Is Starbucks About to Enter a New Era of Transformation?

It is well known that Starbucks was founded in 1971. After experiencing a financial crisis in the late 1980s, Howard Schultz took over and served as CEO twice. After nearly thirty years of dedicated management, Starbucks went public, expanded rapidly, and became the world's largest coffee chain brand.

As Starbucks' current CEO Kevin Johnson's retirement date approaches, and with no successor determined yet, "Starbucks Daddy" Howard Schultz confirmed he would return as CEO before this year's annual shareholders meeting.

Starbucks faces numerous challenges with this return, including the labor union movement in the United States and the highly watched Chinese market. Food safety incidents and police expulsion events at Starbucks China in the past six months have threatened the brand image Starbucks has long established. Additionally, rapid store expansion and supply chain tensions have brought various cost and sales pressures to Starbucks.

In the past year, Starbucks has faced a series of controversies, pushing it to the brink of transformation. At the recently concluded Starbucks 2022 annual shareholders meeting, plans were made for Starbucks' development in the coming years.

Equipment and Beverages

Starbucks announced the new Clover Vertica brewer and continued rollout of the Mastrena II espresso machine. Since March 2022, the Clover Vertica brewer has been deployed in pilot locations in Minneapolis as well as at Starbucks Reserve Roasteries and stores in the United States, with plans to equip all company-operated stores in the US with this brewer by 2025.

Additionally, Starbucks emphasized beverage innovation. While continuing efforts to improve coffee standards, beverage innovation, particularly in cold espresso and plant-based products, represents Starbucks' two fastest-growing categories. In the previous fiscal year, cold beverages accounted for nearly 70% of Starbucks' total beverage sales, an increase of 20 percentage points over the past three years.

Employees

Starbucks will add $1 billion in wages, training, and benefits. Hourly wages will increase by an average of 17% within 18 months, with starting wages ranging from $15-23 per hour by summer 2022. Partners with two and five years of tenure at Starbucks will receive wage increases of 5% and 10% respectively.

To address labor shortages, Starbucks will add more than 70 recruitment staff in various country markets and also plans to hire 5,000 new partners weekly.

Stores

Starbucks plans to expand its global store count to 55,000 by 2030.

The high-end image that Starbucks painstakingly established and managed over the past two decades is now in jeopardy. As China, Starbucks' second-largest market globally, sees an increasing number of local coffee brands and new-style tea brands diverting Starbucks' consumer base. The voice of "get out of China" is growing louder, and the Chinese market that Howard Schultz once favored is facing more and more challenges.

Starbucks announced that it will find a successor this fall. This means Howard Schultz may only have six months to radically transform Starbucks. So, before autumn arrives, can Howard Schultz help Starbucks complete its transformation as scheduled?

Image source: Internet

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