I am curious, at least here in the US, with 0:09:17.320 --> 0:09:19.760 regards to those growth plans, how much have you taken 0:09:19.760 --> 0:09:22.360 into account the economic environment. I mean, a lot of 0:09:22.360 --> 0:09:26.439 your products are still if not premium, certainly proceed as 0:09:26.520 --> 0:09:29.319 premium priced products here, does that work against you if 0:09:29.320 --> 0:09:30.840 we do end up in the economic downturn. 0:09:31.040 --> 0:09:32.600 You know, Look, I think at the end of the day, 0:09:32.760 --> 0:09:35.120 the thing that I'm excited about is people are saying 0:09:35.480 --> 0:09:39.160 the experience they're getting at Starbucks, the whole package. 0:09:38.679 --> 0:09:39.719 They're saying, it's worth it. 0:09:39.880 --> 0:09:44.320 And we're we're seeing some of our highest scores through 0:09:44.360 --> 0:09:48.120 consumer claimed statements. And that's why I think it's so 0:09:48.160 --> 0:09:50.600 important that we have this great cafe experience, we have 0:09:50.640 --> 0:09:53.440 this great customer experience where it's a connection between our 0:09:53.480 --> 0:09:56.240 barista and then look, we've always been unwavering in the 0:09:56.320 --> 0:09:59.520 quality of our coffee, our drinks, and the ingredients that 0:09:59.559 --> 0:10:02.880 we use. So yeah, you know, we're going to be 0:10:03.200 --> 0:10:06.559 an affordable luxury item, but if you look at it, 0:10:06.640 --> 0:10:10.040 we're priced pretty darn competitively. And then I think for 0:10:10.120 --> 0:10:15.000 what you get for the premium that we provide, I 0:10:15.000 --> 0:10:17.120 think customers are saying, yeah, you know, I'm all in 0:10:17.160 --> 0:10:17.400 on that. 0:10:17.720 --> 0:10:19.960 Do you think you have that pricing power right now? 0:10:20.000 --> 0:10:21.719 Should you feel like you need to pull that lever? 0:10:21.960 --> 0:10:23.680 You know, Look, pricing is one of those things that 0:10:23.679 --> 0:10:26.719 will always be the last lever that will pull. There 0:10:26.760 --> 0:10:29.400 are times where you do have to put some pricing 0:10:29.400 --> 0:10:32.880 into the business, you know, But fortunately we've been able 0:10:32.920 --> 0:10:35.760 to hold off for the last little more than a year. 0:10:36.559 --> 0:10:41.040 So we'll see how things evolve. But you know, if 0:10:41.040 --> 0:10:43.160 we need to do it, we'll do it very strategically 0:10:44.040 --> 0:10:46.080 and we'll try to do it as minimal as possible. 0:10:46.160 --> 0:10:48.400 You're spending a lot to revamp your stores. I know 0:10:48.480 --> 0:10:50.920 that's a temporary costs in theory, but there are other 0:10:50.960 --> 0:10:53.760 additional costs you're having to deal with, including labor costs 0:10:53.840 --> 0:10:55.240 and things that are going to be a long more, 0:10:55.280 --> 0:10:58.080 longer term and permanent. How has that factored into the forecast? 0:10:58.400 --> 0:11:00.520 Yeah, you know, look, obviously you always have to think 0:11:00.520 --> 0:11:04.280 through what does it cost in order to make sure 0:11:04.320 --> 0:11:07.280 we maintain the integrity of the experience. And right now 0:11:07.320 --> 0:11:09.520 we're having to come back in we call it our 0:11:09.760 --> 0:11:14.080 Coffee House Uplift program, where we are just basically retouching 0:11:14.920 --> 0:11:17.440 all of our cafes. So we want to have great seats, 0:11:17.559 --> 0:11:21.199 great atmosphere, a place that feels warm, place you want 0:11:21.200 --> 0:11:24.760 to be. And then obviously we have been and will 0:11:24.760 --> 0:11:28.800 always be some of the best benefits, best wages you. 0:11:28.760 --> 0:11:30.520 Can find as a. 0:11:30.480 --> 0:11:32.560 Partner, and so when you look at it in retail, 0:11:32.559 --> 0:11:33.640 there's no doubt we have one. 0:11:33.520 --> 0:11:34.760 Of the best jobs in retail. 0:11:36.360 --> 0:11:38.840 And that's the reason we can also see it is 0:11:39.080 --> 0:11:42.600 we have the lowest turnover in our industry by a lot. 0:11:42.800 --> 0:11:45.400 Our turnover is below fifty percent at the hourly level. 0:11:45.640 --> 0:11:48.240 In this industry, turnover is usually over one hundred and 0:11:48.320 --> 0:11:49.120 twenty five percent. 0:11:49.240 --> 0:11:51.440 So we're definitely doing something right. 0:11:51.559 --> 0:11:54.360 And the feedback I'm getting from our partners is they 0:11:54.400 --> 0:11:57.400 definitely feel supported, they're engaged, and they love doing the 0:11:57.400 --> 0:11:58.120 work that they're doing. 0:11:58.280 --> 0:12:01.240 I am curious though about somebody union as draw that 0:12:01.520 --> 0:12:04.120 kind of predated you, but obviously still there as well. 0:12:04.720 --> 0:12:07.360 Have you spoken with those unions in any sort of 0:12:07.360 --> 0:12:10.280 meaningful way recently. Are they still demanding more than what 0:12:10.280 --> 0:12:11.079 you've already offered? 0:12:11.640 --> 0:12:14.120 You know, Look, I think we've talked about this. 0:12:14.840 --> 0:12:17.800 I'd love to be able to find a deal so 0:12:17.840 --> 0:12:21.080 that we could get a contract and move on, but 0:12:21.120 --> 0:12:22.760 it's going to have to be reasonable, and it's going 0:12:22.800 --> 0:12:24.439 to have to reflect the fact that we are the 0:12:24.559 --> 0:12:28.880 leader in benefits wages for people that work twenty hours 0:12:28.960 --> 0:12:31.559 or more in our company because it has to be 0:12:31.640 --> 0:12:35.240 sustainable so that all four hundred thousand partners and all 0:12:35.240 --> 0:12:37.800 two hundred and fifty thousand partners in the United States 0:12:38.400 --> 0:12:40.760 can continue to have a great experience, a great career, 0:12:40.960 --> 0:12:45.640 and frankly get great development and growth personally and professionally. 0:12:45.679 --> 0:12:49.040 So you know, we're always going to continue to have 0:12:49.040 --> 0:12:53.000 the conversation, and you know, I'm a believer in that 0:12:53.040 --> 0:12:54.959 you can find a solution, but it's going to have 0:12:55.000 --> 0:12:57.640 to be reasonable so that everybody can be successful long term. 0:12:57.760 --> 0:13:00.880 The US is obviously your primary market for quite some time, 0:13:00.920 --> 0:13:02.679 and made a real big push into China. At one 0:13:02.679 --> 0:13:05.880 point you were the largest coffee chain in China. You've 0:13:06.040 --> 0:13:07.960 chunched from that just a little bit, and you've recently 0:13:08.080 --> 0:13:11.600 entered into a partnership to effectively sell off the majority 0:13:11.600 --> 0:13:14.600 of that business to the private equity firm. Boyu, what 0:13:14.840 --> 0:13:17.400 is Starbucks going to look like, particularly in China and 0:13:17.400 --> 0:13:19.160 the rest of the rest of the countries. 0:13:19.240 --> 0:13:21.199 Yeah, Look, I think the one thing I want to 0:13:21.240 --> 0:13:23.200 be clear on is we do believe China is a 0:13:23.200 --> 0:13:26.760 tremendous growth market. You know, today we have over eight 0:13:26.800 --> 0:13:28.520 thousand coffee houses. 0:13:28.840 --> 0:13:29.960 We believe with our. 0:13:29.920 --> 0:13:33.720 Partner BOU that could be fifteen twenty thousand coffee houses, 0:13:34.679 --> 0:13:37.400 and they are the great They are a great partner 0:13:37.559 --> 0:13:39.960 for growth, and part of the reason why we decided 0:13:40.000 --> 0:13:42.439 to do this is for our next chapter of growth. 0:13:42.480 --> 0:13:45.360 We just believe we needed a local partner to help 0:13:45.440 --> 0:13:48.040 us kind of figure out how we can grow faster 0:13:48.360 --> 0:13:50.160 because one of the things that has really I think 0:13:50.400 --> 0:13:52.160 been exciting to see and on the other hand, kind 0:13:52.200 --> 0:13:55.640 of like whoa is the coffee category is really growing 0:13:56.000 --> 0:13:59.160 and you know, some of these competitors that have emerged 0:13:59.320 --> 0:14:02.400 in China have just I think, really ramped up their 0:14:02.440 --> 0:14:04.320 new unit growth and so we're gonna have to get 0:14:04.360 --> 0:14:07.680 more competitive in our new unit growth story. And I 0:14:07.720 --> 0:14:09.080 still believe at the end of the day, we have 0:14:09.200 --> 0:14:12.680 the best product and the best experience, So I believe 0:14:12.679 --> 0:14:14.319 that'll set us up for success. And I think that's 0:14:14.320 --> 0:14:17.000 why BOU is so excited to partner with us because 0:14:17.040 --> 0:14:18.840 they see the opportunity as well. 0:14:19.120 --> 0:14:21.240 You talked at your investor day about this being sort 0:14:21.240 --> 0:14:24.200 of an asset light model that you're taking there. Does 0:14:24.240 --> 0:14:28.280 that also mean that investors should expect maybe slimmer margins 0:14:28.360 --> 0:14:30.600 because of the fact that you have to share a 0:14:30.600 --> 0:14:31.560 lot of that money with Boyo. 0:14:32.120 --> 0:14:34.160 No, you know, and look the way we've structured it 0:14:34.240 --> 0:14:38.040 is obviously the partnerships are in the cases where we 0:14:38.080 --> 0:14:42.080 have full license scenario, we don't end up deploying our 0:14:42.120 --> 0:14:46.200 capital into the markets. We support the licensee in a 0:14:46.200 --> 0:14:50.080 different fashion through you know, marketing and menu and technology 0:14:50.280 --> 0:14:54.200 and you know design. So it just becomes less of 0:14:54.840 --> 0:14:57.920 a requirement on our capital. But it's still you know, 0:14:58.000 --> 0:15:00.200 in most cases you see the margin actually right and 0:15:00.240 --> 0:15:01.720 becomes margin and creative. 0:15:01.520 --> 0:15:03.880 To the total business. And the thing that's really. 0:15:03.720 --> 0:15:06.520 Exciting is there's so much opportunity for growth and when 0:15:06.560 --> 0:15:09.160 you have these local partners in these international markets, we 0:15:09.320 --> 0:15:13.000 just end up, i think, getting access to the premieer 0:15:13.080 --> 0:15:15.560 real estate and at a speed that we couldn't do 0:15:16.160 --> 0:15:18.440 from our Seattle offices. 0:15:18.720 --> 0:15:21.240 I am curious about the scale of this business, particularly 0:15:21.280 --> 0:15:23.320 in light of some of the businesses that you ran before, 0:15:23.400 --> 0:15:25.960 relatively successfully. For those who don't know a former brand 0:15:26.040 --> 0:15:28.440 manager at P ANDNG. You went on, turned around Taco Bell, 0:15:28.560 --> 0:15:31.840 you turned around Chipotle. Now you're Starbucks. Is Starbucks too 0:15:31.880 --> 0:15:33.320 big to handle right now? 0:15:33.600 --> 0:15:33.920 Oh? No. 0:15:34.520 --> 0:15:37.400 The thing that's great about Starbucks is the brand is beloved, 0:15:37.480 --> 0:15:41.120 it's iconic, and when you go around the world, there's 0:15:41.160 --> 0:15:43.720 no doubt that people want to engage with the Starbucks brand. 0:15:44.240 --> 0:15:46.160 As I was looking at the US, I think we 0:15:46.360 --> 0:15:49.479 just moved too far away from what made Starbucks Starbucks. 0:15:49.520 --> 0:15:51.960 And I think you were at our investor day yesterday 0:15:52.040 --> 0:15:54.000 and I think Mike said it really well, which is, 0:15:54.280 --> 0:15:55.920 we don't need to change who we are. We just 0:15:55.920 --> 0:15:57.440 need to be great at who we are and what 0:15:57.480 --> 0:16:01.360 we do. And that's what we're getting back to doing intentionally, right. 0:16:01.400 --> 0:16:03.640 So it's like, we're going to be intentional about that 0:16:03.800 --> 0:16:07.360 barista to customer interaction, the customer experience you get. We're 0:16:07.360 --> 0:16:09.160 going to be intentional about making sure you have a 0:16:09.160 --> 0:16:11.560 great seat. We're going to be intentional with the menu, 0:16:11.720 --> 0:16:15.640 the marketing, the digital experiences that we provide. And what 0:16:15.680 --> 0:16:17.800 I've seen just most recently from this quarter is when 0:16:17.840 --> 0:16:21.080 we do that with excellence, you know, we get rewarded 0:16:21.080 --> 0:16:22.400 with customer's business and loyalty. 0:16:22.480 --> 0:16:24.640 Are you're going to be intentional about the locations. I mean, 0:16:24.720 --> 0:16:27.560 under your predecessors, there was a big expansion plan where 0:16:27.600 --> 0:16:29.120 at least here in New York City, I mean you 0:16:29.120 --> 0:16:31.640 can walk down a single block and have like five Starbucks, 0:16:31.720 --> 0:16:34.000 you know, all competing against each other. That's we're trenched 0:16:34.000 --> 0:16:34.400 a lot. 0:16:34.600 --> 0:16:36.640 Do you go back to that, Well, look, I think 0:16:36.680 --> 0:16:39.240 there are opportunities for us to continue to grow in 0:16:39.280 --> 0:16:43.600 New York City and frankly in a lot of communities 0:16:43.640 --> 0:16:45.960 around the United States. We talked about the Essially, we 0:16:46.000 --> 0:16:49.080 believe we can add five thousand stores. We've got line 0:16:49.080 --> 0:16:51.840 of sight on that, and as we grow our afternoon 0:16:51.880 --> 0:16:54.320 day part and grow the economics of the business, we'll 0:16:54.320 --> 0:16:57.160 probably go well beyond those five thousand that we've identified. 0:16:57.800 --> 0:17:01.200 So you'll see Starbucks continuing to to bring new stores. 0:17:01.560 --> 0:17:03.720 We want to be smart about where we locate them 0:17:04.040 --> 0:17:08.280 so that it's the right place for the customer most importantly, 0:17:08.320 --> 0:17:10.879 and then also so that we can attract and retain 0:17:10.920 --> 0:17:13.000 partners to have a great experience working in the stores. 0:17:13.080 --> 0:17:15.359 Most of your revenue is still waited to the morning. 0:17:15.400 --> 0:17:18.399 You mentioned the PM, if you will, afternoon what actually 0:17:18.400 --> 0:17:21.200 gets people not only in the stores in the afternoon hours, 0:17:21.240 --> 0:17:22.200 but also spending more. 0:17:22.920 --> 0:17:25.800 Yeah, well, so we have an afternoon business today, but 0:17:25.880 --> 0:17:28.520 I think there is a multi billion dollar opportunity to 0:17:28.640 --> 0:17:31.800 grow our afternoon day part. You know, as we get 0:17:31.840 --> 0:17:33.840 the cafe set up to be a great place for 0:17:33.880 --> 0:17:37.159 you to you know, kind of reset, recharge, whatever you 0:17:37.200 --> 0:17:39.600 want to do, and we pair that up with the 0:17:39.680 --> 0:17:44.160 right beverage and ultimately the right food. I think there's 0:17:44.160 --> 0:17:46.080 no reason why we can't have as strong of an 0:17:46.119 --> 0:17:48.320 afternoon day part as we have in the morning. 0:17:48.640 --> 0:17:51.480 And speaking of food, you are making some major menu changes. 0:17:51.520 --> 0:17:53.800 One thing I noticed at the investor day there were 0:17:53.840 --> 0:17:58.120 a lot of non caffeinated beverages now that are coming 0:17:58.160 --> 0:17:58.879 down the menu. Y. 0:18:00.040 --> 0:18:01.560 I think we were sampling a lot of the things 0:18:01.560 --> 0:18:04.080 that we think are going to be right for the afternoon. 0:18:05.000 --> 0:18:07.840 And you know, we talked about our new energy refresher platform, 0:18:07.960 --> 0:18:11.520 or you'll be able to do, you know, completely decaffeinated 0:18:12.040 --> 0:18:15.240